11 May 2020

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The Reshoring Index: Change Ahead

 

During these trying times, it can sometimes be helpful to take a step back and look at the bigger picture. Even before the current COVID situation, manufacturing was undergoing some significant shifts that may have far-reaching implications for the years to come. These changes are documented in the Reshoring Index.

 

The Reshoring Index

 

As a result of the recent trade war, we’ve seen a substantial change in something known as the Reshoring Index. Essentially, this index compares U.S manufacturing output against that of 14 low-cost countries, namely China, Taiwan, Malaysia, India, Vietnam, Thailand, Indonesia, Singapore, Philippines, Bangladesh, Pakistan, Hong Kong, Sri Lanka, and Cambodia. Key components within this index have recently shown dramatic shifts in trends that, until recently, had been greatly favoring foreign imports. To put it simply, domestic manufacturers had a great 2019.

 

The Importance of Imports

 

To understand the importance of these recent shifts, one need only look as far as the goods we import. The MIR, or manufacturing import ratio, shows total manufactured goods imported as a percentage of domestic manufacturing gross output, basically how much of our total manufacturing happens overseas. This number dropped significantly in 2019, meaning that imports made up less of the total than the year before. 

 

According to Kearney, a consulting firm that focuses on global manufacturing, this reduction in the MIR is the most significant reduction in imports they have seen since they started tracking the reshoring index. 

Coronavirus And The Road Ahead

 

Additionally, Kearney speculates that the current outbreak of Covid-19 will have an even greater impact on manufacturing across the globe. They conclude that companies will become more risk-averse, and avoid “putting all of their eggs in the lowest cost basket”. This means that countries that have, in recent years, dominated the market, will likely see a decline in overall manufacturing exports. 

 

Further Reading And Resources 

 

Kearney has created a site for business leaders, entirely dedicated to Covid-19 related topics within the world of manufacturing. These resources can help you stay informed with up to date information about the industry and what you can do for your business.

 

Whatever happens in the months and years to come, it’s important to remember that American manufacturing continues to be your best choice for ensuring quality craftsmanship. And if you find yourself with an excess of downtime during this period of quarantine, check out our extensive library of blogs. With information on a variety of topics, you’re sure to find something that will keep you informed and entertained.

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