Reshoring America

Over the past few decades, factories—and the manufacturing jobs that go with them—have been moving abroad to countries in Asia, Latin America, and Africa, where labor and materials were cheaper. The movement of manufacturing out of the U.S. was called off-shoring. The practice of American-based companies moving production from other countries to the United States is called reshoring.

There are many reasons for American manufacturers to reevaluate offshoring and consider reshoring. Companies are increasingly recognizing that costs, risks and strategic impacts previously ignored are large enough to overcome the shrinking emerging market wage advantages. Harry Moser, president of the Reshoring Initiative, said “The country has a unique opportunity to address a broad range of economic and social issues. Reshoring’s success bringing back hundreds of thousands of jobs in the last six years despite the headwinds faced by U.S. manufacturing is proof that millions can and will be brought back when the headwinds are eliminated.”

A study by the Economic Policy Institute found that the U.S. lost roughly 2.4 million manufacturing jobs to China alone from 2001 to 2013. However, a developing economy in China means its factory wages are rising, and so have development and production costs for things like electricity, land, energy, and much else. Rising costs in China are forcing manufacturers to relocate their operations elsewhere to even lower cost labor countries such as Vietnam and Indonesia.

reshoring institute

While China will remain an important manufacturing platform for Asia and Europe, the U.S. will become increasingly attractive for the production of many goods sold to consumers in North America. 31 percent of companies with at least $1 billion in annual revenues are likely to add production capacity in the US within five years, according to the Boston Consulting Group (BCG). The percentage of companies actively moving operations back to the U.S. continues to increase.

Walmart, the world’s largest company, announced in early 2013 a “Made in USA” program in which it pledged to purchase $250 billion of American-made products for its stores by 2023. In 2015, moved manufacturing of its F-650 and F-750 trucks from Mexico to a production plant in Avon Lake, Ohio. Boeing announced in 2014 it would transition several hundred manufacturing jobs from overseas to its plant in St. Louis, Missouri. The reshored jobs will primarily be parts manufacturing for the company’s 777 series passenger jets.

General Motors (GM), in January announced that it will invest an additional $1 billion in U.S. manufacturing operations. These investments follow $2.9 billion announced in 2016 and more than $21 billion GM has invested in its U.S. operations since 2009.

GM Chairman and CEO Mary Barra said:

As the U.S. manufacturing base increases its competitiveness, we are able to further increase our investment, resulting in more jobs for America and better results for our owners. The U.S. is our home market and we are committed to growth that is good for our employees, dealers, and suppliers and supports our continued effort to drive shareholder value.

Manufacturing plays an outsized role in the U.S. economy. Despite losing five million jobs over the past decade due to automation and offshoring, the American manufacturing industry is now producing up to 12% of the country’s gross domestic product. A vibrant manufacturing sector also needs an equally vibrant workforce, educated in a multitude of fields from engineering to economics.

These skilled craftsmen, technicians, designers, planners, researchers, engineers, and managers will be in high demand over the next decade due to technological advances in tools for engineering. As a result, the industry plans to open its doors to 3.5 million new workers who are skilled in advanced machinery by 2027, according to the infographic published by Dennis Spaeth, electronic media editor at Cutting Tool Engineering.