Market Snapshot: Onshoring Trends

Market Snapshot: Onshoring Trends

According to research from Bain & Company, more companies are planning to make supply chain investments closer to their home markets by leveraging onshoring and nearshoring practices. Onshoring, also known as reshoring, involves bringing business operations or production back to the company’s home country, typically to enhance control, address supply chain challenges, and support the local economy. Nearshoring is the practice of relocating business operations to a nearby country (i.e., Mexico and Canada) to improve logistical efficiency, reduce costs, and streamline communication.

What’s driving onshoring and nearshoring trends?

• Post-pandemic demand for resilient supply chains
• Pressures for reduced carbon footprints
• Uncertainty associated with geopolitical issues
• Rising labor costs in traditional offshore markets and higher logistics expenses 
• Concerns related to national security and intellectual property

How is onshoring impacting U.S. markets?

• U.S. manufacturing construction spending is estimated to be 20% higher in 2024 compared to last year and nearly double the average of the last three years.
• Approximately 300,000 manufacturing jobs have been created in the U.S. since the pandemic-driven reshoring trend began, which represents a fivefold increase in job creation tied to onshoring in 2019.
• Companies driving onshoring activity primarily include manufacturers of semiconductors, EV batteries, energy storage products, solar panels, pharmaceuticals, medical devices, food, and defense components.
• Arizona, Texas, Ohio, Michigan, South Carolina, Georgia, and Tennessee are among key states experiencing significant manufacturing and supply chain infrastructure growth tied to onshoring trends.

What’s happening with regards to nearshoring?

• Even though interest in nearshoring in Mexico is high, companies are running into bureaucratic challenges and energy grid constraints, resulting in lagging implementation (Mexico is the largest U.S. trading partner accounting for 16% of total trade).
• The Biden administration put in place incentives that facilitate nearshoring. There is a possibility that the Trump administration will reassess these policies, potentially putting more emphasis in onshoring. Nonetheless, nearshoring will continue to be a complementary strategy for companies. 

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