According to data in the latest report from the Reshoring Initiative, the "bleeding of manufacturing jobs to offshore has stopped." The U.S. has gone from losing about 140,000 manufacturing jobs per year to gaining 10,000 or more per year, the report states. While that number represents some gains, the report notes that there are still three to four million manufacturing jobs offshore, which represent "a huge potential for U.S. economic growth."
Growth is what this country needs right now. Today's GDP numbers were worse than anemic at 0.2% for the first quarter. Blame the weather, blame whatever you want to blame, but the numbers speak for themselves when it comes to the U.S. economy. However, the reshoring of manufacturing provides a glimmer of hope.
The Reshoring Initiative parsed the numbers and provides the reasons companies are reshoring, something that is necessary to understand in order to see the big picture and quantify those reasons. The top three positive reasons for Reshoring and Foreign Direct Investment (FDI) cited by 118 companies are government incentives (175 companies cited this reason), skilled workforce (140 companies cited this) and image/brand (Made in USA).
Reshoring places higher emphasis on the Made in USA image, automation and re-design of the product, while FDI places more emphasis on government incentives and skilled workforce, said the report. "Since reshoring is almost all from low-wage countries, the companies have to minimize labor cost here to enable reshoring and can provide more perceived value by offering Made in USA," said the report's commentary. "Since most FDI is from other developed countries, Made in USA is a less powerful sales argument. The foreign company can be recruited by all 50 states and often has larger projects, thus more government incentives."
The top three negative reasons associated with offshoring are wuality/rework/warranty (193 companies cited this), lead time (148 companies cited this), and freight costs (114 companies). Rising wages was cited by 86 companies, while 80 companies cited total cost of ownership (which encompasses the top four negative reasons).
The Reshoring Initiative stated that only products that have been imported can be reshored, thus the products least suitable for offshoring never left. "Generally, reshoring is focused on products whose size and weight suggest offshoring never offered great total cost savings," said the study's commentary.
At the top of the list is the transportation equipment industry, with 132,823 jobs and 33 companies reshored back to the USA.
It's no surprise that over 50% of reshoring has been from China. "This is consistent with the huge percentage of offshoring that went to China but is a major change from the view in the decade of 2000 to 2010 that China was indomitable," said the report.
Reshoring is strongest in the southeast and Texas, the report noted. This is consistent with Boston Consulting Group's forecast on this topic that the region would be the first to become competitive with China for products to be sold here. "The tendency is for green-field factories to go into these lower wage, lower tax, right-to-work states," according to the report. "Reshoring in the north is more often into existing company facilities."
The Reshoring Initiative noted that the purpose of the report is "to provide trend data that will motivate companies to reevaluate their sourcing and siting decisions and assist them in making better decisions that consider all of the cost, risk and strategic impacts flowing from those decisions."
[Image: Stuart Miles/freedigitalphotos.net]