Another report on manufacturing coming back—or not—to the United States, "Reshoring is dead in its tracks, says A.T. Kearney," that came into my inbox the other day appears to be further proof that we're still waiting for this phenomenon to happen. Companies that study this have been saying the same things for several years: It's anecdotal; it's coming in dribs and drabs; it's a job here and job there. But there have been no tsunamis—nor should we expect any.
I have a file of reports on reshoring and in looking back through them, not a whole lot has changed. So what does that mean for the plastics industry? Well, it means don't hold your breath waiting for that customer who jilted you a few years ago and took the work to China to return any time soon.
It also means that you need to be looking at new and different customers in new and different industries—and maybe in different countries like Mexico, where manufacturing is booming. As Patrick Van den Bossche points out in the aforementioned article, the United States is fast becoming home to a lot of foreign companies, as they invest in what, despite our own economic woes, is still one of the best places in the world to invest. Van den Bossche noted, however, that you'll have a new class of competitor, as many of these OEMs from Europe, Japan and China (such as Volvo, which is now owned by a Chinese company) will be pulling their supply base into the U.S. with them.
While Van den Bossche points out that there's still "a bit of an adversarial note when you read about Chinese manufacturing, if you go to South Carolina, where manufacturing and textile plants were abandoned years ago by their U.S. owners, people there are looking to Chinese companies to save these towns." According to various reports, Chinese foreign direct investment (FDI) in the U.S. totaled $12 billion in 2014. That number is expected to be even bigger this year, as Chinese companies expand their subsidiaries and build greenfield plants.
These plants also will be competing for the Made in America branding that has become so popular for U.S. manufacturers in the past few years. Chinese manufacturers are not dumb. The more we encourage U.S. consumers to reject Chinese-made goods in favor of products made in America, the clearer the handwriting on the wall becomes for the Chinese. If we want Made in America, they can make it in America!
Don't doubt for a minute that many companies, including startups, continue to head to China for cheaper manufacturing opportunities. The recent devaluing of the yuan will drive manufacturing costs lower as factories are cutting prices, according to many analysts. Chinese competition is far from being eliminated.
However, U.S. manufacturers have learned to thrive on competition, and competition has many advantages. For one, it's made U.S. manufacturers better. I've seen that in the moldmaking industry. In spite of the complaining that moldmakers have done over the past two decades, they are for the most part stronger technologically, more profitable and more savvy in winning new work from new customers by selling the value they offer.
"We do remain passionate about U.S. manufacturing," Van de Bossche told me, "but we want executives to understand the real story so they don't get scooped up in the hype."