Reshoring Picks Up Steam as Manufacturers Weigh Options
IMT Staff posted on November 07, 2014 |
reshoring, jobs, US, manufacturing, Many would point out that the United States is in a renaissance in manufacturing, as the movement to drive offshore production back to America continues.

Reshoring, the effort by domestic companies to move manufacturing stateside from overseas, has been an influence on manufacturing since at least 2010, when one of its leading proponents, Harry Moser, a former machine tool executive, formed the Reshoring Initiative, of Kildeer, Ill., to aid the effort. Reshoring momentum continues to build, as data show that manufacturing is returning to the U.S. or likely will after years of offshoring operations, mostly to China and Asia, where low production costs were a powerful lure once. In order to contain production costs and logistics expenses and gain better control over quality, delivery, and time-to-market, manufacturers are turning back.

One annual survey, released last month, by The Boston Consulting Group (BCG), found that compared with a year ago, 24 percent more senior manufacturing executives at companies with sales of $1 billion or more would consider returning production to the U.S. in the near future. Moreover, 54 percent said reshoring is an option.

Respondents also said the U.S. had surpassed Mexico (read: nearshoring) as the likely location of new capacity for the American market. The proportion of executives who favored the U.S. over Mexico was similar to the decrease among those who selected Mexico: 27 percent preferred the U.S. versus 26 percent last year, while 24 percent chose Mexico, down from 26 percent in 2013.

Participants in the BCG study forecast that the U.S. would account for an average 47 percent of their total manufacturing activities in five years, a 7 percent increase over last year’s response. Executives reported that 11 percent of production capacity would still be in China at that time, a decline of 21 percent from 2013.

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The payoff from reshoring will be a surge in manufacturing sector hiring. Half of respondents expected to increase U.S. production jobs by 5 percent or more. Only 17 percent anticipated employing at least 5 percent fewer workers in five years.

BCG says this reinforces a previous estimate it made indicating that reshoring, and rising exports, could create 600,000 to 1 million U.S. manufacturing jobs by 2020 — a prediction consistent with numbers from Moser and others.

Companies will not simply hire workers, though. BCG and others note that affordable automation and advanced technologies will play increasing roles in manufacturing cost reductions and support reshoring.

Executives will also turn to emerging processes such as additive manufacturing and hybrid production (using machinery combining additive manufacturing and subtractive finishing) to streamline operations. Concurrent with this will be greater use of advanced materials like titanium, metal alloys, and carbon-fiber composites.

New hires will thus need skills to operate and maintain high-tech machines and to handle high-performance materials. Finding and training them may be a challenge.

One point made by advocates of reshoring — and of nearshoring, the relocation of manufacturing to Mexico or Canada — is that the U.S., despite higher costs compared with Asia and elsewhere, is competitive when the total cost of production is considered. While it was not unusual for companies to achieve 30 to 40 percent savings on offshore manufacturing in Asia versus the U.S., shipping delays, quality problems, and even travel expenses for U.S. managers to and from offshore plants could wipe out much of these gains.

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This article was originally published on ThomasNet News Industry Market Trends  and is reprinted with permission from Thomas Industrial Network.  For more stories like this please visit Industry Market Trends

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