Trade war spurs sharp reversal in 2019 Reshoring Index, foreshadowing COVID-19 test of supply chain resilience



Kearney|Patrick Van de Bossche|Brooks Levering|Yuri Castaño|Brandon Blaesser

Kearney’s seventh annual Reshoring Index revealed a dramatic reversal of a five-year trend, as domestic US manufacturing in 2019 commanded a significantly greater share versus the 14 Asian low-cost countries (LCCs) tracked in our study, with manufacturing imports from China registering a particularly sharp decline.

This year’s report also shares the second installment of the Kearney China diversification index (CDI), which tracks the rebalancing of US manufacturing imports from Asia away from China to other Asian LCCs, most notably Vietnam.

New to this year’s report is the Kearney near-to-far trade ratio (NTFR), tracking the potentially significant nearshoring trend of sourcing manufactured goods from Mexico.

2019 saw companies actively adapting to what then felt like a major disruption—the US-China trade war—by reducing imports of manufactured goods from China while increasing manufacturing imports from the other countries in our Asia LCC sample, as well as from Mexico.

2020 dawned with a disruption of a new order of magnitude—COVID-19. At this writing, the full extent of the societal and economic trauma the coronavirus pandemic may cause is unknown. But it will be historic. As a result, we forecast that companies will be compelled to go much further in rethinking their sourcing strategies—indeed, their entire supply chains.

Specifically, we expect companies will be increasingly inclined to spread their risks, as opposed to putting all their eggs in the lowest cost basket. More fundamentally, we anticipate that the threat of future crises will compel companies to restructure their global supply chains with an eye toward increased resilience, as well as lower risks and costs, as resilience is the key to operating profitably in the face of ongoing disruptions.

Kearney Reshoring Report_June 2020

Patrick Van den Bossche, Partner, Kearney 

Brooks Levering, Partner, Kearney

Yuri Castaño, Consultant, Kearney

Brandon Blaesser, Consultant, Kearney

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