Shifting U.S. mentality prompts global companies to rethink their U.S.-bound supply chains

For decades “Made in America” presented a conundrum whereby U.S. consumers expressed a preference for locally made goods, but still voted with their wallets, choosing imports over a broad range of domestically made products from cars and white goods to computers and clothing. That was then. This is now. Today, given radical changes in consumer attitudes and logistic capabilities, it’s time for companies from across the globe that serve the U.S. market to reconsider their supply chain approach.

COVID-related out-of-stocks triggered a growing awareness among U.S. shoppers of their dependence on all too fragile global supply chains and made them better appreciate the benefits of having products manufactured closer to home. This initially nascent support for domestically made or nearshored goods has been gradually reinforced by a growing sense of nationalism as confirmed by recent Gallup and Pew Research Center polls.

Heightened concerns around environmental and labor-related issues are also starting to factor into consumers’ buying decisions. While the portion of transportation in a global manufacturer’s carbon footprint is typically relatively small, it can assume outsize importance in customers’ minds when they look at the Country of Origin on the packaging label. And no company wants to be featured in a news headline about how U.S. Customs and Border Protection (CBP) has targeted its imported products over concerns about forced labor and violation of human rights.

These shifts in U.S. consumer thinking have helped position “Made in America” brands as more desirable, even at higher costs. A 2022 poll, conducted by Retail Brew and The Harris Poll , confirmed by a more recent survey from Morning Consult , found at least half of Americans are willing to pay a premium for domestically made goods. In reality, in many cases even a 10–20% price increase may not cover the added cost of reshored or nearshored products.

So U.S. government policies are providing an additional boost to bringing manufacturing closer to home. Under the guise of de-risking global supply chains and “responsibly managing the competition,” the Biden Administration is intervening with carrot and stick policies in the form of bills, awards and incentives, as well as CBP crackdowns at the border. The more strategic the sector – say CHIPS (Creating Helpful Incentives to Produce Semiconductors), IRA (Inflation Reduction Act), etc. – the more likely politicians are to target it.

These changing customer perceptions and bi-partisan support for federal incentives regarding Made in USA products should cause global executives to take notice and rethink how they service the U.S. market. Many of them already are. New quantitative and qualitative research contained in the 10th edition of Kearney’s Reshoring Index found the number of CEOs of American manufacturing companies approached by their Boards to look into bringing manufacturing closer to the U.S. market doubled vs. the previous year, to 71%. This explains why 96% of CEOs are either evaluating reshoring their operations, have decided to reshore, or have already reshored.

Nearshoring is equally gaining in popularity. Mexico has substantially increased its share of manufacturing imports into the U.S. Post-COVID, American imports of Mexican manufactured goods grew by 26%. Further growth is expected since Mexico’s FDI grew by 48% in the first quarter of this year. Chinese companies have also started manufacturing in Mexico, expanding their capacity closer to the U.S. to benefit from duty-free import fees under USMCA (United States–Mexico–Canada Agreement).

Nearshoring or reshoring isn’t always easy, whether it involves U.S. companies “coming home” or European or Asian businesses hoping to continue to supply the largest economy in the world. CEOs see quality of goods produced and defects on inbound materials and components from the new supply base as their top challenges. Survey respondents also reported a lack of “the basics” – infrastructure, labor availability and skills, and manufacturing operations management capability.

Addressing these challenges and ensuring you get the full benefits from bringing manufacturing closer to the U.S. market takes solid preparation. This led to the development of Re/Nearshoring Readiness Assessment , a proprietary Kearney tool to assist companies in evaluating their readiness to successfully execute and sustain their reshoring or nearshoring strategy.

This article was written by Patrick and Omar and sent as part of a monthly perspective Kearney shares with our clients on the bigger trends unfolding across the operations landscape.

Interested in receiving next month’s note? Sign up?here .

---

Patrick Van den Bossche is a partner and Americas manufacturing lead in Kearney’s strategic operations practice with more than 25 years of experience in advanced analytics, logistics, chemicals, private equity, and supply chains. He is based outside of Philadelphia.

Omar Troncoso is a partner in Kearney’s strategic operations practice and head of the Mexico City office. He specializes in consumer goods, private equity sectors, and mergers and acquisitions. He is based in Mexico City.