#673 – Reshoring Gains Traction in U.S. Manufacturing

Posted on | The Agurban

We have shared information about reshoring a number of times. We are excited to see this trend continued throughout 2017. We are very optimistic about the future of manufacturing!

Reshoring Gains Traction in U.S. Manufacturing
Mark Crawford, Staff Editor, Area Development, Q1 2018

U.S. manufacturers are picking up momentum in bringing the jobs back they outsourced decades ago to low-cost countries — a move called reshoring.

According to the Reshoring Initiative, an organization that helps manufacturers decide if they can successfully relocate their overseas operations to the U.S., reshoring and FDI (foreign direct investment) job announcements soared in 2017. For the first three quarters of 2017, announcements were up 250 percent from 2016 YTD, representing a gain of nearly 180,000 manufacturing jobs.

Over the last 10 years, leaders in the U.S. FDI/reshoring movement include GM` (12,000 jobs), Boeing (7,800 jobs), Toyota (6,000), Mahindra (6,000), Volkswagen (4,000), and Volvo (4,000). In addition, Ford, Foxconn, Mercedes-Benz, GE, Caterpillar, Polaris, and Intel have each brought back more than 2,000 jobs.

Factors that are accelerating the reshoring movement include favorable domestic economic conditions; advanced technologies such as automation, robotics, and the Internet of Things; reduced domestic energy costs; the just-lowered corporate tax rate; aggressive tax incentives from various states; as well as increased labor costs overseas.

In particular, the labor cost differential between China and the U.S. has narrowed significantly over the past five years, greatly reducing profits for offshore enterprises. Increased shipping costs further erode the bottom line. Disruption of supply is also a concern with longer supply chains. This is especially true for possible shortages of materials or parts that can only be sourced from a few suppliers, which would have serious impacts on delivery and production schedules. Increasingly, the cost advantage of lower wages overseas is undercut by higher supply chain costs and quality issues. When all these factors are considered together, more U.S. manufacturers are starting to look at the United States as the place to manufacture.

According to the Reshoring Initiative, U.S. companies are reshoring many of the jobs previously sent overseas as a result of favorable economic conditions at home as well as the use of advanced technologies.

“It still takes six weeks to bring a product from China to the U.S., whereas here you have an opportunity to produce that product domestically and get it to the customer in days, instead of weeks,” says John Malloy, CEO for Victaulic, a global pipe and tool manufacturer in Easton, Pa.

Advantages of a U.S.-only supply chain include:

  • Improved quality control and safety
  • More reliable and less costly shipping
  • Shorter and more reliable supply chains
  • Faster decision-making
  • American job creation
  • Positive impact on the national economy
  • Improved brand through “Made in America”

“In fact,” says Harry C. Moser, founder and president of the Reshoring Initiative, “regaining a ‘Made in America’ label is the fourth-most frequently mentioned reason for reshoring, out of the 43 reasons that we track.”