Onshoring and Reshoring are More Than Just Buzzwords

Onshoring and Reshoring

There’s been a good deal of anecdotal evidence that businesses are working toward onshoring or reshoring following the pandemic. But new data is revealing the trend is more than anecdotal.

The COVID-19 pandemic highlighted many of the weak spots in supply chains, offshoring being one of the most glaring. When China shut down manufacturing just as the world went on an e-commerce spending spree, consumers were left empty-handed and unhappy. The fallout since then has been the failure of many retailers and manufacturers who weren’t able to pivot and deliver what consumers wanted on demand. That left companies reexamining their supply chains, practices, and sourcing.

Now that we’re a couple of years down the road, onshoring has kicked in for real. Walmart, for instance, began a “Made in America” initiative in 2021 following pandemic disruptions. According to the “Reshoring Initiative,” in 2022, reshoring restored over 200,000 jobs in the United States. All these figures are good for American workers, but what about the supply chain?

The numbers seem to back up the idea that reshoring is here to stay and that by doing so, companies are making their supply chains more resilient. A recent report on resilience from Accenture points to projections that, by 2026, 65 percent of companies plan to buy key items from regional suppliers, up from the current number of around 38 percent. Some 85 percent of organizations plan to make and sell their products regionally within the next three years, up from 43 percent today.

To get there, companies are investing heavily in software and technology. So far, in 2023, Accenture reports that organizations are investing an average of $1 billion to digitize, automate, and relocate their supply and production operations. That figure is expected to increase to at least $2.5 billion in 2026.

These plans stand in contrast to the immediate, knee-jerk reactions when the pandemic began. With suppliers and supply chain partners largely offshore, efforts to provide just-in-time deliveries failed despite years of operating with global partners in that manner. Now that companies have had some breathing room, they can rethink and strategize, including a push for onshoring. Data capture tools, AI, and machine learning are all tools that are helping accelerate this movement.

Moving forward, companies will need to lean heavily on these tools to make onshoring a sustainable model. Using digital twins to help configure supply chain networks is an example. These new networks will also need to build in flexibility and agility so that they are far more resilient to future unexpected disruptions. Onshoring is one piece of that sustainable picture—the physical piece of the puzzle–but the right tools are just as important.

A final piece of the equation is upskilling the workforce. While there’s plenty of talk that technology will replace workers, the reality is that these employees will be shifting their skill sets, moving away from manual tasks and into more tech-focused arenas. Put together, onshoring can lead the way to a more resilient supply chain.