With reshoring decisions dictated by costs and logistics factors, U.S. manufacturers are unlikely to shift manufacturing operations out of East Asia in 2023, separate reports indicate.
“The ultimate extent of how much production will be reshored or moved closer to home remains an open issue and will depend heavily on the relative costs of production in various parts of the world,” a Citigroup Inc. report on supply chain finance noted.
A significant share of global manufacturing is in East Asia as it is cost competitive. In addition, China’s substantial investment in port infrastructure and new container ships over the past two decades to create efficiencies have protected manufacturers’ bottom lines. However, COVID lockdowns, tense relations with the West, and Russia’s invasion of Ukraine is creating a different operational landscape for some manufacturers in 2022, which saw some manufacturers moving production to countries such as India.
Supply chain congestion and port infrastructure will likely limit how much manufacturers can change strategy this year though, a study by project44 showed. Ultimately, the health of the economy will determine supply chain development this year.
A survey of over 2,600 industry professionals by logistics services platform Container xChange said 88% believe that inflation and recessionary fears would be the most significant factor impeding businesses in 2023.
Source: Bloomberg
