US companies looking to return home from China face significant problems

As the United States awakens to its supply-chain vulnerabilities amid heightened pressure on companies to “reshore” from China, it is grappling with an uncomfortable truth: most will not end up relocating to the US. And, business experts say, the relatively few that do probably should not have left in the first place.
“Reshoring was just something nice, a nice idea, mostly for companies that should never have outsourced to a country like China,” said Renaud Anjoran, chief executive of Shenzhen-based Sofeast, which advises companies manufacturing in China and Vietnam. “Their total cost was not really that much lower, they didn’t save that much, they were not that labour-intensive.”
Accurate figures on reshoring are hard to come by. The Kearney Reshoring Index showed record shifts of US production from Asia in 2019, but this measures macroeconomic trends not individual jobs, companies or where they move to.
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Another online “Reshoring Initiative”, which claims that “around 900,000” jobs returned to the US between 2010 and late 2019, relies on Google searches and does not factor in how many jobs were lost.
Patrick Van den Bossche, a Kearney partner who pioneered the Reshoring Index, said that companies often announce production shifts to the US, attracting headlines and official praise, without following through.
“There are these bold statements about bringing everything back from China,” said Van den Bossche. But all too often, 5,000 promised jobs are quietly scaled back to 500 even as deadlines stretch into years, he said. “Soup is never eaten as hot as it’s cooked. There’s a lot of blowhard stuff going on right now.”
That has not stopped the calls from Washington to “reshore” and “decouple” the world’s two largest economies, fuelled by Covid-19, the trade war and mounting US-China tensions.
The Defence and Commerce Departments are pressuring US companies to sharply reduce or end China sourcing and manufacturing; the State Department is working with Australia, India and Japan to reroute supply chains; and President Donald Trump signed an executive order in May directing the US International Development Finance Corporation ” America’s development bank for emerging markets ” to bolster US manufacturers.
“My goal is to produce everything America needs for ourselves and then export to the world,” Trump said on a recent visit to a Pennsylvania factory.
Congress, for its part, has introduced several bills recently aimed at reshoring manufacturing and revitalising US industries. Legislation ” targeting industries from rare earths and medical products to drones, steel and semiconductors ” calls for subsidies, tax breaks, national security safeguards and investment restrictions or bans on Chinese companies.
Coronavirus has been a painful wake-up call that we are too reliant on nations like China,” said US Senator Lindsey Graham, Republican of South Carolina.
Economic and political logic do not always correspond, however. Manufacturers relocating from Asia to the US are often confronted by creaky factories, outdated infrastructure, underdeveloped supplier networks and mismatched labour, analysts said.
“I don’t believe that countries, any country around the world, can reskill people very quickly,” said Rafael Salmi, president of Richardson RFPD, a technology engineering company based in Geneva, Illinois.
“You’re going to have hundreds of thousands of Uber drivers or Instacard delivery people or hairdressers that lose their jobs. And it’s like, wow, I’m going to create a hi-tech factory? The access to talent is still a big challenge.”
High-end sportswear maker Kitsbow decided last year that US production made sense given the long lead times, cash flow concerns and language gaps with its Chinese suppliers. But implementing a just-in-time inventory system ” which is second nature in Asia ” was challenging back in North Carolina.
“We knew we would have to train some of the sewers. We didn’t realise we would have to train almost all of them,” said Kitsbow chief executive David Billstr…
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