Are manufacturing plants coming or going?
Published: February 5th, 2013
There seems to be an ongoing debate about whether manufacturing plants are coming or going. Harry Moser, founder of the Reshoring Initiative, has been involved in several of these arguments over whether or not "reshoring" is fact or fiction. Perhaps it’s somewhere in the middle, where the truth supposedly lies.
Study results were released last month from the Manufacturers Alliance for Productivity and Innovation (MAPI) and concluded that “Runaway plants [defined for the survey as a plant that closes in the United States and reopens in a foreign country with a lower operating cost structure, producing the same product(s) that will be shipped back to the U.S.] are only the tip of the iceberg when it comes to job and plant destruction within U.S. manufacturing.
"A widespread, more fundamental reason for the decline in the number of manufacturing plants (and manufacturing jobs from openings and closings) is the sourcing decision to purchase intermediate goods from foreign rather than domestic suppliers. Although economic forces and business requirements seem to be shifting in favor of domestic sourcing, there is little evidence that a manufacturing revival has occurred—the necessary positive economic and strategic forces are not reinforced by supportive public policy.”
MAPI’s study shows that while the rate of plant closings has a declining trend over the last 13 years, the rate of plant openings has consistently fallen even more, resulting in a net loss of manufacturing plants. According to the most recent data in MAPI’s study, approximately 10,000 plants closed during the first quarter of 2012 (3.3% of plants) and 8000 plants opened (2.6% of plants). This opening and closing of plants has also negatively impacted manufacturing jobs.
Additionally, the MAPI study also shows that the nearly $4 trillion in sourcing decisions made by domestic manufacturers dwarf the runaway plant and export platform issues in determining the location of manufacturing production.
Almost daily you can read about manufacturers investing in new facilities or expansions of current facilities. It took me all of one minute to find two articles on two automotive parts suppliers: Denso plans to invest nearly $1 billion in North American manufacturing plants over the next four years and add 2000 jobs, with more than $750 million of that investment in the U.S. And American Axle announced it will invest over $100 million on a manufacturing plant in Three Rivers, MI to add new production lines, creating 500 jobs.
In about the same amount of time, I found a news item announcing that Cequent Performance Products is closing its Goshen, IN factory and moving the production of its trailer hitches to Mexico, costing the town 450 jobs. And Sikorsky recently closed its plant in upstate New York that employed 570 workers, primarily due to cuts in the federal defense budget.
Harry Moser’s organization, The Reshoring Initiative, will have a Reshoring Summit March 12-14 at the Cleveland Marriott Downtown. Moser will feature a variety of speakers on this topic including Tobias Schoenherr, co-author of a reshoring study sponsored by the Council of Supply Chain Management Professionals. That study found that 40% of respondents believe there is an increased movement of manufacturing plants back to the U.S.
Many recent studies and surveys—and there are a slew of them out there—have revealed this optimism that reshoring is more reality than myth, and perceive that manufacturing is taking a larger place in the U.S. economy once again. While it may take a few more years to determine whether or not that is true, perception is reality for the moment, and that might result in the "lemmings" coming back the other direction.