INVESTMENT STRATEGY
RESHORING
Toilet Paper and Real Property EVERY INVESTOR MUST UNDERSTAND THE OPPORTUNITIES RESHORING CREATES.
By Neil Timmins
NO. 2 COST CONSIDERATION. Labor costs in traditional offshore manufacturing hubs such as China have been rising steadily over the years. For example, labor costs in China now outpace those in Mexico. In many cases, cheaper labor overseas no longer outweighs the increased monetary cost and risks. Simultaneously, advancements in automation and robotics have further diminished the cost advantage of overseas production. Manufacturers who reshore production upskill their domestic workforce to oversee the advanced automation and robots that complete tasks previously executed by people. Reshoring enables companies to leverage automation while minimizing transportation and logistics expenses. NO. 3 QUALITY AND INTELLECTUAL PROPERTY PROTECTION. Some com- panies have experienced quality con- trol issues, data security risks, and intellectual property theft when man- ufacturing overseas, specifically in technology. By reshoring, businesses can maintain tighter quality control standards, protect intellectual prop- erty, and ensure compliance with lo- cal regulations. NO. 4 REDUCED TIME TO MARKET (TTM). Time to Market (TTM) refers to the time it takes for a product to be
“Limit 2 per person.” “Limit 1 per Checkout.” It was common to run across
reevaluation of manufacturing and distribution strategies. One notable trend that emerged is the reshoring (also called nearshoring or onshoring) of manufacturing to the United States. Reshoring involves companies relocating their facilities from overseas back to the U.S. The growth in reshoring is one that real estate investors ignore to their own detriment. Let’s see why reshoring is happening, the industries it affects, and the opportunities this creates for investors.
purchase restrictions on “essential items” during the COVID-19 pan- demic. And if a purchase limit didn’t apply, your plans to stock up on 30- roll packs of Kirkland’s finest 2-ply might have been foiled because it was out of stock. As you know, toilet paper wasn’t the only item in short supply. Carbon dioxide detectors, cleaning supplies, sriracha, lumber, and computer chips were just a few of the other products missing from shelves. The COVID-19 pandemic taught us all a thing or two about the significance of supply chains. Reuters reported in August 2021 that the cost of shipping a single container from China to the East Coast had “climbed over 500% from [2020] to $20,804.” At the same time, ships sat waiting for days, and even weeks, due to port congestion, lockdowns, and labor shortages. When you consider the average container ship transports 15,000 con- tainers and those 15,000 containers end up at hundreds of destinations, it’s easy to see why thousands of businesses were missing inventory. Increased shipping costs. Increased fuel costs. Delays. The problem is compounded at an exponential rate just for shipping a single container! The disruption of global supply chains led to a worldwide
WHY RESHORING IS HAPPENING There are four main reasons reshoring is occurring.
NO. 1 SUPPLY CHAIN RESILIENCE, DIVERSIFICATION, AND CONTROL. The pandemic exposed vulnerabilities in global supply chains with disruptions in shipping, shortages of critical components, and reliance on distant suppliers. According to the Kearney Reshoring Index, “79% of executives with manufacturing capacity in China have already moved part of their manufacturing capacity to the U.S. or plan to in the next three years.” Reshoring affords companies greater control and flexibility over their supply chains, reducing their risk of future disruptions.
16 | think realty magazine :: september – october 2023
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