Reshoring: Risky Business

Welcome back to another exciting issue of The Supply Times. This week, we look at the potential implications of reshoring, as well as what makes a good job and where to find them. I’ll also share a list of what I’ve been reading, watching, listening to, and thinking about.

Onward!

Industry Highlights: Reshored in the USA

At the risk of sounding like a broken record, supply chain woes are still in full effect. The war in Ukraine continues on, and a new surge of Covid in China has officials locking its citizens down in ways that would make George Orwell’s jaw drop.

These two events are having a significant economic impact across the globe. In a recent world economic outlook, The International Monetary Fund projected that global growth will decline about 2.5% this year and will continue to drop for the medium term. The IMF reported this is primarily due to the humanitarian crisis induced by the Russia/Ukraine war.

With the global outlook murky at best, many companies are seriously considering moving back in with Uncle Sam. These reshoring efforts would certainly increase labor costs, but executives are hopeful that sourcing materials from factories closer to home would not only cut down on transportation costs, but also make lead times more predictable.

It’s a plan that’s certainly exciting government officials, who’ve been prodding manufacturers to come home for years. Trump’s populist “America First” messaging helped him win key Rust Belt votes in 2016, but his efforts to boost domestic production were largely derailed by the pandemic. Biden picked up the baton, unveiling the “Made In America” plan that punishes offshoring and rewards those that create jobs at home.

According to the Reshoring Initiative, reshoring and foreign direct investment job announcements topped 220,000 in 2021—38% higher than the year before. It projects that nearly 1800 US firms intend to reshore at least part of their businesses in 2022, including Lockheed, General Electric, and US Steel, who just broke ground on a $3 billion mill in Arkansas.

Despite many companies’ bullish patriotism, some economists warn that a shorter supply chain doesn’t necessarily equate to a better one. Last week, the IMF reported that though the idea of reducing dependence on foreign suppliers has gained traction, it was premature and “likely misguided.”

The Wall Street Journal noted that trade has bounced back remarkably quickly, and that countries unaffected by shutdowns were often able to quickly increase their capacity to supply other regions. And by doubling down on domestic production, the country’s factories may have their own domestic suppliers disappear in a crisis, leaving them back at square one.

A better alternative, the IMF recommended, was for companies to diversify their supply chains so that supplies in one country could be quickly substituted for another in times of crisis. An article in The Economist agreed, stating supply chains held up better during the pandemic than it’s often assumed, and greater self-sufficiency is likely to leave countries more vulnerable to future shocks, not less.

Maybe it’s better to make those MAGA hats in China after all.

The Future of Work: A Job Well Done

If you sat a Boomer and a Millennial down and asked them what their ideal job looks like, you’d likely get very different answers. That’s because the generations value different things. For example, an Indeed.com article reports Boomers value visibility—making sure their boss sees them showing up to the office on time every day and working hard. Millennials, on the other hand, prefer the flexibility of a home work environment even if it means less face time with their superiors.

It’s safe to say a “good” job is difficult to quantify, but a new Department of Commerce project is attempting to do just that.

Called the Job Quality Measurement Initiative, the plan is to quantify what makes a job “good” so employers can become more competitive in attracting top talent. “Having a job isn’t just about a paycheck—it’s also about the dignity that comes with it,” Commerce Secretary Gina Raimondo said in October. “Companies that provide higher quality jobs get higher quality workers, ultimately giving them a competitive advantage.

Deputy Secretary Don Graves admitted there isn’t a single silver bullet that defines a quality job, so finding a way to measure such a thing takes some finagling. According to The New York Times, project managers are working with research group The Aspen Institute to refine the criteria. They won’t be announced until June, but experts predict they’re likely to center around economic stability and mobility, as well as equity, respect, and voice.

Location might also play a role in job quality, and if a recent report from The Wall Street Journal is any indication, the best jobs AREN’T in big cities.

In conjunction with Moody’s Analytics, WSJ looked at 300 metro areas and ranked them according to five factors: unemployment rate, labor-force participation rate, job growth, labor-force growth, and wage growth. Here’s the top 5:

1 - Austin, Texas

2 - Nashville, Tenn.

3 - Raleigh, N.C.

4 - Salt Lake City, Utah

5 - Jacksonville, Fla.

The hotspots have a lot in common. They’re midsize cities with a population under 2.3 million, they boast fairly low income tax rates, and are home to large universities, state capitals, or high-tech employers.

Big-city jobs rebounded from the devastating hit they took from the pandemic in 2020, but still remained quite low on the list. Los Angeles ranked no. 26; Chicago and New York, 40 and 41, respectively.

Looking for a hot job market but don’t like the bustle of city life? Elkhart, Indiana is the place for you. It topped the list of metro areas with fewer than 1 million residents, largely due to the fact that it’s home to three of the largest RV manufacturers in the country.

The Supply Aside: What I’m Reading, Watching, Listening to, and Thinking About

RE: Supply Chain, Work, and Beyond

• 📕 Read: What would it have been like to live in the Biblical city of Babel days after its destruction? According to this great longform essay called “Why The Past 10 Years of American Life Have Been Uniquely Stupid” that I read in The Atlantic, America during the 2010s might not be far off. Haidt does a great job in this piece of comparing the fragmentation in the religious story to the political and tech division we’ve seen in our recent past. It’s a long one, but well worth the investment—and if you’re feeling lazy, there’s an audio version at the top of the page.

• 📺 Watch: If you’ve read the last couple of newsletters, you’re probably seeing a theme developing here, because this issue, I want to highlight The Dropout, the Hulu miniseries chronicling disgraced biotech company Theranos. It’s one of several shows currently on the air dramatizing the rise and fall of a modern company. Amanda Seyfried and William H. Macy give incredible performances, and who can forget the inimitable Naveen Andrews since he was stranded on an island 20 years ago on Lost. 

• 👂 Listen: I love a good business success story, especially when it involves yogurt. Which is why I enjoyed listening to Chobani founder and CEO Hamdi Ulukaya interviewed on the Harvard Business Review’s series, The New World of Work. Hamdi shared his story of building Chobani into a company that’s nabbed more than 20% of the yogurt market, as well as his musings on how to effectively scale a business and common mistakes he’s seen leaders make.

• 💡 Think: On a personal note, the month of Ramadan is always a special time of year. It starts with anticipation and then some slight trepidation on day 1, when a whole month seems daunting. However, as you get into a daily cadence of waking up a couple of hours prior to sunrise, eating and then powering through the day, the days/weeks seem to fly by. An important part of this month is a reminder to cool our worldly pursuits and focus on worship, reflection and increased charity. As we near the end, it’s bittersweet (sleep deprivation notwithstanding). Grateful for completing this fasting ritual, yet still left wondering if maximum benefit was derived. There’s always next year!To my readers and friends that celebrate the holiday marking the end of Ramadan, wishing them all ‘Eid Mubarik.’

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