Maybe it’s more difficult to shift supply lines after all.

That’s one message from a new report from the Asia-Pacific Economic Cooperation trade group, or APEC, which found that improving the resilience of supply chains is neither simple nor cost free. The research comes as the pandemic continues to trigger supply disruptions and prompt discussion of global manufacturers moving their production closer to home.

But the the expense of relocating production is just one reason for hesitancy to do so, Akhmad Bayhaqi, senior analyst of the APEC Policy Support Unit said during a briefing.

“In the long run it still remains to be seen how firms will evolve in responding to this pandemic,” Bayhaqi said. “If you are reshoring but end up with higher costs then your business may not be able to survive.”

Even exercise equipment maker Peloton, which this week announced it’s building a $400 million facility in Ohio, indicated the plan will be incremental to its Asian manufacturing footprint rather than a outright shifting of production to the U.S.

Asked about reshoring in the American auto industry on a Cleveland Fed webinar this week, Louis Vitantonio, president of the Greater Cleveland Automobile Dealers’ Association, said “trying to find the ability for successful reshoring of the parts suppliers, finding places to put them and build those locations is very hard to do.”

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Still, there’s incentive for firms to act now and make sure their supply lines are ready for the next shock. With the right kind of investment, money spent on supply chain resilience could return an up to 25% lift in plant output and up to 30% boost in customer satisfaction, according to APEC research. Potential measures include faster adoption of digital technologies that boost supply-chain visibility and government initiatives that capitalize on the corporate know-how that firms have acquired from their supply lines.

Those findings come as supply blockages continue to grind along.

In China, the crunch has reached a point where some firms don’t want to take the risk of investing in their business. Surging prices of raw materials means “margins are compressed,” says Eric Li, owner of Huizhou Baizhan Glass in Guangdong. With the global economic recovery still uneven, “the future is very unclear, so there is not much push to expand capacity,” he adds.

Manufacturers like Li might not find much solace from politics either. U.S. Trade Representative Katherine Tai and China’s Vice Premier Liu He had a “candid” first conversation as the two sides try to resolve some of their differences on trade. Translation: They were brutally honest and far from major breakthroughs.

—Enda Curran in Hong Kong

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