Summary
During the COVID-19 pandemic, reshoring has become one of the key strategies chosen by many companies. Nowadays, the choice of this strategy is often caused by the need to increase health safety and by a severe crisis in the supply chain. However, there is a wide range of reasons for reshoring, such as issues of flexibility and quality or proximity to end customers.
The Reasons for Reshoring
Walmart is one of the companies that have decided to restore their manufacturing back to the U.S. The company used to have its manufacturing units in Taiwan and China and sell the product in the United States. The decision to change the strategy was caused by the sales decline in the last five years. The decline was caused by offshore variables, such as travel costs, carrying costs, and an increase in salaries overseas. Among other reasons for reshoring are the pledges for the company, shipping delays, and concerns about contaminants in plastics. There are also more positive reasons, for example, one branch has received “over $600,000 from the Walmart U.S. Manufacturing Innovation Fund.” (Official Walmart site, 2021). Moreover, reshoring is aimed to create synergies that would increase the flexibility of production.
Walmart Reshoring Measures
Within the framework of reshoring strategy, the company has taken complex measures. Walmart has decided to bring back to the U.S. more than 30 manufacturing sites, most of which were located in China (Official Walmart site, 2021). Cindi Marsiligo, the company’s Vice President, reported that Walmart is aiming to create more than 300,000 jobs in the U.S. by 2023, whereas Walmart’s increase in the U.S. manufactured purchases is evaluated as $250 billion over ten years (Official Walmart Site, 2021). Moreover, the company plans to participate in a program called “American Lighthouses,” aimed to reinforce U.S. production (Kapadia, 2021). The program is to involve academics, manufacturers, development groups, and governments. These measures are aimed to provide the dynamic development of the company and to make it crisis-proof.
However, according to the report by the European Union, despite the reinforcement, the “reshoring policies of a range of companies based in the U.K., Japan, and the U.S. are quite modest” (Raza, Grohs, Essletzbitchler, et al., p.2). Nevertheless, it still allows to increase the safety during the pandemic crisis and enhances the strategic autonomy and flexibility of companies. This is the reason why it can become an increasing trend in the modern world.
References
Kapadia S. (2021). Walmart to spend $350B on local sourcing, and work to pinpoint barriers to reshoring. Supplychaindive. Web.
Official Walmart Site. (n.d.) Web.
Raza W., Grohs H., Essletzbitchler J., & Pintar N. (2021). Post Covid-19 value chains: Options for reshoring production back to Europe in a globalized economy.Policy Department for External Relations Directorate-General for External Policies of the Union. Web.