What's the point at which manufacturers decide to shift production from China and return it to the U.S.? Gregory Burkart, managing director and leader of Duff & Phelps Site Selection and Incentives Advisory practice, offers some insight into the calculation with SupplyChainBrain.
According to Greg, there is a “tipping point” at which companies decide that manufacturing in China is no longer economically feasible, and return at least some production to the U.S. But it’s more than a matter of simply comparing factory wages between the two countries. Businesses that once focused almost exclusively on manufacturing and logistics cost now must take into account the heightened risk of siting production at great distances from their markets.
The coronavirus pandemic demonstrated how even temporary disruptions in offshore manufacturing can wreak havoc with global supply chains. Today, additional considerations are being thrown into the mix, including the level of innovation and concerns over intellectual property protection. Finally, there’s the issue of rising trade tensions between the U.S. and China, resulting in heavy and unpredictable duties in both directions, higher overall costs and reduced access to markets.
Companies had been aware of such risks before this year, but it took a pandemic to drive the point home. They began to feel its effects in late 2019 and early 2020, with the first wave of factory shutdowns in China and other parts of Asia where the disease struck first. “The expanded equation for determining whether or not to reshore some operations started with the pandemic,” says Greg.
Watch the full SupplyChainBrain video here.
