WORDS BY: DAN VARRONEY
CEO OF PROTOMAC CORE CONSULTING
AND THE AUTHOR OF REIMAGINING INDUSTRY GROWTH
Consumers could not find essential products during the pandemic and many thought it was the pandemic itself that caused supply chains to buckle under the strain. Container shortages, port bottlenecks, shipping price increases, and trade imbalances added frustration to industries, companies, and consumers. However, the cracks in the supply chains existed before the pandemic. Global interconnectedness, interdependence, and interrelatedness requires new thinking. The “just in time” approach is fading as “just in case” strategies emerge in the form of reshoring and nearshoring strategies for industries and companies.
Numerous products are still in short supply, but it is the scarcity of semiconductors that slows down everything from the manufacturing of products to the delivery of everything from dishwashers to automobiles.
CEO’s are leaning in and including “onshoring, reshoring, and nearshoring” in corporate presentations to investors and shareholders. Bloomberg notes that references to these terms are up over 1000% compared to the pre-pandemic timeframe. Dodge Construction network data reports a robust 116% increase in U.S. Manufacturing facilities over the past year. Companies including Intel and Taiwan Semiconductor are constructing plant facilities in Phoenix, Arizona.
Nearshoring and reshoring are not going away. In a recent survey conducted by Kearney, 92% of CEOs view reshoring favorably. Since 2010, 1.3 million jobs have been added and over 1,800 companies report foreign direct investment since 2010 (Reshoring Initiative 2021 Data Report).
Reimagine Sourcing and Supply Chains From the “Outside In”
Ranging from the great recession to COVID-19, the conflict in Ukraine, and 40 year record inflation, the U.S. has experienced considerable volatility and change. None of this is new in history. What is new and unique is the speed that new challenges emerge, and how quickly everyone is aware of them. When it comes to reshoring and nearshoring, the time seems right for reimagination.
Today’s focus is narrow and too siloed. A more expansive approach, one that incorporates collaboration and innovation within industries, is a more likely way forward when it comes to nearshoring and reshoring.
Industries bring the collective wisdom, insights, and scale necessary to build practical and durable solutions. Approaching it from this perspective, industries can build their structural frameworks consisting of their own supply chains, study points of failure, and build pre-competitive strategies that help ensure durable and resilient supply chains.
Such strategies to address macro policy and logistics concerns are already being implemented. For example, American Eagle has reached outside traditional thinking and built out a logistics platform that can be used by others in the apparel industry. As is the case with other new innovations, the global pandemic accelerated the launch of this unique strategy. The effort is led by Shekar Natarajan, chief supply chain officer at American Eagle. Almost 50 other companies are using the platform, and Natarajan is seeking to add an additional 200 brands.
Strategic partnerships between industries and their trade associations are also proving invaluable. Trade associations are accelerating their traditional roles as industry advocates, and they are ready to meet the moment.
They can be positioned as strategic business units, serve as neutral integrators, and collect information on points of failure throughout the supply chain. From there, they develop policy solutions, implement advocacy strategies, shape a favorable business environment, and deliver road maps leading to resilient supply chains.
These strategic partnerships between industries and their trade associations already help deliver unified advocacy strategies and convey outcome-focused messages to government officials. For example, the recreational boating and baking industries have built their own strategic partnerships with their trade associations.
• The frozen foods industry, a significant provider of food for our nation. While frozen foods offer a wide array of affordable and healthy choices , they also help consumers reduce food waste due to their long shelf life. Through the American Frozen Food Institute, the industry is leaning into this attribute to grow the marketplace for frozen foods, including to food insecure
• The unmanned systems community, its rapidly developing technologies, and its hope for a new, different, and possibly better world for us all. As with any truly disruptive technology, the industry has a chasm to cross. Their dominant trade association, the Association for Uncrewed Vehicles, is working hard to achieve widespread public acceptance of autonomous vehicles by building a web of relationships across a vast community of natural market evangelists.
• The asphalt pavement industry, which could be described as a community of data-driven engineers dedicated to doing good for everyone. From sustainability to safety to highway design, the National Asphalt Pavement Association is where and how new research and development takes place. It is also a destination location where the industry connects, learns from one another, and seeks ways to continuously improve our quality of life through local, regional, and national road and highway systems that traverse and connect America.
These partnerships provide a way forward on everything from developing industry fail-safe options to where and how to store excess parts and goods for the next national emergency.
Industries and suppliers seeking to accelerate their reshoring efforts can leverage their strategic partnerships to build cooperative local government relationships. For example, they can:
• Work with state and regional transportation authorities and advocate to secure the necessary transportation or rail infrastructure to ship goods.
• Leverage their strategic partnerships to build cooperative local government relationships to provide education and training programs that deliver a trained and skilled workforce.
Increased reshoring and nearshoring is especially possible through strategic partnerships between industries and trade associations. They are effective, and they move the needle for industries. This approach is worthy of immediate exploration, and over time strategic partnerships should be implemented or expanded for every industry and trade association.