More and more often, they come back

 

The trend of re-establishing activities and job orders on the Italian territory, or anyway in Europe, seems to consolidate; now, the entire Country-system is called to enhance and to facilitate the reshoring, creating the ideal conditions to favour the growth of investments and competences.

«COVID-19 pandemic might accelerate the repatriation trend of activities previously delocalized but it is necessary that in the motherland facilitating and boosting initiatives, in both technological and political ambit, are implemented to prevent this boost from running out». As confirmed to Stampi by the associated Professor of economic-managerial engineering of Milan Polytechnics, Stefano Elia, who has recently contributed in the research Il reshoring manifatturiero al tempo di COVID-19: trend e scenario per il sistema economico italiano.

“It is indispensable reshoring is advantaged by favourable national policies”
Stefano Elia, associate Professor of economic-managerial Engineering of Milan Polytechnics

(The manufacturing reshoring at COVID-19 time: trend and scenario for the Italian economic system). The report involved the participation, besides Elia, of professor Luciano Fratocchi from University of L’Aquila; Paolo Barbieri from University of Bologna; Albachiara Boffelli and Matteo Kalchschmidt from University of Bergamo. The study has allowed assessing that, on a European scale, from 2007-2008 until now, about 800 reshoring cases have occurred. 175 have concerned Italy and some of them precisely took place simultaneously with coronavirus emergency. «However, it is not possible to grasp the characteristics and the size of the trend», Elia explained, «if previously we do not analyse the reasons for the offshoring, which did not depend just on the will or need of finding new markets». The will of decreasing costs and especially labour ones has to do with it; and the research of product diversification due to higher know-how or competitiveness than those found in domestic ambit. «Therefore, they should decide coming back», the report co-author specified, «when these aspects can be more easily found in the motherland, too. However, the reshoring must be guided, oriented and reasoned to be advantageous indeed. Besides, the cost factor should not be the main variable considered. Otherwise, if manufacturing in China is no longer competitive, moving to Vietnam would be enough».

Digitalization as driver

On the contrary, a reduction of manufacturing burdens is a possible target also in West nations provided that greater use is made of digital technologies, which especially in recent years have demonstrated they can contribute in the rise of enterprises’ efficiency. Meanwhile, it is indispensable that reshoring is advantaged by favourable national policies. Acting on the taxation boost is undoubtedly important, but it is not sufficient in itself: additionally, we need support services in drawing up a business plan that calculates the pros and cons of the return; the availability of skilled teams and support in scouting phase. In other words: training. «Competences are a topical issue», Elia stated, «and more in general reshoring operations do not hit the target if they are not completed by a long-term planning, as the one studied by France, Great Britain and United States in unsuspecting times. As well as by impressive reforms of justice, public administration, taxation and infrastructures. In this way, we would support the return to the Peninsula not only of our enterprises but eventually also the setup of non-Italian companies with origins in other States. In short, if it is suitably managed, the manufacturing reshoring makes the competitiveness grow in its whole». If the objection concerns then the real possibility that digitalization goes hand in hand with an employment rise, the reply is that the alternative, without the reshoring of enterprises headquartered abroad or the attraction of new investments, is the zero-growth of available jobs. Moreover, wide-ranging institutional programmes must include targeted didactic courses for young and training projects aimed at the upskilling of factory workers. «The horizon must be broad», Elia specified, «but this is unavoidable since the cost competition with Asia is likely to remain unequal. Furthermore, we have to develop other suitable skills for supporting another pillar of reshoring: differentiation. In other words, the possibility of creating in Italy, in the specific case, high added-value products. Through the already mentioned digital technologies or researches about innovative sustainable materials, because sustainability is a competitive edge».

Much ado for nothing

“Even if a company like ours reshored the manufacturing of its electronic boards in Italy, it should anyway buy the necessary components from China”
Davide Praino, plant manager of Bitron Electronic China Co

