EP97: Manufacturing’s Homecoming: The American Cities Best Positioned to Thrive in the Reshoring Era

Summary:

In this episode, we analyze the reshoring trend in U.S. manufacturing, identifying cities poised for growth and those facing challenges.  Key factors influencing reshoring include supply chain disruptions, automation advancements, and government incentives.  Beneficial locations possess strong infrastructure, skilled workforces, and strategic geographic positions, while areas with high costs, aging infrastructure, or dependence on single industries are predicted to struggle. We highlight the transformative potential of reshoring for the U.S. economy while acknowledging the varied regional impacts. Ultimately, the success of reshoring hinges on strategic partnerships, innovation, and building resilient supply chains.

Questions to consider as you read/listen:

 1. What factors determine which US cities thrive with reshoring?

2.How does reshoring impact different US regions economically?

3. What challenges hinder reshoring in specific US locations?

Long format:

Manufacturing’s Homecoming: The American pCities Best Positioned to Thrive in the Reshoring Era

By Justin James McShane 

TL;DR: 

The reshoring movement is bringing manufacturing back to the U.S., driven by supply chain issues, automation, rising overseas costs, and government incentives. Cities like Greenville, Detroit, Austin, Phoenix, and Minneapolis are prime reshoring hubs due to factors like infrastructure, skilled workforces, and strategic locations. Some areas, like parts of the Rust Belt and high-cost cities, may struggle to compete. Reshoring offers a transformative opportunity for U.S. manufacturing growth and economic revitalization.

Introduction

The reshoring movement—bringing manufacturing operations back to the United States—has gained significant momentum in recent years. This trend is driven by a combination of factors, including supply chain vulnerabilities exposed by global disruptions, advancements in automation, rising labor costs overseas, and increasing government incentives for domestic manufacturing.

Certain U.S. metro areas and municipalities are uniquely positioned to capitalize on this trend due to their infrastructure, skilled workforce, strategic location, and industry-specific expertise. The following list highlights some of the key regions that are emerging as reshoring hubs, along with the factors that make them attractive destinations for manufacturing investment. These insights underline the evolving landscape of American manufacturing and the opportunities for economic growth across diverse sectors.

The winners list:

Here are some specific municipalities or metro areas in the U.S. that are well-positioned to benefit from reshoring, along with the reasons why:

1. Greenville-Anderson, South Carolina:

Known historically as "The Textile Capital of the World," Greenville has transformed into a modern manufacturing hub with affordable labor costs, a growing inventory of manufacturing space, and facilities like Michelin's North American headquarters. The area benefits from a business-friendly environment and significant manufacturing space under construction.

2. Detroit, Michigan:

As a traditional automotive manufacturing center, Detroit is seeing a resurgence with initiatives like General Motors reshoring battery production. The metro area has a skilled workforce in automotive manufacturing and is adapting to the electric vehicle trend, supported by local and state incentives.

1. Austin, Texas:

Austin hosts significant tech and semiconductor operations, including investments from companies like Samsung. The city's tech ecosystem, coupled with Texas's low taxes and business-friendly policies, makes it ideal for tech manufacturing. The presence of the University of Texas also supports a steady supply of skilled labor.

4. Phoenix, Arizona:

Phoenix is becoming a semiconductor manufacturing hub with initiatives like Intel's expansion. Also within the state is TSMC’s fab center. The area benefits from state support, ample land for development, and a climate conducive to year-round construction, reducing project timelines for new facilities.

5. Minneapolis-St. Paul, Minnesota:

This metro area has a diverse manufacturing base, including medical devices and electronics. With steady manufacturing growth, good business diversity, and strong employment in manufacturing, it's well-positioned for companies looking to reshore operations that require high precision and innovation.

6. Omaha, Nebraska:

Located along the Missouri River, Omaha has access to an inland waterway, which is beneficial for shipping goods. It's also noted for its potential in renewable energy, which could attract manufacturers looking to reduce their carbon footprint and energy costs.

7. Tulsa, Oklahoma:

Similar to Omaha, Tulsa benefits from its location on the Arkansas River for logistics, and it has a history of oil-related manufacturing. The city is gaining traction in energy-efficient manufacturing due to local wind and solar resources.

8. Orlando, Florida:

Orlando is expanding in aerospace and pharmaceuticals, sectors that are seeing reshoring due to supply chain vulnerabilities. The city leverages Florida's no state income tax and a supportive environment for business growth.

9. San Diego, California:

While California faces higher labor costs, San Diego's proximity to the Mexican border makes it advantageous for nearshoring, particularly for high-tech and biopharma industries. The region is known for its innovation in these fields, supported by a strong academic and research infrastructure.

