Kearney finds reshoring has moved beyond the drawing table

Kearney's 10th Annual Reshoring Report finds a potent mix of shifting consumer sentiment, increased scrutiny on ESG stances and labor policies, government incentives, and improvements in automation have aligned to make reshoring and nearshoring powerful commercial realities that are changing the face of international trade.

CHICAGO, April 13, 2023 /PRNewswire/ -- Reshoring, and nearshoring, have finally matured into commercial realities, according to a new study released today by Kearney, a leading global consulting partnership. Kearney's 10th Annual Reshoring Index Report finds that reshoring initiatives have become so successful that companies that have taken a wait-and-see approach to locating manufacturing operations in the past are now scrambling to find facilities in Mexico and the United States. However, the report also cautions that the road to reshoring is harder than most companies had expected and requires thorough preparation and strategic planning.           

The Reshoring Index is a unique barometer for tracking the extent to which America is reshoring manufacturing back from low-cost countries and regions (LCCs) in Asia that have benefitted for decades from US companies offshoring their manufacturing operations. The Reshoring Index is determined by dividing the import of manufactured goods from the 14 Asian LCCs by the US domestic gross manufacturing output to calculate the manufacturing import ratio (MIR). The Reshoring Index reflects the year-on-year change in the MIR.

Since 2013 Kearney has noted a slow shift in commercial production away from China to other low-cost Asia Pacific countries and regions (now known as "Altasia") and Mexico.

In Asia this shift has primarily benefited Vietnam, Taiwan, and India, but Mexico has also accounted for a larger share of US imports in the past few years. Since the onset of the COVID-19 pandemic, American imports of Mexican manufactured goods has grown from $320 billion to $402 billion (+26 percent). That number includes many Chinese companies, which have commenced manufacturing operations in Mexico, building and expanding capacity closer to the US domestic market.

As for reshoring, what 10 years ago was merely a promise is now a fact. Kearney's latest CEO survey indicated that 96 percent of CEOs are, at a minimum, evaluating the potential to reshore their operations, an increase from 78 percent in 2022, with most already having decided to reshore, or already reshored. Much of this activity is, directly and indirectly, consumer-driven with US consumers becoming far more comfortable with paying a premium for American-made products and increasingly concerned about companies' ESG stances, reducing carbon emissions, and countering human rights violations. Other factors boosting reshoring include new policies from Washington, D.C., and access to increasingly more affordable automation.

"As a result of the shifts documented in our report, in 2022, US imports of manufactured goods from the 14 Asian LCCs and regions tracked totaled 14.1 percent of US domestic gross manufacturing output, down from 14.49 percent in 2021," says Patrick Van den Bossche, partner and lead author of the annual Reshoring Index report. "This significant trend shift marks the first time that domestic manufacturing growth outpaced Asian LCC imports growth since 2019, resulting in a positive 2022 Reshoring Index of 39.

"We finally seem to be heading toward a sustained reshoring movement," says Omar Troncoso, partner in Kearney's consumer and retail practice. "Reshoring is becoming both a cause and an effect of companies significantly rethinking how they construct and operate a supply chain that will carry them forward into the next decade."

Read the full report here.

About Kearney

Kearney is a leading global management consulting firm. For nearly 100 years, we have been the trusted advisor to C-suites, government bodies, and nonprofit organizations. Our people make us who we are. Driven to be the difference between a big idea and making it happen, we help our clients break through. For more information, visit www.kearney.com.

Media Contacts:

Emily Burnham and Ryan Dicovitsky
Dukas Linden Public Relations
[email protected]

SOURCE Kearney