Manufacturing in America Grows with Reshore Efforts

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A more to 'Reshore' manufacturing back to the United States will boost manufacturing
A more to 'Reshore' manufacturing back to the United States will boost manufacturing

A more to 'Reshore' manufacturing back to the United States will boost manufacturing
A more to ‘Reshore’ manufacturing back to the United States will boost manufacturing

Boosting ‘Made in America’ with Reshoring Manufacturing

CHICAGO – Cheap consumer products or jobs? That has been the trade off in manufacturing in North America. For the past twenty years, many of the products consumers use have had their manufacturing shifted offshore. The bulk of that manufacturing has headed to Asian economic giant China. Many of the clothing people in North America wear is made in Bangladesh, or China.

Everything from clothing to computers has seen its manufacturing base move from North America to Asia. That economic transition has shifted America from a world leader and growing economic giant to a less powerful economic force in the world. The United States has seen its debt grow as manufacturing has left the country.

That trend may now be starting to reverse. The trend is now toward ‘reshoring’ manufacturing from offshore plants back to the United States.

More than half United States Manufacturers Reshoring

According to a new survey by The Boston Consulting Group, “More than half of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the U.S. from China or are actively considering it.”

The share of executives who are planning to ‘reshore’ or are considering it rose to 54 percent, compared with 37 percent of executives who responded to a similar BCG survey in February 2012. The new survey, conducted last month, elicited responses from more than 200 decision makers at companies across a broad range of industries. Virtually all of the companies manufacture in the U.S. and overseas and make products for both U.S. and non-U.S. consumption.

Part of the reason, especially in clothing has been media reports of the conditions workers in some countries are facing. 

The survey also found a sharp increase in the percentage of executives who are actively engaged in the process of shifting production to the U.S. When asked whether they expect to move production in light of rising wages in China, 21 percent of respondents — around twice as many as in 2012 — said they are “actively doing this” or that they “will move production to the U.S. in the next two years.”

The increase in willingness to reshore supports earlier BCG findings that are part of the firm’s “Made in America, Again” series, produced by its Operations and Global Advantage practices. The series explores the shifting economics of global manufacturing and how the changes are starting to favor the production of certain goods in the U.S.

In a report released in August, “Behind the American Export Surge: The U.S. as One of the Developed World’s Lowest-Cost Manufacturers,” BCG projected that production reshored from China and higher exports due to improved U.S. competitiveness in manufacturing could create 2.5 million to 5 million American factory and related service jobs by 2020.

“Over the past couple of years, we’ve projected an improvement in U.S. manufacturing competitiveness by 2015 that would help drive an American manufacturing revival,” said Harold L. Sirkin, a BCG senior partner and a coauthor of the study. “The results of our latest survey make clear that a profound shift in attitude is beginning.”

The top three factors cited as driving future decisions on production locations were labor costs (cited by 43 percent of respondents), proximity to customers (35 percent), and product quality (34 percent). More than 80 percent of respondents cited at least one of these reasons as a key factor. Other leading factors include access to skilled labor, transportation costs, supply-chain lead time, and ease of doing business.

“The wide range of reasons executives cite for shifting production shows that companies are becoming more sophisticated in their understanding of all the factors that must be considered when deciding where to manufacture,” said Michael Zinser, a BCG partner who leads the firm’s manufacturing work in the Americas. “When you look at the total cost of production for many goods, the U.S. appears increasingly attractive.”

“These findings confirm that the reshoring trend is more than anecdotal,” said Justin Rose, a BCG partner who along with Sirkin and Zinser is a coauthor of The US Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback” (Knowledge@Wharton, 2012). “As the costs and benefits become more apparent, we expect more companies to consider manufacturing in the U.S. if their products are to be consumed in the U.S.”

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