A majority of manufacturing executives at companies with sales greater than $1 billion claim in a new survey that they are pulling production back from China and returning it to the U.S., or are at least considering such a move. Labor costs, proximity to customers and product quality are key reasons for production location decisions.
The number of executives who are reshoring or considering bringing back production from China surged considerably from 37 percent in 2012 to 54 percent, according to the survey, conducted by The Boston Consulting Group (BCG). The company compiled responses from more than 200 executives across a wide range of industries that manufacture products for both U.S. and foreign consumption.
Shifting production back to the U.S. could have a significant impact on manufacturing job growth. A separate report released by BCG in August noted that greater reshoring and exports could potentially create “2.5 million to 5 million American factory and and related service jobs by 2020.”
The reshoring trend has been on the uptick in recent years, with the help of efforts such as The Reshoring Initiative, which launched in 2010 with the stated goal of bringing manufacturing jobs back to the U.S. The Reshoring Initiative attempts to help manufacturers recognize profit potential and their role in improving the economy by practicing local production and sourcing.
Beyond such initiatives, reshoring efforts are echoing throughout industry events. Author Michele Nash-Hoff, who wrote “Can American Manufacturing Be Saved,” told sister publication IMT that the central theme of this year’s Del Mar Design and Electronics Show (DMEDS) in San Diego, Calif., was “The Rebirth of American Manufacturing” — with a full day track dedicated to reshoring.
Reasons for industry reshoring efforts vary widely, according to the BCG survey. Twenty-one percent of survey respondents who were asked whether they expect to move production due to rising wages in China said that they are actively doing so, or expect to shift operations in the next two years.
The top factors cited by survey participants when asked what influences decisions about location were labor costs (43 percent), proximity to customers (35 percent), and product quality, with more than 80 percent of respondents citing one of these reasons as a key location factor. Other reasons include skilled labor, transportation costs, supply-chain lead time, and ease of doing business.