Onshoring, the practice of relocating production and supply chain operations back to a company’s home country, has gained significant momentum in recent years. This shift is driven by factors including supply chain vulnerabilities, geopolitical risks, labor costs abroad, and consumer preference for domestic goods. Below are some key benefits of onshoring, accompanied by examples and trends observed across industries.

Benefits of Onshoring

1. Enhanced Supply Chain Resilience
   The COVID-19 pandemic and subsequent geopolitical disruptions exposed vulnerabilities in global supply chains. By bringing operations closer to home, companies can reduce dependency on distant suppliers, mitigate risks, and improve responsiveness. This is particularly vital for industries like automotive and electronics, where delays in overseas manufacturing have historically caused significant bottlenecks.

2. Cost Control and Energy Savings
   U.S.-based companies benefit from reduced logistics costs and the country's competitive energy prices. For example, natural gas prices in the U.S. are significantly lower compared to Europe and Asia, offering a cost advantage for energy-intensive manufacturing.

3. Job Creation and Economic Growth
   Onshoring creates jobs and stimulates local economies. In 2022 alone, over 350,000 jobs were reshored in the U.S., reflecting a 25% increase from the previous year. This trend supports not only manufacturing jobs but also related industries like warehousing and logistics.

4. Improved Quality Control and Intellectual Property Protection
   By producing closer to their end markets, companies gain better oversight of manufacturing processes, ensuring quality and safeguarding intellectual property. This is especially critical in sectors such as pharmaceuticals, semiconductors, and aerospace.

5. Sustainability and Customer Demand
   Onshoring can align with sustainability goals by reducing the carbon footprint associated with long-distance shipping. Moreover, many consumers prefer “Made in the USA” products, associating them with high quality and supporting local economies.

Trends in Onshoring

1. Sector-Specific Growth
   Industries such as electronics, chemicals, and automotive manufacturing are leading the onshoring movement. For example, BMW has long leveraged its South Carolina plant as a hub for North American operations, while La-Z-Boy has recently bolstered its U.S. manufacturing capacity.

2. Government Incentives
   Legislative measures such as the CHIPS Act and the Inflation Reduction Act have encouraged domestic production, particularly in critical sectors like semiconductors and electric vehicles. These incentives make onshoring economically viable and promote long-term supply chain resilience.

3. Real Estate and Infrastructure Expansion
   Onshoring has driven a surge in industrial real estate development. U.S. Census Bureau data shows that annualized manufacturing construction spending reached $237 billion by mid-2024, a significant increase from $128 billion two years prior. This trend highlights growing investment in domestic production facilities.

4. Emerging Markets as Nearshoring Hubs
   While onshoring is a key focus, nearshoring to neighboring regions such as Mexico has also become popular. Mexico’s proximity to the U.S., favorable trade policies under the USMCA, and growing infrastructure make it an attractive alternative for companies seeking cost efficiency alongside supply chain agility.

Conclusion

Onshoring is more than a temporary response to global disruptions; it represents a strategic shift toward sustainable, resilient, and efficient manufacturing. By re-evaluating global supply chain strategies, companies are positioning themselves for long-term success while contributing to local economies. The combination of private investment, government incentives, and shifting consumer preferences ensures that the trend will continue shaping the future of global production.

References

1. Kidder Mathews, Onshoring, Nearshoring, & Reshoring Strategies Sail into New Territory, October 2024.

2. Foley & Lardner LLP, Back to (North) America: Companies Reassess Their Supply Chain Strategies, November 2024.