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LOGISTICS/SUPPLY CHAIN
Shoring Up Operations for Growth Both domestic and foreign companies with operations abroad are realigning their supply chains and moving operations closer to the U.S. in order to strategically position themselves for growth. By Jeff Jorge, Principal, International Growth Services Practice Leader; and Thane Hutcheson, Director; Baker Tilly, LLP
A “Goldilocks” Scenario for the Economy
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he pandemic wreaked havoc across every industry, and companies in the manufacturing and mobility/transportation sectors were not spared. The result? Companies are re-evaluating their supply chains and operations in a post-COVID environment.
Realigning the Supply Chain For the past 20 years, manufacturing moved operations from the U.S. to East Asia to take advantage of cheap labor. This approach dominated manufacturers’ strategy, paving the way for a status quo where low-skilled and large-scale manufacturing was done in China. But COVID-19 — coupled with rising wages in East Asia, trade tensions, and a tariff war between the U.S. and China — undermined the business logic of a long, extended supply chain with all of its potential chokepoints along the way. Today, the status quo is no longer tenable: The impact on the supply chain of a tanker running aground in the Suez Canal and bringing shipping to a halt is no longer a “what if” scenario. Companies with operations abroad are looking to shore up their logistics and move operations closer to the U.S. And it’s not just U.S. companies making these calculations. Increasingly, foreign companies are building plants in the U.S. and in nearby countries to be closer to the world’s biggest economy — and to position themselves strategically for growth.
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The pandemic — and the lockdown — produced one of the sharpest declines in U.S. economic activity since the Great Depression. But because the recession was driven by an exogamous event, rather than arising from internal factors (such as inflation, overleveraged consumers, a real estate bubble), the economy has proven resilient. Given the pain that the pandemic inflicted on the U.S., the fundamentals of the economy remain relatively healthy. More importantly, growth is about to become the name of the game in the United States. By Memorial Day, a large portion of the adult population within the U.S. will be vaccinated. It’s possible that by summer, herd immunity will be achieved. That’s not to say that precautions will not remain. But the worst in all likelihood is behind us. Companies that succeeded in battening down the hatches and survived the pandemic are seeing the light at the end of the tunnel. Stimulus checks have hit bank accounts, people are getting vaccinated, weather is improving, and the fundamentals of the economy are showing strength. Along with the recently passed COVID-19 relief package, the Biden administration is looking to push through an infrastructure bill to repair roads and bridges, bring highspeed Internet service across the country, and seed innovative areas for growth. Moreover, the Federal
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5/26/21 10:29 AM
