What Is Reshoring?
Reshoring is the process of returning the production and manufacturing of goods back to the company's original country. Reshoring is also known as onshoring, inshoring, or backshoring. It is the opposite of offshoring, which is the process of manufacturing goods overseas to try to reduce the cost of labor and manufacturing.
- Reshoring, also known as onshoring, is the opposite offshoring and involves the returning of the production and manufacturing of goods to the company's original country.
- Reshoring can help strengthen an economy by creating manufacturing jobs, reducing unemployment. and balancing trade deficits.
- Reshoring doesn't always have positive results, where a company underestimates the costs and the logistical planning involved.
- Some products are best left offshore, particularly those native to other countries.
How Reshoring Works
Despite the fact that offshoring often has financial benefits, including cheaper labor and lower production costs, reshoring can strengthen an economy. Reshoring creates manufacturing jobs, which strengthens the workforce, reduces unemployment, and helps balance trade deficits.
In many cases, in the U.S., companies even find that the extra cost to manufacture in the states is so slight that the benefits would outweigh the labor costs, particularly considering the fees involved in customs and shipping from overseas.
Reshoring does not always have positive results for the companies involved, however. If the effort is poorly managed, or if the circumstances are not conducive to a smooth transition, reshoring efforts can fail. Often, a company underestimates the costs and the logistical planning involved. To avoid failure, companies often call in consultants that specialize in reshoring.
While reshoring is a way to stimulate the domestic economy, it is important for companies to remember that some products are best left offshore, particularly those native to other countries. For example, crops grown locally in China should also be processed there so that they remain close to the source.
Examples of Reshoring
For decades, many U.S. companies engaged in offshoring, often sending their manufacturing plants to China, Malaysia, Vietnam, and other countries with a lower cost of labor. However, after the Great Recession of 2008, these companies found alternative ways to cut costs by reshoring and returning their business to the U.S. to create jobs for unemployed Americans.
Since the Great Recession, reshoring has become a political priority. To combat the recession, President Obama introduced a number of measures to promote reshoring to stimulate the economy. In 2011, President Obama launched the SelectUSA program, which connected companies with resources available on federal, state, and local levels. In 2012, he spoke at the White House's Insourcing American Jobs Forum, promoting the idea of bringing more jobs back to the U.S. Then in 2013 during his State of the Union address, President Obama stressed the importance of reshoring by major companies such as Ford and Apple.
More recently, according to Recode, most reshored jobs—approximately 60% from 2010 through 2016—have come from China because labor there has become more expensive. The COVID-19 pandemic also spurred new interest in reshoring as global supply chains became disrupted by outbreaks and lockdowns. In fact, for 2021 reshoring activities were expected to hit record highs.