Unlike few other events in recent memory, the global coronavirus pandemic illustrated the complexities of supply chains. It also highlighted the risks of relying on manufacturing that takes place overseas, limiting access to important medicines, machines and technologies on which societies depend. Although a trend toward onshoring could impact every facet of the U.S. economy, several recent examples are worth noting.
No single trend promises immediate change. However, taken together, these illustrations in the media suggest fundamental shifts are underway. These changes could create long-term opportunities in the form of new jobs, readier access to goods and more resilient supply chains that can withstand the next unpredictable event in the marketplace.
Trend 1: The U.S. government is investing millions of dollars in onshoring capabilities
Electronic chips have been a big focus over the past several years, and a $117 million contract for manufacturer GlobalFoundries underscores this priority, according to FedScoop.com. The federal government agreement illustrates how officials are focused on onshoring opportunities to bolster domestic security. In this case, the silicon-on-insulator manufacturer will relocate some of its production capabilities to Malta, New York, and begin delivery of chips in 2023. As FedScoop.com explains it, these chips are important because they are used in “precision guided munitions, hypersonic weapons and satellites.”
Other business executives see value in onshoring for chip production, too, particularly in light of massive demand for these products. A leader from Europe’s top chip maker, Infineon Technologies, explained to Nikkei Asia: “From a resilience perspective, [it’s] a wise thing to do.”
Trend 2: Capital expenses rise at companies seeking supply chain resilience
Businesses know money talks—and gets things done. Companies are definitely getting things done, as illustrated by a 20% increase in capital expenditures across the S&P 500 companies in early 2022, according to the Financial Times. One expert attributed the flow of new dollars compared to year-ago levels to the fact that “onshoring or rejigging supply chain risks” comes at a cost. Businesses are pouring funds into manufacturing and other core capabilities needed to make the goods they bring to market. Normally, companies might pull back on CapEx amid rising inflation and global conflict. Yet “in this case they may have to spend more than they otherwise might,” added Savita Subramanian, a Bank of America executive.
Other factors contributing to increased capital expenses that further support onshoring activities include the post-pandemic bounce back of industries including energy and aerospace, according to JP Morgan.
Trend 3: Companies navigate onshoring needs in a rapidly changing economy
Although onshoring is an exciting trend for proponents of U.S. manufacturing, it isn’t always an easy proposition. That requires companies to invest not only in manufacturing facilities but also in the skill set and logistics they have in place to make it possible. A handful of major businesses already have invested $400 billion in U.S. manufacturing in the past few years, according to WealthManagement.com.
Yet money alone won’t solve the puzzle of the rapidly changing economy and unique manufacturing needs. For example, new veins of manufacturing—such as electric vehicles—will soar in importance, leading companies to pivot to meet the market and new businesses to enter the market for the first time. Meanwhile, manufacturers overall face common challenges such as access to utilities, worker shortages and concerns from neighboring communities that don’t want a manufacturing facility nearby, WealthManagement.com noted. Expenses also are on the rise, which will cut into companies’ profitability.
Onshoring is among the most exciting trends shaping the U.S. economy today. Here at Plastics Manufacturing Resources, we’re committed to helping businesses overcome supply chain challenges, access custom-made plastic components and achieve the goals and dreams of their customers. To learn more about how we can help organizations thrive in the era of onshoring, contact us at 508-878-8280 or sales@plasticsmfg.net. We look forward to hearing from you.
