(Re)Investment in the Land of Opportunity.
Don’t investors read the news anymore?
Surely, they’re wary of the ill effects of a lingering pandemic, of anxiety-inducing supply chain crises, of staggering inflation, and material cost escalation. So why is it that global shareholders are bullish on American business ventures? Despite the dire headlines, America continues to lead the world in foreign direct investment (FDI), and many home-grown companies that once outsourced operations are eyeing a triumphant return to their roots.
Find out why in the latest edition of Bytes & Insights.
Can America Maintain Its Industrial Muscle?
In the wake of the Great Depression and President Roosevelt’s New Deal economics, America became a powerhouse of industrial production. The nation celebrated V-E Day atop mass-produced Sherman tanks, introduced Coca-Cola to every corner of the world, and cruised downtown on wheels courtesy of Detroit’s Big Three. Behind these outsized achievements stood the American factory worker— the image of the nation’s realized potential, set against an industrial backdrop that manufactured not just products, but a new vision of American life.
As the world takes its tentative first steps into a post-pandemic reality, America is once again at the fore of the industrial fray. In 2022, the U.S. ranked #1 in the world in FDI—that is, a foreign business investment to establish domestic operations in America.
Byte: America ranked #1 in FDI for the tenth consecutive year, a sign of confidence in U.S. industry and its workforce. This ranking rides largely upon the construction of new manufacturing facilities to support growing global consumer demands.
Amid a pandemic, war in Ukraine, and political tensions in China, businesses have dealt with the downsides of a deeply interwoven global economy. In response, corporations have turned to stable, developed economies with vast markets, reliable infrastructure, and skilled workforces that align with their long-term growth plans. Correspondingly, U.S. federal and state governments have removed barriers to market entry by offering lucrative tax incentives to companies that position America as a leader in advanced technology and energy solutions. The results may change the face of the American factory, but the U.S. looks set to maintain its industrial-strength role in manufacturing.
Learn more about the U.S. role as the world leader in FDI here.
Manufacturing’s Return a Shore Thing
Changes and challenges have rocked the global economy in recent years. No country has been immune to setbacks, and businesses everywhere have had to adjust to stay profitable. But where GDP growth has slowed and inflation squeezed the average consumer, demand continues to rise. In addition to the task of maintaining a strong bottom line, businesses are under more pressure than ever to predict demand in the face of long lead times, to produce and package record numbers of goods, and to fulfill increasingly specific orders quickly, accurately, and environmentally responsibly.
Getting in front of changing consumer demands requires a proactive approach to operational efficiency. Businesses must be willing to explore new supplier relationships, invest in vision systems and process automation, and operate out of localized hubs that facilitate fast distribution.
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Many companies pursuing such a model are finding surer footing on American soil. Moving operations onshore (or nearshore) offers a clearer answer to snarled supply chains, escalating foreign labor costs, and other difficulties.
Byte: The manufacturing sector continues to make gains driven by new onshore or nearshore operations. To fully leverage this trend, business must be able to stay agile and keenly aware of consumer trends and buying habits.
With demand and lead times near record highs, having access to a reliable supply chain is now just as important a factor as material cost. In decades past, when American corporations outsourced operations to Asia or Central America, it was precisely because the ability to save on overhead costs provided a competitive advantage. Today, we’re seeing the inverse play out; corporations are willing to pay more for a skilled workforce and for raw materials in exchange for stability and a delivery model that provides the greatest advantage of the day: speed. Meanwhile, federal and state governments that watched corporations pack up shop in the 1980s are now courting companies with bouquets of tax breaks.
While inflation and material costs are indeed high, these are not phenomena unique to the U.S. To that end, if companies must absorb rising costs, why not pay more and have goods produced and delivered to consumers faster?
Reassuring Reshoring
Considering bringing your offshore business stateside? The decision is replete with complex calculations. Cost, scale, schedule, and logistics all factor intricately into the evergreen goal of maximizing profits.
But you need not feel overwhelmed: focused investment in a few key areas can help lead to faster ROI and pay dividends for decades.
Data systems and advanced technology can help you stay flexible and relevant in a fast-paced market, but the best approach to reshoring is one that allows you to meet your customers where they are, deliver quality goods and services, and keep operations lean and efficient.
Read the full article on gray.com for more tips on reshoring your business.