Reshoring – the idea to bring back so-called “advanced manufacturing” back to North America –could create a “multiplier effect” for freight flows, leading to more “freight touches” and translating into greater need for capacity, according to some freight market analysts.
As reported by Fleet Owner:
The logistics system may “touch” freight once or twice if it is delivered via containers to West Coast ports, explained John Larkin, managing director and head of transportation capital markets research at Stifel Capital Markets, during a conference call with reporters last week. But if the goods are produced in North America, that results in many more touches. “Thus reshoring presents a multiplier effect on freight moving around,” he said.
Rosemary Coates, executive director of the Reshoring Institute, noted there are many transportation and logistics effects associated with reshoring, a concept strategy that began to pick up steam in 2012 following an 11-year period of strong “offshoring” of manufacturing from the U.S. predominantly to China.
By Coates’ estimation, reshoring can bring some 750,000 jobs back to the U.S. largely in the “advanced manufacturing” sector, where the production of more “high dollar” finished goods such as small motors, molded plastics, and high-end textiles.
She also believes reshoring is more than a fad:
- More than half of American companies over $1 billion in revenues say they are reshoring now or considering it.
- Walmart has made a significant impact by pledging $250 billion over 10 years to buy goods made in America.
- Surveys indicate that consumers are willing to pay 10% to 12% more for products made locally.
- State, local and federal governments are supporting efforts to bring manufacturing back via tax and investment incentives.
Though such “advanced manufacturing” will require more robotics, 3D printer, and higher skilled – and thus more expensive – labour, shorter and more secure supply chains will help reduce the “structured cost” of such goods over time, she said.
Reshored manufacturing brings production as close to the consumer as possible, meaning more regionalized – even localized – distribution patterns for goods, she indicated; a trend that could potentially help motor carriers develop more “balanced” lanes that get drivers home more frequently.
Still, Coates thinks reshoring is returning manufacturing to North American shores “like raindrops” as opposed to the “Tsunami-like” offshoring induced.
Yet it’s a trend picking up speed as since 2003 the rate of offshoring decreased by 70% of 80%, while reshoring initiatives increased 1500% over the same time span.