Reshoring Initiatives Impact US Economy

 Reshoring Initiatives Impact US Economy

 Written by: Logan Schill 

“Reshoring involves the return of the production and manufacturing of goods to the company’s original country. It is the opposite of offshoring, which is the process of making good overseas to try to reduce the cost of labor and manufacturing,” cited by Freight Waves.

American offshoring started in the 1970’s by prominent public US companies. In the early 2000’s, US manufacturing companies created another boom to the world economy with their offshoring initiative and efforts to save money by bringing in products manufactured in Asian-Pacific countries such as China, Taiwan, Sri Lanka, Malaysia, Indonesia, India and Vietnam to mention a few because they are low-labor cost countries. Building a stronger world-wide economy provided cost savings to US manufacturing companies for both consumer and industrial market goods. However, events such as worldwide Covid-19 pandemic and the Russian-Ukraine War, have created supply chain issues in the United States.

Companies did not have a balanced manufacturing plan for a massive world-wide pandemic that has created supply chain disruptions for raw materials to US manufacturing companies and finished goods for consumers. The complexity of the Russian-Ukraine war has magnified supply chain issues. With severe supply chain issues and significantly increased freight costs, several US companies are now looking toward a reshoring initiative. Products will be manufactured in the US creating jobs and an upswing to the US economy.

Reshoring efforts can add up to $443 billion dollars to the US economy according to Thomas Net.  In its 2021 State of North American Manufacturing Annual Report, Thomas found several shifts in domestics sourcing trends and supply chain demands in the post-pandemic world.  The survey found that 83% of North American manufacturers are likely to reshore products, up 54% in March 2020.  According to the findings, if manufacturers bring on just one single-contract domestic supplier, $443 billion could be added to the US economic value.

One key factor for reshoring are the increased costs of freight. Chart on the right indicates rising cost of containers from China starting in July ’21 to beginning of 2022. Costs were around $2,500 per container in August to a high of $20,000 per container in September ’21. Average cost from July ‘21 to start of 2022 was $14,487.09 per container.

One specific product in high-demand has been nitrile gloves. Post-pandemic the US government and distributors are sourcing domestically. Production for nitrile gloves is increasing with two manufactures in the states. Nitrile gloves are an important personal protective equipment (PPE) item used by workers in many industries including medical, laboratory, automotive, food processing and several other industries. More than 95% of nitrile gloves are manufactured in Asia and less than 1% have been manufactured in the US.

SHOWA Group and US Medical Glove Company (USMGC) are both domestic manufacturers of nitrile gloves. SHOWA Group is expanding operations in Alabama, and USMGC has leased a one million square foot facility in Illinois to ramp up production.

SHOWA Group is installing two new production lines to double their production to 800 million gloves per year. SHOWA plans to add two more production lines in the near future to increase their output to 1.2 billion gloves per year. Increase in production will add nearly 100 new jobs to the SHOWA Group team. 

Reducing carbon dioxide emissions is an environmental impact reshoring products back to the US as indicated by the artboard on the right from SHOWA Groups website.

According to Richard Hepell, President and COO of SHOWA stated in a CNN interview, “We are trying to make sure the US Government knows we have a facility here. We’re bringing in the latest high-speed monorail production lines that will product three times more gloves per hour. This will help bridge the gaps between costs differences in Asia and US. The key to this is making sure to continue to invest in new technology, keep an eye on what’s happening in Asia, and then try to stay ahead of the curve in the US to keep us competitive.

USMGC will house up to 80 American-made nitrile glove machines capable of producing up to 8.1 billion gloves per year. The vision to create four major manufacturing hubs will create more than 3,000 direct jobs and 10,000 indirect jobs created in the US. “American customer service, reliability and quality control can only be delivered by eliminating dependence on foreign made machines, not just foreign made gloves,” said US Medical Glove CEO, Dylan Ratigan.

According to Nick Mallinger, President of Tanis Incorporated, “We are seeing our business increase as companies continue the reshoring initiative. We do business with both SHOWA Group and US Medical Glove Company. We are also working with Peleton, who recently purchased Precor in North Carolina. Peleton was having freight and logistics issues getting their equipment made overseas, so they purchased Precor to have control of their products and logistics domestically manufactured in North Carolina.”

Offshoring will continue to be part of the US economy. However, reshoring initiatives will be an ongoing effort as US manufacturers continue to battle raw material delays or shortages, freight costs and logistic issues. Reshoring is necessary to rebalance costs and the supply chain, especially in the United States. Reliable, dependable, and quality manufacturing companies have an opportunity to thrive with the current reshoring initiatives. Manufacturers will have more control of their products and costs as well as having the ability to hire more labor.

Works Cited

“Artboard 1.” SHOWA Gloves, https://www.showagroup.com/wp-content/uploads/2021/02/Made-in-USA-glove-reduces-impact-on-environement.pdf. Accessed 30 May 2022.

“Made in America.” SHOWA Gloves, https://www.showagroup.com/us-en/showa-made-in-america. Accessed 30 May 2022.

Mahoney, Noi. “Can US cash in on reshoring manufacturing opportunities?” FreightWaves, 6 January 2022, https://www.freightwaves.com/news/us-cash-in-on-reshoring-manufacturing-opportunities. Accessed 30 May 2022.

“NEW REPORT: Reshoring Could Drive $443 Billion in U.S. Economic Value Over Next 12 Months.” Business Wire, 2 June 2021, https://www.businesswire.com/news/home/20210602005529/en/NEW-REPORT-Reshoring-Could-Drive-443-Billion-in-U.S.-Economic-Value-Over-Next-12-Months. Accessed 30 May 2022.

“US Medical Glove Leases Almost 1 Million Sq. Feet for Nitrile Glove Factory.” PR Newswire, 26 August 2021, https://www.prnewswire.com/news-releases/us-medical-glove-leases-almost-1-million-sq-feet-for-nitrile-glove-factory-301363781.html. Accessed 30 May 2022.