Reshoring of Supply Chains

07/27/20

As many companies consider or begin the process of reshoring, per the Detroit’s Business Journal, local Detroit business leaders are involved with organizations offering a reshoring initiative for North American manufacturers that will offer site selection services, relocation, and business performance solutions. Cornerstone Consulting Organization, a business and manufacturing consulting firm, and Juniper Solutions, a site selection consulting firm, launched Rapid Reshoring Solutions. Both companies are based in Ohio, but Bill Currence, founder of Cornerstone, and Scott Wawrzyniak, managing partner, are based in metro Detroit and work with area companies including automotive manufacturers.

Per Bill Currence, “In this COVID-19 climate, there are a range of variables and pressures that will compel manufacturers to thoroughly analyze and act on re-aligning global supply chains and possibly bring their overseas operations back home to the United States, Our experts have worked across the globe supporting manufacturers for decades, and we’re ready to quickly support these businesses on reshoring efforts while progressing the American economy.”

Reshoring supply chains will be complex for many companies. MIT professors Yossi Sheffi and David Simchi-Levi offered their thoughts about reliance on China, the possibility of reshoring, and how supply chains will — and won’t — change in the era of COVID-19. The professors suggest that companies are unlikely to completely abandon China for the following reasons:

1. It will take decades and untold money to move out of China, so it likely won’t happening very quickly. China is a sophisticated supplier of many parts, Sheffi, the director of the MIT Center for Transportation and Logistics, points out that clothing manufacturers who have left China for other countries are still buying Chinese textiles. Proof in point: While China’s share of clothing manufacturing has fallen over the last five years, its export of raw textiles, which are made with sophisticated large machinery, has gone up. Even if sewing and parts of some other industries leave, “big industries invested decades in building up a whole ecosystem in China,” Sheffi said. “It will take decades and untold money to move out of China, so I don’t see it happening very quickly.” Simchi-Levi agreed: “China is still going to play an important role, and it’s not surprising because it’s a huge market.”

2. Reshoring isn’t necessarily the answer. The pandemic has many speculating about reshoring and bringing manufacturing back to the U.S. Simchi-Levi said that is unlikely to offer what companies are looking for. “Reshoring does not guarantee resiliency,” he said. Such consolidation brings risk. Simchi-Levi pointed to the relatively small number of slaughter plants in the United States that process much of the country’s beef and pork supply. Plant shutdowns because of the coronavirus led to concerns about a backup in meat production, falling prices for farmers, and meat shortages, though that outcome was largely avoided this spring. In other cases, reshoring could require government involvement. For example, drug manufacturing has been moved to India and China not just because of cost, but because it requires highly toxic chemicals, Simchi-Levi said. Reshoring those activities would require development of clean chemical manufacturing technologies, which requires significant investment of time and money — five to 10 years of development time.

3. Supply chains largely held up to the pandemic test. All told, supply chain performance was better than expected during the pandemic, Sheffi and Simchi-Levi agreed. In the early days of the pandemic, pictures of empty shelves made the rounds as people stocked up on staples like rice, pasta, and yeast (and, of course, toilet paper). Despite the pictures of empty shelves, Sheffi said, the food supply chain never really failed. Many of those photos were taken later in the day, he said, and though stores might have run out of some items, there were never any actual shortages. Despite “unbelievable” changes in demand patterns, including people spending more time at home and buying comfort food, the food supply chain in the United States continued to work, Sheffi said. The medical supply chain system also worked, with no shortages of drugs, with one notable exception: a lack of personal protective equipment, or PPE.

Per Sheffi, “Supply chain managers are going to be much more important in the corporate hierarchy.” At APICS Greater Detroit, we profoundly agree with this sentiment and are here to help you with the information you need to help your company reduce costs, minimize risks and meet demand during these challenging times.

Looking to connect with local supply chain professionals? Join us for a free webinar on August 11th, with special guest speaker, William Crane, CEO of Industry Star. More info below.

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