The Reshoring Initiative, an organization committed to helping manufacturers recognize the profit potential of utilizing local sourcing and production, has published its annual data report on reshoring trends, and the news is good. More than 60,000 manufacturing jobs were brought to the United States by reshoring and Foreign Direct Investment (FDI) combined in 2014, representing a 400 percent increase since 2003.
With only 30,000 – 50,000 jobs being offshored to other countries in 2014, the resulting net gain of 10,000 or more jobs per year represents a shift in the right direction. By comparison in 2003, the United States lost net about 140,000 manufacturing jobs per year to offshoring. The steady decrease in the number of jobs lost, capped by a net gain last year, is building confidence that reshoring and FDI are important contributing factors to the country’s manufacturing rebound.
Data for this report comes from the Reshoring Initiative’s Reshoring Library of more than 2,000 published articles, privately submitted reshoring case studies and some other privately documented cases. The report provides data and analysis in 13 different categories ranging from the number of manufacturing jobs lost to offshoring and reasons cited for reshoring to a breakdown of data by industry, country, region and state. It also includes an international summary of cases reshored to other countries
Of particular interest are the reasons companies gave for reshoring and FDI. Government incentives, the skilled workforce, capitalizing on the value of a Made in USA label, and automation topped the list in 2014. At the same time, companies cited lower quality, long lead times, high freight costs and rising wages as reasons against offshoring.
The data also indicates that reshoring was strongest in the Southeast and Texas, a trend consistent with The Boston Consulting Group’s (BCG) forecast for those areas to lead the way in becoming competitive with China for the manufacture of products to be sold domestically. Much of this is attributed to the trend for companies to build “green-field” factories in states with lower wages, lower taxes and right-to-work laws.
“We publish this data annually to show companies that the trend in manufacturing in the United States is to source domestically,” said Harry Moser, founder and president of the Reshoring Initiative. “With 3 to 4 million manufacturing jobs still off shore, we see huge potential for even more growth and hope this data will motivate more companies to reevaluate their sourcing and siting decisions.”
The Reshoring Initiative offers many tools and resources to help companies make supply chain sourcing decisions. The Reshoring Initiative’s Total Cost of Ownership (TCO) Estimator is the best-known publicly available tool for this purpose. It uses advanced metrics that allow users to easily determine the total cost of offshoring by accounting for and understanding the relevant offshoring costs, which include inventory carrying costs, shipping expenses, intellectual property risks and more.
For more information, visit: www.reshorenow.org
According to Boston Consulting Group’s recent press release: “Within the next five years, the United States is expected to experience a manufacturing renaissance as the wage gap with China shrinks.” BCG went on to say that the remaining labor cost gap will be largely overcome by the incremental costs associated with offshoring. The Reshoring Initiative provides the information and analytical tools to accelerate the manufacturing renaissance by helping companies recognize and calculate their full cost of offshoring and thus decide what products to reshore now.
Even before the current trends in Chinese wages and currency, many companies had offshored more than was in their own self-interest. In fact, Archstone Consulting’s 2009 survey showed that 60 percent of manufacturers ignore 20 percent or more of the cost of offshoring. To help companies make better sourcing decisions the non-profit Reshoring Initiative provides free Total Cost of Ownership (TCO) Estimator software that companies can use to compare the cost of offshoring and domestic sourcing. Suppliers can use the software to sell the advantages of local sourcing to their customers.
The Reshoring Initiative has made great progress this year:
- Seventy-five presentations already scheduled for 2011, including live, webinars, TV and radio. Increasingly, major national trade associations are requesting to hear about reshoring.
- Release of Version 5 of the TCO Estimator, covering 17 countries and two product categories: parts and molds/dies.
- Completion of the first 2 steps of the 6-step Illinois Reshoring Initiative, supported by 40 trade associations, economic development agencies and companies.
Harry Moser, Founder and President of the Reshoring Initiative said, “Boston Consulting Group has added increased national visibility to the reshoring trend. It is now up to the customers to reevaluate their sourcing decisions and the suppliers to aggressively promote savings from reshoring. The Initiative is available and ready to help both groups.”
With clear evidence of the fragility of global supply chains, Chinese and other low labor cost country wages rising rapidly, the U.S. $ declining and oil soaring, this is the perfect time for U.S. companies to reevaluate their offshoring strategies and bring some of the sourcing home.
A 40-year manufacturing industry veteran and retired President of GFAgieCharmilles, Harry Moser founded the Reshoring Initiative to move lost jobs back to the U.S. For his efforts with the Reshoring Initiative, he was named to Industry Week magazine’s Manufacturing Hall of Fame in 2010. Additional information on the Reshoring Initiative is available at www.reshorenow.org or www.illinoisreshoring.org. The Initiative’s 13 sponsoring associations and companies are acknowledged at that site.