More insights from the Strategic Source and Sell survey: Channel diversity | On-time performance
More on reshoring
- Infographic: Reshoring optimism
- Gruenes on Growth blog: Top 10 reasons you need to reshore
- Webcast: Reshoring gets real
Reshoring is real — and about to dramatically reshape the U.S. economy. More than one-third of U.S. businesses will move goods and services work back to the United States, in the next 12 months. Grant Thornton's Strategic source and sell: Realities of reshoring survey of U.S. executives1 finds that even IT services, one of the first business functions to move offshore, are likely to return within a year.
Executives indicated their companies are “likely” or “very likely” to bring back the following categories of work:
- IT services, 42% of executives
- Components/products, 37%
- Services (e.g., customer services, call centers), 35%
- Material, 34%
In all, 37% of businesses are likely or very likely to bring goods and services work back to the United States — and/or a similar percentage are moving work closer to home (e.g. Mexico, Latin America).
This means that as much as 5% overall U.S. procurement may come home. The huge numbers could dramatically impact U.S. trade balances — and should provide an enormous boost to domestic manufacturers, retailers, wholesalers/distributors and service providers.
Findings from the Grant Thornton survey confirm anecdotal reports about the return of production and services work from overseas. In 2012, General Electric brought production of hot water heaters and refrigerators back to two new assembly lines in Kentucky. Apple is investing $100 million to build a Mac product line in the United States. And Wal-Mart will increase its purchases of U.S.-made merchandise by $50 billion (approximately $5 billion per year) for 10 years.
Some companies will bring work back to existing plants and facilities, while others will co-locate operations near existing assets. Yet others will explore state and municipal incentives for greenfield- and brownfield-reclamation operations that make the reshoring decision even more cost-effective, by investing in state-of-the-art facilities.
To assess your reshoring potential, thoroughly evaluate all tangible costs related to offshore suppliers, including the following:
- Transportation costs
- Expediting costs
- Warehouse space/costs
- Salaries (include personnel overseas and domestic managing overseas suppliers)
- Material handling costs
- Procurement staff costs
- Inventory carrying costs
- Cost of debt
- Component/product damage costs
Savvy executives will also analyze the intangible costs related to offshore suppliers, including lost intellectual property or damaged customer relationships due to late deliveries or poor quality. Also important — but harder to quantify — is the customer goodwill generated by bringing goods, services and jobs back to the United States.