Davide Praino is the plant manager of Bitron Electronic China Co, we have reached him by phone in the multinational headquarters in Chengyang district, in Qingdao City, and he has clear ideas about the eventuality of a mass reshoring. «When in January China seemed to be the main victim of the contagion», he told Stampi, «we talked a lot about a possible significant return to West of delocalized activities, not without concern. Concrete cases have instead been few and today the impression is supply opportunities to Europe and Italy are multiplying. Probably, the trend mostly concerns the United States but owing to political reasons». However, this does not mean fears have completely vanished: «To express a definitive judgement», Praino added, «we will have to estimate the long-term effects of the substantial displacement stop, the trend of logistics costs and the difficulty of travelling to/from Asia and Europe. They are all possible sources of criticalities that might lead some companies to redefine their strategies. Bitron relies on staffs, here, dedicated to quality controls and tests for both the Electronics Division and the tools that are used only in-house. However, we should think that others employ professionals who directly come from Italy or different European Countries just for this purpose. Worth reminding customer relations. They are managed from remote, but it is not the same thing». The Italian multinational could rely on sufficient forces and resources to manage the COVID-19 impact and was not compelled to postpone or to re-programme any of its projects. Its presence in the People’s Republic is nowadays historical and consolidated; staying is an indisputable choice. «Not only it is an enormous market», the plant manager pointed out «but also the access door to an immense array of potential customers.
It will remain competitive because it has immense reaction capabilities. Let us think of customs duties. To avoid the impasse, manufacturers have invested in other States not subjected to sanctions, creating some factories on the spot and so going on selling without problems». Speaking of the specific reshoring issue again, Davide Praino ended: «The pandemic shock was fleeting but we cannot foresee what might happen in autumn. Today the focus is on the recovery of connections with Europe because it is unconceivable we can proceed unevenly. However, there is a further fact worth considering. Even if a company like ours reshored the manufacturing of its electronic boards in Italy, it should anyway buy the necessary components from China: we are links of a much extended chain whose essential parts are in Asia. For this reason I believe that reshoring is

Made-in effect

Matters of macro-economic kind, like trade wars and international tensions, last but not least also SARS-CoV-2, are other food for thought about the reshoring opportunity, but the care of the finished product quality, more directly controllable from close up, is essential. «Without neglecting», the Professor of Milan Polytechnics highlighted, «the so-called made-in effect, customers’ certainty of dealing with a product that can be labelled as made in Italy by full right. This mark, in fact, is an authentic brand and generates a calculable added-value. Let us think of Candy, which delocalized and was taken over by Chinese, but declared they intend to bring back part of their productions to Brianza, precisely treasuring the tricolour excellence and the made-in impact». Eco-sustainability is at the same time a label and a business and the short manufacturing chain, the concept of proximity and zero kilometre, are all intrinsic of both the circular sustainable economy and of reshoring. Stefano Elia hopes in the multiplication of public institutions’ (for instance, of investment agencies) and of trade associations’ branches dedicated to companies that are going to undertake the way back home, supporting them in the cost-benefit analysis. Provided that there is then the awareness that reshoring makes sense only if they are reasonably certain they are not missing business opportunities in the foreign Country.

Reshoring is there and you can feel it

“For all those companies backed by a sound economic situation, the reshoring might guarantee almost unconceivable business opportunities”
Francesco Gallicchio, industrial manager of the Turin Gallicchio Stampi

In the opinion of the industrial manager of the Turin Gallicchio Stampi, Francesco Gallicchio, the reshoring phenomenon is not only a theme much felt and debated but also a source of concrete opportunities. «Pandemic coincided with the stop of supplies from Asia and the rise of transfer difficulties for men and goods», Gallicchio said, «compelling many companies to question about the advantages of delocalization and to change strategy. Not fortuitously, we are already receiving a good number of demands for equipment and moulds previously manufactured in China». Problems do not arouse with the same urgency for all and certainly big multinationals with factories and important induced activities in the People’s Republic go on taking advantage of it. However, the logistics problem remains and the concept of the proximity to final customers is emerging with its whole relevance. «There are German customers», Gallicchio reminded, whose toolshops mainly operate in the automotive world, «that have decided entrusting some job orders to suppliers in Germany, even if their quotations were similar to ours. In my opinion, this is the sign of a generalized trend to privilege domestic induced activities, the physical proximity». As you can notice, it is not a matter of costs: «None of the buyers that have preferred us to Asia again», Francesco Gallicchio highlighted, «has imposed us particular economic conditions or tying prices, also because the People’s Republic has no longer been for a long time a paradise for the low-cost manufacturing. On the other hand, we got used to saving and optimizing resources, enhancing efficiency through investments in automation, to preserve acceptable margins». Automotive companies or their Tier-1 channel order new tools for specific components and the trend might prove to be advantageous for all. «I believe», Gallicchio ended, «only those backed by a sound economic situation will overcome the present crisis with their heads up. For all these enterprises the reshoring might assure, in cascade, almost unconceivable business opportunities».

Finally, we need Europe speaks with one voice and thinks systemically, so that proximity chains can embrace more Countries, certainly, but all part of the European Union or bordering with it. Each nation has its own manufacturing attitudes and enhancing them, according to a network vision, would mean creating more richness for all. «COVID-19», Stefano Elia ended, «can be an accelerator of the phenomenon, a catalyst. We expect it boosts a review of manufacturing models and value chains. However, above-mentioned limits remain, such as technological or political elements, to avoid the boost stops until the next pandemic or emergency. Otherwise, even worse, Countries other than Italy benefit from Italian companies’ reshoring decisions, giving birth to a near-reshoring process (i.e. of re-establishment of some machining in near Countries but not in the origin nation of the enterprise) that would bring no benefits to our Country.

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