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In his June 2021 editorial, ASSEMBLY's editor in chief John Sprovieri discussed President Biden's February executive order to review critical U.S. supply chains. I would like to build on John's analysis and offer advice to the Biden administration.
Shortening and closing supply chain gaps for essential products will immediately benefit the following industries: personal protective equipment (PPE), medical device manufacturing, electronics and defense. Sixty percent of reshoring cases after March 2020 mention the pandemic as a factor in the decisions. Already, reshoring cases among manufacturers of medical devices and PPE are double compared with last year.
The volatility and uncertainty resulting from trade wars and the COVID-19 pandemic, coupled with increased consumer demand for faster delivery, customization and responsiveness, is helping to promote reshoring and foreign direct investment (FDI) in the United States. Reshoring and FDI are both motivated by the same logic: the agility and financial advantages that companies achieve by producing near their customers.
Since 2010, more than 4,700 companies have brought back some or all of their manufacturing operations and sourcing to the U.S. Despite COVID-19, reshoring was up in 2020.
COVID-19 has accelerated deglobalization in manufacturing, but that shift was already underway before the pandemic. Between 1990 and 2016, global trade had been growing at average annual rate of 4.9 percent, according to the World Trade Organization.
Growing sustainability and resilience concerns brought about by trade war uncertainty and the COVID-19 pandemic have companies looking for ways to mitigate risk and increase agility.
Deglobalization was already happening before the coronavirus brought the world to a grinding halt. Global supply chains that were once so appealing were becoming less attractive due to geopolitical turmoil, shifting priorities, rising costs, trade wars and environmental concerns.
