The Covid-19 pandemic exposed the risks of a global supply chain heavily dependent on offshore manufacturing. For much of 2020, shocks to the system resulted in months-long shipping delays for essential goods like PPE, electronics and medical supplies.
The Biden administration has pledged to rebuild U.S. supply chains in a way that prevents critical equipment shortages in the future.
The current state of American reshoring
Over the past few years, reshoring rates, as measured by the Kearney Reshoring Index, have been volatile. After trending steadily upward since 2008, they hit a record high in 2019 before dipping deep into the negatives in 2020.
What reshoring rates will look like in 2021 remains uncertain right now. In a recent article for Supply Chain Dive, contributor Deborah Abrams Kaplan summed up the current analysis and recent forecasts on reshoring and onshoring. The results are a mix of optimism and caution.
One survey from Heartland Forward, a nonprofit think tank “dedicated to improving economic performance in America’s Heartland,” found that 70 percent of businesses queried were likely to reshore over the next few years.
Other industry observers are less enthusiastic. Analysts at UBS Investment Bank wrote that “the narrative of a hasty supply chain retreat from China looks overdone.” The authors argued that the size of the Chinese economy and low production costs, despite rising wages, would discourage major reshoring efforts by American companies.
How the Biden administration has responded
The policies of the Biden administration could have a significant impact on which of these predictions becomes reality.
In January, President Biden signed an executive order strengthening the “Buy American” program. The order will review the current nonavailable articles list, potentially making it more difficult for government contractors to buy foreign goods.
In February, Biden also signed an executive order to review weak spots in the supply chains of critical items — including computer chips, medical gear, electric-vehicle batteries and specialized minerals.
However, beyond reviews of existing loopholes in legal frameworks and risk analysis of the supply chain, there’s been little concrete action yet.
Right now, companies wanting to reshore or strengthen their supply chain operations may be on their own. The use of advanced supply chain management strategies, like the AS91xx series of standards for aerospace supply chain management, may help businesses resolve some of these weak spots on their own.
Advanced technology, like artificial intelligence and machine learning, could also enable new, more data-driven supply chain management strategies.
New spending could encourage reshoring
Future legislation could provide some relief for businesses wanting help in reshoring. The next significant move related to the supply chain is likely to be the $2.3 trillion infrastructure package that the Biden administration hopes to push through Congress this year.
The plan includes at least $100 billion dedicated to encourage onshoring. The administration also hopes to introduce an onshoring tax credit at some point.
These investments could make reshoring, onshoring and near-shoring all more attractive to American businesses.