By Bridget McCrea
Re-shoring initiatives are in full force and aren’t expected to let up anytime soon, according to a new report from Boston Consulting Group (BCG). In U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much, the research firm explored the idea of re-shoring—or, simply, the return of manufacturing operations and jobs to U.S. soil.
BCG credits improved U.S. competitiveness and rising costs in China as the key drivers of the trend, which it expects to add 2 million to 3 million jobs and about $100 billion in output across a range of industries. Industries that are leading the charge include: transportation goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics.
Manufacturing sourcing website MFG.com has also picked up on the re-shoring trend. Last year it surveyed North American manufacturing firms and found that 21% had already brought production into, or closer to, North America during the second quarter of 2011. That represented a 12% increase over the same period in 2010, according to MFG.com, which also found that 38% of manufacturers surveyed were currently exploring their re-shoring options.
Reversing the Flow
The re-shoring movement represents a major reversal over the early-2000s, when the U.S. trade deficit with China alone cost U.S. manufacturing over 2.8 million jobs between 2001 and 2010, according to the Alliance for American Manufacturing.
The fact that American manufacturing firms are bringing their operations closer to home doesn’t surprise Gary Conley, president of TechSolve Inc., a manufacturing consultancy in Cincinnati. For the last few years he’s watched companies that moved production offshore question the value of those moves, namely because they weren’t achieving the anticipated production values, quality, and cost savings.
When fuel costs increased and labor cost differentials shrank the need to re-shore became even more evident. Throw the desire to consolidate supply chains, and bring production closer to the end user, into the mix and the re-shoring argument becomes even stronger. “Manufacturers that offshored production and jobs didn’t fully understand what the total cost was going to be,” says Conley. “As a result, we’re now seeing some disappointed manufacturers moving production back into the U.S.”
Generac is one of many manufacturers that has been slowly re-shoring its operations. This Waukesha, Wis., maker of standby power systems “recently brought back jobs from overseas,” according to Kyle Raabe, vice president of sales, and plans to continue strengthening its U.S. footprint in 2012. “There’s no question that we’re growing our manufacturing presence here in the state of Wisconsin and in the U.S. as a whole,” says Raabe.
Key drivers of Generac’s reshoring initiative include the need to respond quickly to market changes and customer needs. Being able to put a “Made in the U.S.A.” sticker on its products is another compelling motive, says Raabe, who sees the manufacturer’s re-shoring strategy as a positive for its distribution network. “Not only do they get the benefit of faster response times and a closer-knit supply chain,” says Raabe, “but they can draw emotional connections with end users with U.S.-made products. It’s definitely a win-win.”
More to Come
In assessing the overall re-shoring trend, Raabe expects manufacturers across various industries to compare the costs of on-shoring versus re-shoring, and then make decisions on a product-by-product basis. “In our case, when you look at what we manufacturer and the skilled labor, components, delivery times, and logistics that go into our products,” Raabe says, “there’s definitely a value to doing it [all] right here in our own backyard.”
With individual manufacturers like Generac undertaking individual re-shoring ventures, and with groups like the National Reshoring Initiative spreading the word about how goods can be competitively produced onshore, the move to bring production and jobs back to the U.S. will likely continue. For distributors, that could mean even more “Made in the U.S.A.” bragging rights on the near horizon, as well as shorter order lead times, lower inventory levels, and improved supplier relationships.
“Higher fuel costs and global crises [like the earthquake in Japan] have pushed American manufacturers to rethink their offshoring initiatives and we don’t expect that trend to let up anytime soon,” says Conley. “Over the next few years re-shoring will pretty much become conventional wisdom amongst U.S. manufacturers. It’s the new way of the world.”
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at firstname.lastname@example.org or visit her website at www.expertghostwriter.net.Tagged with tED