Two years of supply shocks have made efforts to strengthen supply chain resilience top-of-mind for manufacturers and retailers. Economists at Goldman Sachs see three main solutions for those in the U.S.: reshoring foreign production, diversifying supplier networks and overstocking inventories.
Overstocking, or targeting a permanently higher level of inventories, is the strategy that’s most clearly underway, especially in durable goods, the economists said in a recent report. Companies analyzed by Goldman Sachs are aiming for inventory-to-sales ratios roughly 5% higher than before the pandemic on average, according to the report.
Reshoring, on the other hand, appears limited so far. That’s partly because construction of new domestic manufacturing facilities “has mostly gone sideways,” the economists wrote. At the same time, imports of foreign parts and final goods have grown faster than domestic manufacturing output, they said, suggesting that many supply chains still depend on foreign sources for production materials.