by Joan Koo, IEDC Intern
On July 13th, IEDC hosted a webinar entitled Preparing for the Next Wave of Investment: Re-shoring and FDI. It provided insights on strategies to attract reshoring companies. The panel was moderated by Maureen Donohue Krauss, President and CEO of Detroit Regional Partnership and included Bruce Takefman, President and Founder of ResearchFDI; Susan Davenport, Senior Vice President and Chief Economic Development Officer, Greater Houston Partnership; Michelle Comerford, Project Director and Industrial Supply Chain Practice Leader, Biggins Lacy Shapiro and Company. The panels provided information on reshoring trends, a case study, and best practices.
Current Trend in Reshoring
Bruce Takefman began the webinar by sharing several statistics and suggesting that current reshoring trends will have a long term impact as reshoring will not happen overnight, a minimum of 18 months and more is required for a firm to decide and complete the process.
Foreign Direct Investment Confidence Index is a survey conducted among global business executives which rank markets based on likely to attract investment in three years. The United States and Canada rank in the top five markets for the eighth consecutive year. However, the escalating tension with China combined with the impact of COVID-19, weighs the economic outlook in 2021.
Kearney recently released the seventh edition of the Reshoring Index. The Reshoring Index is measured by the ratio between total manufacturing goods imported and total goods produced in the US. Based on the index, US experienced net reshoring as producers decided to source more goods domestically. Moreover, import trends diversified from China and moved toward other Asian developing countries. The US also increased nearshoring sourcing from neighboring countries such as Mexico.
Case Study: Greater Houston
Susan Davenport shared the efforts that the Greater Houston Partnership is taking to encourage reshoring and FDI. Recent reshoring firms in the Houston area include power and automation technology, aerospace, parts for oil and gas, petrochemicals, kitchenware, electric motors, and material science. These firms match with Houston’s target industry. Ms. Davenport suggested the following tools and tactics to assist reshoring companies.
- Regional Coordination and Asset Mapping
- Proactive Business Recruitment Strategy
- Engagement in Economic Development Initiatives
- State and Federal Program Coordination
- Export Plan and Strategy: Synergies with Recruitment Initiatives
- Data Analysis and Research
- Local, State and Federal Incentives
- Expand Exposure via Virtual Meetings and Events
- Consider Nearshoring Opportunities
- IEDC resources: Economic Development Research Partners Program
Location Strategies and Best Practices for EDOs
Michelle Comerford of Biggins Lacy Shapiro and Company shared her insights from working with companies seeking to land in the United States. She explained that China is becoming less of an advantageous location due to the disruption of supply chains as a result of COVID-19 as well as rising labor costs and increased federal policies sparking a trade war.
Michelle introduced the concept of Total Cost of Ownership (TCO) which takes risk and strategic response costs into the equation when deciding the location. With TCO, the US becomes a more attractive place to locate than China. She stressed that the location strategy for firms needs to change from solely considering the cost to taking risk into consideration.
Ms. Comerford shared how EDOs cab prepare their communities for reshoring opportunities, stating that the recommendations for this type of recruitment is not much different than her recommendations for all recruitment, such as:
- Workforce training is essential since automated reshoring firms need more skilled workers rather than lower cost unskilled labor.
- Utility and logistics infrastructure is core for automated firms to successfully reshore.
- Ready-To-Go sites and buildings can help to shorten the project timeline.
- Potential federal support for some high priority industries can provide incentives for reshoring.
- Filling gaps in the supply chain by matching existing manufacturing firm’s need for suppliers with reshoring companies can bring expanded investment.
- The Reshoring Initiative provides an Import Substitution Program and Supply Chain Gap Program to assist communities seeking reshoring opportunities.