Reshoring – the Forgotten Trend
As consultants, a lot of our time is wrapped up around the issues that are common pain points and areas of concern for our clients – labor, supply chain, and government spending. Our presenters discuss these items with our clients directly and from the stage as we talk to groups across the country. They are real problems and deserve the time and attention. I would like us to take a step back and observe something powerful going on in the US, which is that Reshoring and Foreign Direct Investment (FDI) are highlighting the desirability of being in the US. Reshoring and FDI are not occurring because of a vague hope for the future; they are occurring because of cold analysis of where the future opportunities lie. In that regard, the vote is in favor of the US.
Kearney, a management consulting firm, reports that the US received the highest global confidence ranking for the ninth year in a row in 2021. This year's top 10 countries are essentially the same as in 2020, with the two changes being that Spain has joined the top 10 while China has fallen to number 12 in the world this year from number 8 in 2020.
In addition, according to reshorenow.org, the number of companies reporting new reshoring in 2021 is projected to reach a very impressive 1,334. These companies move back to the US for a variety of reasons, but generally for very sound financial reasons rather than a general sense of patriotism. In addition, reshorenow.org states that FDI is projected to bring 510 companies into the US in 2021. The total 1,844 companies would be a record high for reshoring and FDI. Remember – these moves are significant and costly, and company leadership does not make these decisions on a whim. They have calculated the costs and determined that a positive ROI can be anticipated from being in the US.
The reshoring and FDI initiatives and confidence ratings should give decision makers a sense of determination and risk-taking as we look into the future. Headlines can dissuade some from stepping out and making bold decisions. Stepping back and looking at the broader view can help you step forward with confidence. It is important to layer in where you fit into the economy and what key leading indicators are signaling regarding your future. Please visit our website for more information on how to do this.
Written by: Alan Beaulieu, President, ITR Economics, for ITR Economics.