*Original Post by Brian Straight, Supply Chain Management Review*
The interest in sustained engagement with China is evolving among North American companies, with nearly 75% of firms surveyed by AlixPartners indicating a current reduction in their exposure. Over half of these companies plan to further diminish their exposure by more than 10% in the coming year.
AlixPartners conducted a global survey, focusing on supply chain professionals and segmented the results by region. In North America, 100 executives from five industries participated, with 60% representing companies boasting at least $5 billion in sales.
The survey uncovered a widespread objective among companies to achieve a 40% reduction in their reliance on China for sourcing, with the U.S. (at 30% increase) and Mexico (at 10% increase) anticipated to experience the most significant gains. In early stages, companies are actively deciding on “make vs. buy” strategies and investing in supplier development, logistics, distribution, and global procurement costs.
These findings align with other recent reports. An August report from AlixPartners highlighted support nearshoring received from new U.S. regulations and legislation. Which included the CHIPS Act, Infrastructure Investment and Jobs Act, Inflation Reduction Act, and the Build America, Buy America Act. Tariffs imposed from 2018 to 2020 on Chinese imports to the U.S. also contributed to this shift.
Accenture’s conducted a survey in the first quarter of 2023 which involved 1,230 senior executives across 14 countries (350 from the U.S.) and 11 industries. Which revealed that 85% of companies plan to manufacture and sell most of their products in the same region by 2026, compared to the current 43%. In the U.S., 91% of companies expressed this intention, up from 52% today.
Furthermore, global expectations foresee nearly doubling regional sourcing to reach 65% by 2026 from the current 38%. with an anticipated increase in the U.S. from 50% to 82% by 2026. U.S. companies are currently investing an average of $65 million in reshoring and production facility relocation, with an expected acceleration to $188 million by 2026.
The most recent AlixPartners’ survey highlighted that total costs are steering this trend, as China is no longer the leader in total landed cost, especially when considering risk.
The report said, “Nearshoring comes with its own unique list of challenges, with labor availability, CapEx, and location selection topping the list. The past few years, however, have taught us that the priority list can change due to unforeseen events that sometimes crop up seemingly overnight.” It also mentione that Special attention needs to be paid to developing a better understanding of U.S. incentives. While there is familiarity with federal and local incentives (including the Inflation Reduction Act (IRA) or the CHIPS and Science Act (CHIPS) programs) and planning to utilize them, this is still where companies feel the least ready.”
Despite awareness, the survey revealed that only 42% of companies plan to utilize these U.S. federal incentives.
*This report by Brian Straight was first published on December 27, 2023.* All Information presented here, was redacted by NAI Mexico’s Corporate Communications Team, based on the original article published by “Supply Chain Management Review”.
