Reshoring: A Viable Option?

Reshoring: A Serious AlternativeA significant trend regarding the repatriation of production operations into the USA from Asia  - otherwise known as re-shoring – is starting to emerge.

Big American manufacturers are taking very seriously the option advocated by Harry Moser (The Reshoring Initiative)  - and many others – that by conducting a complete and objective assessment of all costs and benefits, reshoring has become increasingly attractive.

Factors that influence such decisions include assessing offshore production in terms of Total Cost, consideration of shifting macroeconomic landscapes, pursuing the virtues of staying close to one’s customers, the necessity to tightly control quality, the ease of doing business, and to mitigate risk from unpredictable global disruptions (both political and natural).

Further, given pressures on the Home Front from consumers, Big Firms may be casting an eye toward the protection of the value of their brands.

Location selection is not, big companies are evidently discovering, all about the hourly wage rate.

Nick Zieminski explored the findings and the reasons for firms reconsidering their choices, in the following article written for Reuters:

Large U.S. manufacturers are much more likely than their smaller peers to move production to the United States from China, according to a survey.
Labor costs and the quality of goods are the top reasons for companies to consider so-called “re-shoring,” with some companies considering the United States a de facto low-cost country because of its high unemployment, according to the survey by the Boston Consulting Group.
It found that 37 percent of all U.S.-based manufacturing executives either plan to or are actively considering moving production from China. That rises to 48 percent among companies with more than $10 billion in revenues, the poll found.
Majorities of those polled said they expected wage costs in China to continue to rise, and said sourcing there is more costly than it appears on paper because of factors such as proximity to customers and the ease of doing business.
Makers of rubber and plastic products are especially likely to consider re-shoring. Companies that make computer equipment, metal products and transportation goods are less likely to do so.
“The economics of manufacturing are swinging in favor of the U.S.,” said Harold Sirkin, a BCG senior partner and co-author of the study. BCG says a more competitive U.S. manufacturing base could create up to 3 million jobs by the end of the decade.
The poll of 106 U.S.-based manufacturers was conducted online in February.
Large companies have more plants whose production can be moved and better access to financing, Sirkin said. Among recent examples of what he called an accelerating trend, Sirkin cited Ford Motor, NCR, MasterLock, SleekAudio, Chesapeake Bay Candle, and Farouk Systems.
The United States is becoming a low-cost developed-world country, according to BCG, with wages typically below those in Western Europe or Japan. More European and Japanese companies are likely to export from U.S. plants.
Some companies, including General Electric Co and Boeing Co, have said they went too far in moving operations out of the United States and that wage differences are narrowing. GE has moved much of its appliance manufacturing from Mexico and China to Kentucky. (Read more…)
Here is a terrific video, which lasts about 7 minutes, where Harry Moser explains the basics of reshoring:
Your comments are welcome.

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