Since the start of 2021, Cornerstone has observed unprecedented interest from U.S. manufacturers exploring ‘onshoring’ or ‘nearshoring’ options. The industrial sector is facing significant challenges due to the COVID pandemic, political and social unrest, and growing pressure for companies to reduce their carbon footprint. To alleviate these issues, organizations are looking to move and/or build industrial facilities close to their customer’s national borders (onshoring) or bring them back if they had previously moved abroad (called reshoring). Many companies also are encouraging their downstream parts suppliers to do the same or to situate multiple smaller operations close to their facilities (nearshoring). For industrial facilities in the United States this means setting up production in North America within the same region as their customers.

WHAT IS DRIVING THE PUSH TO ONSHORE MANUFACTURING?

One of the primary drivers for looking to onshore manufacturing operations includes supply chain challenges. They are seeking to determine how to restore supply chains amid the pandemic impacts. Current consensus indicates the highest priorities are:

• medical supplies and pharmaceuticals;
• rare earth minerals;
• semiconductors;
• large capacity batteries;
• strategic materials which are critical for common goods (furniture, construction/building supplies, toilet paper).

The pressure includes increasing demands from consumers for improved speed, while not sacrificing the service and quality of the goods. The talk in boardrooms is how to pull off plans that are sustainable while balancing the most dominant factors of costs and margins. Another strong driver is the pressures of ESG – Environment, Social, and Governance practices. The principal environmental factor under the “E” propelling the onshoring topic is pressure to reduce carbon footprint. Simply stated, the carbon footprint calculation for a particular consumer product includes the carbon generated from procurement of raw materials, production, and transport/delivery. This is known as “end-to-end” in supply chain management. Another factor that could compel manufacturers to increase and/or build domestic production, are pending incentives associated with onshoring or nearshoring costs. In the proposed Infrastructure Investment and Jobs Act, the Biden/Harris Administration has proposed new monetary incentives for moving to the U.S., taking the sting out of the related costs. As of August 11, 2021, the U.S. Senate passed this Infrastructure Framework in a bipartisan vote, which now goes on to the House. However, at the current time, many tariffs imposed during the Trump Administration remain in place.

BENEFITS OF ONSHORING

Consumer, investor, and governmental pressure to reduce carbon footprint is real and, by all accounts, here to stay. A manufacturer or distributor’s end-to-end carbon footprint can be – and many times is – summed up in a “score.” The data used for scoring includes direct and indirect emissions in the value chain and are derived from parameters of greenhouse gas emissions, known as Scope 1, 2, and 3. For parts suppliers, their reduction efforts and scores have an impact on their sales to upstream industrial operations trying to reduce their overall carbon footprint. If a supplier can decrease their numbers by onshoring or nearshoring, they can achieve a better synergy with their customers and increased market share.

CHALLENGES OF ONSHORING

Without question, decarbonization goals are challenging and the prospect and planning of onshoring can be daunting. The dominant factors of production costs, including labor, regulation, taxes and workforce, are immense considerations that require deep deliberation. Whether your organization’s ownership is contemplating reshoring or is considering projects to reduce the carbon footprint for a U.S. based plant, Cornerstone advises clients to engage and collaborate with Subject Matter Experts (SME).  A seasoned SME can save a tremendous amount of time in both cases. In this age of constant pressure to ‘move the needle’ swiftly, the tasks beg for a multidisciplined team.

FURTHER ESG INFORMATION

Whether your organization is seeking to develop an ESG program; identify targets for improvement; validate baseline and tracking data of decreased carbon, waste or water footprint; or address customer requirements; Cornerstone has the expertise to assist. Our associates will partner with your team to collaborate, strategize, plan, and execute a program that not only promotes continual improvement but is also sustainable. Our holistic approach includes but also looks beyond compliance to uncover strategic opportunities for improvement; thereby enabling your organization to make proactive decisions to integrate into your core business strategy. Contact us at info@corner-enviro.com to get started today.