Made in America…Again: Reshoring’s Impact on U.S. Manufacturing Job Creation
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As manufacturers in the United States recalculate and compare the total costs of operating offshore, some are beginning to bring production back to the states. If the trend continues, as experts believe, reshoring could generate millions of new manufacturing jobs over the rest of the decade.

In a survey of U.S.-based manufacturing executives, the Boston Consulting Group (BCG) found that 54 percent of the respondents said they already have plans to bring production back to the U.S. or are actively considering it. Only 37 percent responded that way in February 2012.


Michael Zinser, head of BCG’s manufacturing practice in the Americas, noted that one factor sparking a reshoring movement is that productivity in China is not keeping up with wages, which are increasing 15 to 20 percent each year.

“As a result, the productivity-adjusted wage gap between the U.S. and China, a reason most companies left the U.S. in the first place, is eroding,” he told Career Journal. “In addition, the U.S. is enjoying some of the lowest energy costs in the world, some two to four times better than China and other developed countries, which also contributes to a more competitive U.S. cost base.”

Other key factors driving reshoring decisions are proximity to customers, quality, access to skilled labor, transportation costs, supply-chain lead time, and ease of doing business.

What Reshoring Means for U.S. Manufacturing Jobs

“So far, the reshoring activity has only had a modest impact on overall job creation, but we are in the early stages,” Zinser said. “We expect manufacturing job growth to accelerate over the balance of the decade.”

BCG has projected that reshored production, coupled with rising exports, will create between 2.5 million and 5 million American jobs by the end of this decade.

Those new jobs will not only be in American factories, but also in services that support manufacturing. BCG estimates that the increase in both U.S. exports and domestic goods production that otherwise would have been imported will create between 600,000 and 1.2 million factory jobs, while another 1.9 million to 3.5 million jobs could be created in such services as transportation, logistics, and retail.

MORE FROM THOMASNET NEWS: Walmart’s Buy American Plan Could Be More than “Shot in the Arm” to Reshoring

Zinser cited seven industry sectors in which it will be “just as cheap to produce a product in the U.S. (for consumption in the U.S.) as it will be in China.

“These seven tipping-point industries are computers and electronics, appliances, furniture, machinery, fabricated metals, rubber and plastics products, and transportation goods,” he said. “When the benefits of the U.S. energy advantage are included and increases in exports are considered, we expect that the chemicals industry and other industries that leverage natural gas as a feedstock will also benefit.”

Industry experts caution that although more reshored jobs are coming, it is important to keep in mind that factories have become more automated and workers more productive.

“Because many of the jobs that are returning to the U.S. are not the jobs that left — they are more highly skilled and take advantage of higher levels of automation — we shouldn’t expect to see a return to the levels of a decade ago,” Zinser said.

The NAIOP Commercial Real Estate Development Association maintains that reshoring will not be a job-creating panacea in manufacturing.

“Some industries will add jobs as others shed them, resulting in no change to the total number of manufacturing jobs but halting a decades-long trend of losing more jobs than added,” 
NAIOP reported in a study published in June. “The manufacturing sector is expected to level off at an employment level of roughly 11 million jobs between now and 2020, after losing 6 million jobs between 2000 and 2010.”

Since the start of 2010, some 50,000 manufacturing jobs have returned to the U.S., according to estimates from Harry Moser, founder and president of the Reshoring Initiative. While those gains pale in comparison to the ranks of the 11.3 million unemployed Americans, Moser has pointed out that five years ago the number of jobs coming back was close to zero.

 

 

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Comments:
  • November 21, 2013

    The Reshoring trend is growing for many reasons, such as rising employment costs, employee retention issues, time zone differences, low productivity levels to name just a few.

    This is great news for the U.S. economy. Reshoring has grown rapidly since 2010 and
    offshoring is slowing to the extent that the two processes are about in balance for the first time in decades! Repeated surveys by Boston Consulting Group, MIT, Supply Chain Forum, MFG.com, Deloitte and others consistently show a sizable and growing percentage of companies deciding to reshore at least some of their production and sourcing.

    The positive effects of a robust manufacturing sector are measured well beyond manufacturing. Reports from the National Association of Manufacturing (NAM) indicate every dollar that’s created in manufacturing, has a 1.4 multiplier effect on the entire economy.”
    Also, two thirds of U.S. research and development is concentrated in manufacturing making it a high-powered economic sector.

    The manufacturing multiplier effect drives other sectors, creating jobs and investment in non-manufacturing sectors.

    More than 200 larger companies have publicly announced reshoring actions. These actions inevitably impact thousands of domestic suppliers. If companies consistently evaluate all of the costs and risks, about 500,000 more manufacturing jobs would come back and the trade deficit fall by about 25%.

    The not-for-profit Reshoring Initiative’s free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases companies will find that, although the production cost is lower offshore, the total cost
    is higher. TCO Estimator http://www.reshorenow.org/TCO_Estimator.cfm

    Readers can help bring back jobs and increase profitability by asking their companies
    to reevaluate offshoring decisions. Suppliers can use the TCO software to convince their customers to reshore.

    You can reach Harry Moser, founder/president of The Reshoring Initiative, at harry.moser@reshorenow.org | http://www.reshorenow.org

    I also suggest reading “ReMaking America” the AAM’s new book on the wealth and growth opportunities in manufacturing in America. http://americanmanufacturing.org/remake-america/ Harry Moser wrote an excellent chapter on Reshoring.


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