10. New York-Newark-Jersey City, New York/New Jersey:

This metro area has one of the busiest ports in the world, offering unparalleled logistics advantages for reshoring. The area also scores high on manufacturing business diversity and employment, with programs like the New York Manufacturing Extension Partnership supporting small and mid-sized manufacturers.

These locations are highlighted due to their specific advantages in infrastructure, workforce, government incentives, and strategic positioning for modern manufacturing needs, as per various industry reports.

Areas that will not fare as well with reshoring:

Here are several municipalities and metropolitan areas in the USA that might not fare well with reshoring:

1. Rust Belt Cities:

Cleveland, Ohio 

Cleveland has faced economic downturns due to the decline of traditional manufacturing industries. While there are efforts to diversify the economy, the city might not attract as much reshoring due to the skills mismatch and aging infrastructure.

Buffalo, New York

Known for its past in heavy industry, Buffalo has been transitioning to other sectors. However, the city's economic base might not be as attractive for reshoring manufacturing due to a lack of specialized workforce for new manufacturing technologies.

2. Areas with High Operational Costs:

San Francisco Bay Area, California

The high cost of living, land, and labor in the Bay Area could deter manufacturers from reshoring here unless they are focused on high-tech, high-value products. The area's focus on technology and services might overshadow manufacturing interests.

New York City, New York

Although the region is on the list of likely winners above, the city itself is a major economic hub. NYC's manufacturing sector has not been central for decades due to space constraints, high real estate costs, and a workforce more geared towards finance and services.

3. Rural and Remote Areas:

Many rural areas across the Midwest and parts of the South might struggle with reshoring due to:

Lack of Infrastructure: Poor transportation networks, inadequate utilities, and limited access to skilled labor provide nearly insurmountable headwinds for these areas.

Geographic Isolation: Distance from major markets can increase logistics costs, making reshoring less economically viable for some companies.

4. Regions with Significant Dependence on Single Industries:

Monroe, Louisiana as a case study:

If a town or small city is heavily reliant on a single industry that isn't conducive to reshoring (like oil refining or agriculture), the transition to manufacturing might be challenging.

5. Cities with Declining Populations:

Areas experiencing population decline, like parts of the Great Plains or some small towns in the Northeast, might find it hard to attract reshoring due to a shrinking labor pool and diminishing local markets.

These observations are based on the general economic conditions, existing industrial base, and the challenges related to infrastructure, labor, and cost that these areas face. However, reshoring can be influenced by many factors, including state incentives, federal policies like the CHIPS Act, and shifts in global supply chains, which might change these dynamics over time. Remember, these insights are derived from current analyses and trends, and local conditions can evolve, potentially leading to different outcomes in the future.

Conclusion

The reshoring movement presents a transformative opportunity for the U.S. economy, reshaping the manufacturing landscape while fostering job creation and regional growth. Each metro area or municipality highlighted above demonstrates unique strengths, whether in logistics, infrastructure, workforce expertise, or industry innovation, that position them as key players in this resurgence of domestic production.

As companies continue to evaluate the benefits of reshoring, these regions stand out as prime examples of how local advantages—such as proximity to resources, government incentives, and specialized talent—can align with broader trends in manufacturing. By investing in these hubs, businesses not only address supply chain challenges but also contribute to the revitalization of American manufacturing as a competitive force on the global stage. The future of reshoring will depend on strategic partnerships, continued innovation, and a focus on building resilient, sustainable supply chains across the nation.

Sources:

https://www.engineering.com/manufacturing-is-reshoring-in-america-but-where-will-the-workers-come-from/

https://www.automate.org/industry-insights/reshoring-and-nearshoring-trends-making-north-america-competitive

https://www.forbes.com/councils/forbesbusinesscouncil/2024/08/07/reshoring-in-north-america-strategy-for-manufacturing-excellence/

https://www.willcoxmatthews.com/reshoring-bringing-manufacturing-back-to-america/

https://www.legacyresearch.com/the-daily-cut/reshoring-will-bring-manufacturing-jobs-back-to-america/

https://www.elangham.com/2023/01/26/made-in-america-reshoring-manufacturing-with-the-help-of-3pls/

https://leaders.com/news/productivity/a-success-story-for-reshoring-american-manufacturing/

https://www.americanindustriesgroup.com/blog/manufacturing-in-mexico-the-rising-trend-of-reshoring-and-nearshoring-in-the-usmca-region/

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https://www.washingtonpost.com/nation/interactive/2021/land-development-urban-growth-maps/