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Advantages and disadvantages associated with re-onshoring jobs in advanced economies

Ya. Buddayan-Och

Key West University

Bus714 International Human Resources Management Spring 2024

Dr. Leah Rawleigh

Week 7
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Introduction

Companies have overwhelmingly adopted reshoring, which is the act of bringing back

offshore jobs to the country in which they are operating. This has increased especially during the

COVID-19 pandemic and the global supply chain disruptions (International Economic

Development Council, 2015). This strategic decision needs the involvement of financial,

logistical, and political factors that impact the internal and world economic environment. This

operation is affected by the goal to lessen the risks of long supply chains, enhance product

quality, and keep intellectual property. While it may increase the operating expenses, the labor

market dynamics, and the sustainability of certain industries are also matters of concern. This

paper looks into the pros and cons of re-onshoring jobs in advanced economies, analyzing which

industries may grow or need to be avoided as the decision-making process continues.

Advantages of Re-onshoring

Re-onshoring could make management of manufacturing processes and supply chains

way more secure and help tackle the problem of disruptions that become more frequent and the

geopolitical tensions in today’s world. This control embraces a range of functions such as

preserving product quality and protecting intellectual property rights which are parameters for

maintaining market dominance and performance in technology-intensive and innovative sectors.

Likewise, the relocation of manufacturing processes can reinforce the economies of the countries

by creating jobs, especially in high-skilled areas, which leads to the growth of the economy and

the development of technology (Krenz, Prettner, & Strulik, 2018). But, the positive outcomes do

not apply to all sectors of the economy. They are largely the result of job type, the degree of their

automation, and, of course, the economic context of the reshoring initiative.

By contrast, the move towards domestic manufacturing will imply improving national

security as far as cutting down the risks of relying on foreign sources that can be quite unstable.

Such strategic independence enables the stable and secure supply of vital products, particularly

in paradigmatic areas like pharmaceuticals, defense, and technologies. Moreover, reshoring

contributes to the environmental benefits by shortening the supply chains which consequently

reduces the carbon footprints generated in long-distance transportation of the products.

Nowadays, these environmental considerations are considered of utmost importance for

enterprises that strive to achieve sustainability objectives and satisfy consumers who wish to buy

from environment-friendly companies.

Disadvantages of Re-onshoring

Although shoring is advantageous in so many ways, shoring has its disadvantages too.

The high operational costs inherent to advanced economies due to the higher wages, regulatory

compliance, and infrastructure expenses may, on the other hand, counter the advantages of local

production. The labor-intensive industries that are very much dependent on low-cost

competitiveness might find reshoring to be a less attractive option (Brandon-Jones, Dutordoir,

Neto, & Squire, 2017). Furthermore, the skill gap in the local labor market is a major challenge,

because, commonly, demand for highly skilled workers is higher than their supply which results

in talent deficiency that may slow down a smooth production ramp-up.

However, the rebound of manufacturing jobs in the country does not automatically mean

that low-skilled workers will take advantage of the opportunities as they may find few chances in

the automated and high-tech production environment (Krenz, Prettner, & Strulik, 2018). This

circumstance then worsens income inequalities and puts up a challenge to the long-term social
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effects of reshoring. Economically, reshoring is likely to create political clashes in international

trade relations, as countries that lose manufacturing investments might try to defend themselves

via protective measures, possibly leading to trade conflicts. Hence, reshoring may have different

implications for economic and geopolitical goals at the national level, which can only be

achieved in a well-balanced way by taking into account global trade dynamics.

Industries Benefiting from Re-onshoring

Industries such as advanced manufacturing, IT, and other sectors with a high involvement

of skilled employees and high technology can be expected to reap the benefits of reshoring. The

advanced manufacturing territory, consisting of industries including aerospace, automotive, and

electronics, can utilize the pool of domestic talents and the latest tech infrastructure for the sake

of innovation and to take the lead all over the world. Similarly, the IS industry provides security

by working near end-users, reducing latency, and improving service quality which contributes to

strong domestic regulation (International Economic Development Council, 2015).

On the other hand, some industries are not promised equal growth opportunities with the

reshoring trend. This category of firms, particularly the ones who have depended on low-cost

labor as a competitive advantage such as textiles and consumer goods manufacturing, might be at

a disadvantage when it comes to reshoring mainly because it is less economically rewarding.

These businesses can take advantage of the global labor division of labor, where they can

achieve cost efficiency by moving operations to countries with low-wage workers. In this way,

depending on what particular industry sector is focused on, reshoring can be highly profitable,

but at the same time, the attractiveness and feasibility of this strategy differ from case to case.
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Industries That Should Continue Offshoring

Sectors that are based upon labor-intensive production and relatively small profit

margins, such as textiles, apparel, and basic consumer goods manufacturing, should consider

continuing or even increasing their outsourcing to foreign countries. Vigorous competition in

these sectors is based on the issue of labor costs in the countries with lower wages; therefore, the

price and market share are maintained. The other thing that offshoring does is to allow these

industries to access different diverse global markets more efficiently and effectively, drawing on

the comparative advantages of different areas of the world.

On the other hand, industries that are of strategic or national security significance, for

example, the defense industry, telecommunication, and critical infrastructure should consider

reshoring as a way to gain control of vital production as well as supply chains. They need a very

high level of trust and security which may cause the production at home and control and protect

the field of the national standard from foreign exploitation or disruption.

Conclusion

Reshoring may be considered a national strategic readjustment of the global distribution

of manufacturing operations and supply chains, which occurs as a consequence of a combination

of different economic, technological, and geopolitical factors. On the one hand, it gives rise to

significant benefits such as quality, control, and a boost to the economy, especially in high-tech

and advanced manufacturing areas. On the other hand, it is accompanied by costs as well as labor

market dynamics and international trade relations which pose a challenge. Re-shoring decisions

should be taken after weighing the pros and cons of every unique kind of business. In this kind of

business, the needs, capabilities, and strategic objectives must be taken into account. Therefore,
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reshoring is a comprehensive tactic, not a universal one, so it should be chosen with the

consideration of the balance between local and global economic forces.

References

Brandon-Jones, E., Dutordoir, M., Neto, J. Q. F., & Squire, B. (2017). The impact of reshoring
decisions on shareholder wealth. Journal of Operations Management, 49(1), 31-36.

International Economic Development Council. (2015). Reshoring American Jobs.

Krenz, A., Prettner, K., & Strulik, H. (2018). Robots, reshoring, and the lot of low-skilled
workers. European Economic Review, 108, 1-17.