Water conservation has made tremendous strides in recent years, but shortages could strike companies that rely on the resource for production if they're considering nearshore manufacturing. While many businesses have taken advantage of the cost savings they can enjoy by moving their production to the United States, some haven't realized certain states are undergoing water shortages that could make manufacturing certain goods and materials difficult in the future.
According to 24/7 Wall Street, the states most severely impacted by water shortages are Oklahoma, Wyoming, South Dakota, Colorado, New Mexico, Kansas and Nebraska. Nebraska is experiencing the worst problems, with the entire state experiencing a severe drought, 96.1 percent in an extreme drought and 76.4 percent in an exceptional drought.
These shortages could be vital factors for a company looking to shift its operations stateside to consider. Shortages have the potential to lead to higher prices, which could make it more expensive for a firm to operate in the U.S., rather than less costly. In the long term, higher material prices could have an impact on consumer costs, leading products to become even more unaffordable and limit a company's competitive advantage.