Since World War II, the United States has experienced substantial ebbs and flows in manufacturing. Immediately post-war, the U.S. emerged with a diverse, efficient manufacturing sector that continued through much of the 20th century. But by the early 2000s, offshoring— or the relocation of business processes overseas to take advantage of lower costs—saw its peak, with many manufacturers slashing Stateside employment. In 2014, the manufacturing sector contributed around 12 percent to the U.S. GDP (where it remains as of 2021), down from 21 percent when outsourcing and offshoring began in earnest.  

However, since the pandemic, organizations are setting and meeting serious goals to create more U.S.-based jobs, fostering a resurgence of worker opportunities, increased economic growth, and a renewed competitiveness from American companies. These changes, coupled with meaningful commitments from business and government leaders to boost domestic production, are poised to improve the role and rate of manufacturing throughout the country.

Covid’s Unanticipated Impact

Since 2020, the world has experienced an unprecedented disruption of supply chains, driving North American companies to reconsider how and where they operate their facilities. China—the center of global manufacturing for the last decade—is also losing its supremacy in the sector and seeing declines in factory output.

Covid-19 highlighted the vulnerabilities of our global supply chains. This, along with long-term disruptions from travel restrictions and quarantines, brought into focus the need for domestic manufacturing, particularly of essential items like pharmaceuticals and medical supplies. In a crisis, just-in-time supply chains and lean production can be prohibitive. For example, Toyota, long heralded as having the gold standard of production models, is revamping how it handles its inventory, making supply chain resilience a priority after facing pandemic-related semiconductor shortages and production setbacks.

According to Kearney, 96% of U.S. CEOs say they are evaluating reshoring as a strategy, with a majority committing to the practice as soon as possible. Reshoring initiatives have been so successful, companies who have yet to begin the process are struggling to find domestic facilities. Construction of new manufacturing facilities reached $108 billion in 2022, the highest annual total ever recorded.

“We seem to be heading toward a sustained reshoring movement,” says Omar Troncoso, a partner at Kearney. “Reshoring is becoming both a cause and an effect of companies significantly rethinking how they construct and operate a supply chain that will carry them forward into the next decade.”

New Opportunities for Growth

In the U.S., most manufacturers are pursuing reshoring or near-shoring strategies (near-shoring is the practice of bringing manufacturing closer to customer markets—for example, Mexico is a common choice for American companies). Over the past 12 years, more than 1.6 million jobs have returned, with much of that progress being made recently. In 2010, 5,800 jobs were reshored. By 2022, that number exceeded 350,000.

Some of the major instigators of progress have come from new legislation and a renewed call for public/private partnerships. The CHIPS and Science Act, signed into law in August 2022, devotes $52.7 billion to domestic semiconductor manufacturing, which has already generated an uptick in investments and 44,000 new jobs. The Inflation Reduction Act, also signed in August 2022, reduces the costs of adopting clean technologies and boosts investments in clean electricity, electric vehicles, and emerging carbon-capture efforts.

In alignment with these new laws, manufacturing projects for EV batteries and semiconductors have catapulted the reshoring of vital jobs, representing more than half of all reshored roles announced last year. This stimulus from the federal government will drive ongoing investments in manufacturing for batteries and other components, with major companies like GM and Samsung already among those seeking to expand their footprint in the United States.

As this trend continues, technologies designed to boost efficiency and productivity will become more prominent, allowing for reshoring to become a viable strategy for more organizations.

Ongoing Technological Innovations

Technology is, in part, a driver of reshoring. With electric vehicle batteries and computers/electronics being the most active products for reshoring as of Q3 2022, ongoing emphasis on technological innovation will continue to expand the number of domestic manufacturing jobs. Manufacturing-specific software is also making reshoring more achievable, along with the growing sophistication of artificial intelligence and machine learning, allowing organizations to automate core processes. 

In addition, companies have introduced new technology to influence several aspects of manufacturing, including inventory and materials management, as well as digital manufacturing engineering, which allows for the quick design and implementation of production processes. Collaboration tools are also becoming more prominent fixtures on factory floors, with digital workflows via mobile devices to solve problems quickly and effectively. 

As technology develops and becomes more intuitive, reshoring becomes increasingly viable for more organizations. Beyond improved collaboration and efficiency, technology can also help facilitate crucial training and improve employee engagement, reducing attrition and keeping quality hires on staff.

An Encouraging Outlook

Reshoring presents both tremendous opportunities and new challenges. In the U.S. workforce, the widening skills gap remains a serious issue as organizations seek workers with the right technical expertise. Additionally, initial investments to reconfigure supply chains and invest in new technology can seem initially prohibitive to some leaders. But as reshoring continues its upward trajectory, these issues will become easier to rectify, especially with an increasing consumer demand for locally made products and the dynamic nature of global trade.

The United States has the potential to regain its status as a center of global manufacturing by leveraging technology, investing in education and employee development, and facilitating an environment that supports ongoing innovation.