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Reshoring Supply Chains: It’s Time to do the Math

With the right policies in place to promote competitiveness, American manufacturing can make a strong comeback. We foresee a divergence from “shareholder primacy” toward an inclusive commitment to all stakeholders. We see success for the entire country, balancing the goods trade deficit, increasing manufacturing by 40 percent, creating 5 million manufacturing jobs, cutting the United States budget deficit, and restoring the middle-class and small-to-medium enterprise.

However, many pundits still maintain that it is not feasible to balance the trade deficit. One often-heard argument is that consumer prices would rise unacceptably, e.g. 20 to 50 percent. The reality is that such large price increases will not happen. The pundits fail to understand the power of sourcing based on total cost. clear during the COVID pandemic. 

Quantifying the costs and risks

TCO is a key tool in the sourcing decision process, quantifying whether the costs and risks avoided offset the often-higher U.S. manufacturing cost or price. Most of the issues are related to distance: freight, delivery, inventory, etc. Others are country-specific: rising wages, IP risk, or political instability. A broad range of costs and risks can be quantified using the free online Total Cost of Ownership Estimator®.

Companies doing the math correctly will largely fix the supply chain problem, but the process will take 30 to 40 years. To accelerate the trend, we need the United States government to reduce the American price disadvantage. The best way to do so is a combination of skills training, a lower dollar, and a value added tax replacing other taxes, especially local sales taxes and the corporate income tax. Corporations need to do their share with increased capital investment and training. 

It’s time for companies to do the math. Choosing United States-based manufacturing supports employees, suppliers, local communities, and the national economy while increasing profitability. 

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