After decades of neglect, the U.S. manufacturing sector is picking up steam, particularly from growing support for reshoring U.S. manufacturing. After the seismic disruptions of the global supply chain caused by COVID-19, stakeholders in every industry are questioning the conventional wisdom of depending on production and sourcing from suppliers located on the other side of the world. Now, supply chain resilience is becoming synonymous with investment in domestic manufacturing.
With a surge in demand (backed by federal stimulus), the domestic manufacturing landscape is on course to completely transform over the next decade, rebuilding lost industrial capacity and bringing back hundreds of thousands of jobs (or more) in the process. U.S.-based manufacturers and distributors, and the transportation industry that will keep them running, have much to gain in the process — if they take advantage of the opportunity.
The State of Domestic Manufacturing
For over 40 years, the U.S. manufacturing sector has faced a steady decline, marked by production outsourcing to lower cost regions and subsequent job loss from the 1990s to the 2010s. Cheaper overseas labor was the primary driver of the trend, but the onset of COVID-19 exposed how vulnerable this left supply chains. Concerns about the risks of over-reliance on distant suppliers have renewed focus on reshoring manufacturing operations back to the United States, with a new wave of federal spending and stimulus to support it. The $280 billion CHIPS and Science Act, the $369 billion Inflation Reduction Act, and the $1.2 trillion Bipartisan Infrastructure Bill have been likened to a modern-day “gold rush,” spurring a new wave of investment.
The Obstacles on the Road to Success
Reshoring manufacturing doesn’t just call for a massive expansion of domestic manufacturing capacity; it would also require the growth of adjacent industries, particularly the transportation and logistics sectors needed to move goods and materials around the country. But given the current landscape, growing and adapting the logistics system needed to support industrial revitalization will take a proactive approach to problem-solving that goes beyond direct investment needs.
Changing Demand Patterns
Increased domestic manufacturing activity will quickly reshape current shipping routes, impacting both international and domestic logistics networks. Players throughout the industry will have to adapt rapidly as once-reliable routes become more congested, new routes take shape, and seasonal rhythms shift amid evolving demand patterns. More supporting infrastructure (like new rest stops and distribution hubs) will also pop up to support growing shipping demand, further impacting business as usual.
Supply Chain Instability
Though reshoring U.S. manufacturing will mitigate the risk of international supply chain fragility, increased domestic manufacturing activity in the short term can introduce even more instability as the market evolves rapidly. This can result in issues like material and component shortages, unpredictable demand fluctuations from changing production centers, delays in normal delivery timelines as new logistics routes take shape, and other challenges stemming from the cascade of adjustments required across the ecosystem.
Increased Competition
Reshoring manufacturing will drive increased demand for domestic suppliers and, over the long term, attract a number of new companies to the market. However, increased demand will intensify competition for suppliers, resulting in issues like delays and more cutthroat rate negotiations. Suppliers will need to be highly adaptable and maximize efficiency if they want to retain their current market share while also pursuing opportunities to capture new business.
Infrastructure Problems
Reshoring efforts can face significant hurdles from underfunded infrastructure, where neglect over many decades has led to deteriorating road conditions, train derailments, and breakdowns like the collapse of the Baltimore Key Bridge. Higher logistics traffic could cause even more breakdowns and disruptions until substantial investments are made to get infrastructure back up to code and in reliable condition. Fortunately, in the wake of recent incidents, the federal government is beginning to allocate more resources to rebuilding.
Labor Shortages
America’s persistent labor shortage extends to transportation services as well. Even though demand for logistics services will rapidly increase the number of available jobs, companies will struggle to fill the roles until employee interest — and the workforce skills gap — begins to close. Companies will face added challenges in competing for such a limited labor pool, requiring significant investment to court qualified candidates and incentivize applicants.
Driving Demand for Transportation and Logistics Services
Increased domestic manufacturing activity will significantly boost demand for all types of transportation and logistics services and infrastructure, from TL/LTL and parcel delivery,to 3PL and 4PL services, further complicating the logistics landscape and increasing pressure on these companies to improve efficiency, remain limber, and adapt quickly. Of course, the logistics industry’s disruption and growth will create incredible opportunities for companies that can rise to the occasion.
In addition to generating more revenue from increased shipping volumes, transportation and logistics providers have the potential to carve out market share in new niches, such as becoming experts in specific industries or regions or fulfilling increasing demand for services like last-mile delivery.
Reshaping America’s Transportation and Logistics Landscape
The reshoring movement and increasing investment in domestic manufacturing offer unprecedented opportunities for stakeholders in the shipping and logistics industry to transform their companies, and in the process, transform the U.S. industrial landscape. What’s more, revitalizing the manufacturing sector has the potential to open new avenues for innovation and growth within the logistics sector on its own.
Current industry leaders need to answer the call and leverage their expertise and resources to support this resurgence of domestic manufacturing. Of course, it can be challenging to maintain efficiency amid the fast pace of change in the industry. That’s where transportation software comes in.
An end-to-end transportation software suite provides a comprehensive array of tools that transportation companies can use to efficiently navigate the rapidly evolving logistics landscape, with capabilities like intelligent route planning, enhanced supply chain visibility, and automated carrier selection. As every industry becomes increasingly digitalized, the software ensures that logistics and transportation companies are not only able to keep up with the fast pace of business, but also integrate seamlessly with their customers.
Want to learn more about how transportation software can upgrade your operation? Read our 3G success stories to learn more about how our platform has already helped companies thrive.
