Reshoring of economic activity by transnational corporations (TNCs)

Reshoring refers to the process where transnational corporations (TNCs) bring manufacturing and other operations back to their home countries, often high-income countries (HICs), after previously offshoring them to low-income countries (LICs) or newly industrialised countries (NICs). This shift has gained momentum due to changing economic conditions and strategic priorities.

Trends in manufacturing share of national output

Data on manufacturing as a percentage of national value added shows significant changes over recent decades. From 1970 to 2010, many HICs experienced a decline in their manufacturing share. For instance, some countries saw their manufacturing output drop from around 30% to below 15%, reflecting the impact of offshoring during the 1970s and 1980s. Meanwhile, certain NICs saw fluctuations, with manufacturing initially declining before recovering to higher levels by 2010 due to rising costs and reshoring trends.

Case study: K'Nex Industries

K'Nex Industries, a US-based toy manufacturer known for products like Tinkertoys and building sets, exemplifies the reshoring trend. Initially, in the late 1990s, the company outsourced most of its production to China to benefit from lower labour costs. However, long shipping times created logistical challenges. By 2017, approximately 90% of K'Nex toys were produced back in the United States, highlighting the strategic move to prioritise faster delivery and local production. The "Made in the USA" label also allows the company to charge a premium of up to 15% on its products, adding a competitive edge.

Challenges and opportunities in reshoring

• Economic considerations - Reshoring involves balancing higher wage costs in HICs with benefits like reduced transport expenses. Energy costs and trade agreements also play a role in decision-making.
• Automation impact - Increased use of automation in HICs diminishes the labour cost advantage of LICs, even if they automate as well. However, automated roles are often low-skill positions.
• Job creation - In the US, reshoring has shifted the trend from losing around 140,000 manufacturing jobs annually between 2013 and 2014 to gaining approximately 10,000 jobs or more per year.

Reasons for reshoring and its impacts

The decision to reshore is influenced by a combination of push factors from overseas locations and pull factors in the home country. These factors reflect changing global economic dynamics and consumer expectations.

Push and pull factors driving reshoring

Examples of reshoring initiatives

• UK investment - A company like bathrooms.com has committed $2.5 million to establish production in the Midlands, UK, aiming to manufacture 25% of its products locally. This reduces delivery times significantly for UK customers.
• Key sectors - Industries most likely to reshore include capital-intensive sectors with complex supply chains, such as petroleum, chemicals, aerospace, pharmaceuticals, textiles and leather goods.

Impacts of reshoring

• Direct effects - Increases in output, gross domestic product (GDP), and employment in the home country as manufacturing returns.
• Indirect effects - Benefits to local supply chains as demand for raw materials and services grows.
• Multiplier effects - Employees in reshored industries spend their earnings in the economy and increase demand for services.
• Regional benefits - In the UK, regions like the south-east and north-west gain the most from reshoring, particularly due to concentrations of defence, electronics, and aerospace industries.

Crowdsourcing as a resilience-building strategy

Crowdsourcing is the process of sourcing ideas, services, finances and information from the public via the internet due to the benefit from the collective abilities of a large group of people. It has developed because top-down approaches, that is, government solutions to problems, have proved insufficient.

The concept of resilience and crowdsourcing

The concept of resilience refers to the ability of individuals, communities or environments to respond to shocks and changes while continuing to operate under new circumstances. Crowdsourcing is a way of using a community's best assets, namely its population, to find solutions, discuss ideas, fund projects etc.

Crowdsourcing allows for rapid transmission of ideas and opportunities which would have been more difficult in the era before the internet. For example, Wikipedia is an example of a crowd-sourced effort that enables people in most places to obtain information on most subjects very quickly, and at very limited extra cost.

Benefits and challenges of crowdsourcing

Benefits:

• Empowers people to contribute to solutions
• Allows for rapid transmission of ideas and opportunities
• Enables global interaction and involvement of many people from different stakeholder positions

Challenges:

• Plans and expectations must be clearly stated because there is a danger that different people may interpret plans differently
• The increased interdependence and complexity of global interactions necessitates careful coordination

Case study: Nepal earthquake response

Following the earthquake in Nepal, crowdfunding raised over $20 million in 60 days. It also provided images of buildings, schools and hospitals daily, to help search, rescue and relief workers.

Categories and applications of crowdsourcing

Crowdsourcing can be divided into distinct categories, each suited to specific tasks or goals. These categories highlight the versatility of this approach in building resilience across various contexts.

Types of crowdsourcing

Broader applications of crowdsourcing

Crowdsourcing is not just about raising money – that is crowdfunding. Crowdsourcing includes problem-solving, marketing, sharing knowledge, raising money, promoting open government, greater involvement in research and development, raising awareness, and disaster relief.

Examples of crowdsourcing applications:

• Disaster relief - Used during natural disasters to coordinate response efforts
• Innovation challenges - In 2011 the Bill and Melinda Gates Foundation introduced the Reinventing the Toilet Challenge, a US$100,000 challenge to design a toilet that could dispose of human waste without a septic tank or an outside water system. The winning design was a solar powered system that could break down waste and water to fertilizer and hydrogen.
• Community empowerment - Crowdsourcing is a high-technology bottom-up approach of empowering communities around the world.