Reshoring is a term you may not have heard (I hadn’t). It’s industry-speak for bringing manufacturing and jobs back to the U.S. from overseas.
Over the past several decades, many industries — from textiles to furniture to shoes, you name it — that were once the bedrock of thousands of U.S. communities, many in rural areas, have gone overseas, leaving a giant hole in a thriving economy that supported much of the middle class.
However, as wages in China and other low cost countries have risen and transportation costs have escalated, there has been some movement of industries and jobs back to the U.S.
Harry Moser, who in 2010 founded The Reshoring Initiative, an industry-led effort to help U.S. manufacturers realize that local production and sourcing can often reduce their total costs, was among speakers at a recent Mississippi State University Franklin Institute conference, “Reshoring, Retaining, and Growing Mississippi’s Manufacturing Jobs.”
He cited a study by the Boston Consulting Group that, by 2015, improved U.S. competitiveness and rising costs in China will put the U.S. in a strong position to add 2 million to 3 million jobs in a range of industries, with an estimated $100 billion in annual output by 2020.
“The standard of living for Chinese workers is going up, and that is making us more competitive,” Moser says.
More than a third of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the United States from China, or are considering it, according to the Boston Consulting Group survey. Key factors driving such decisions include labor costs, product quality, ease of doing business, and proximity to customers. In addition, 92 percent believe labor costs in China will continue to escalate, and 70 percent said sourcing in China is more costly than it looks on paper.
“I believe reshoring is the single best way to strengthen the U.S. economy,” Moser says.
Jay C. Moon, president and chief executive officer of the Mississippi Manufacturers Association, said rising costs of producing goods offshore, plus more costly transportation, could lead to a resurgence of manufacturing in the U.S.
“A lot of manufacturers are now rethinking the costs of overseas production versus the same production in America — particularly with China.”
But, he cautions, Mississippi needs a better educated labor force. “With only 3 million people in our state and with our high dropout rate, we can’t afford to have people sitting on the sidelines. We’re going to need a strong effort in the next eight to nine years to train our workers.”
And, he says, continued investments are needed in infrastructure — roads, railways, ports, and airports to enhance “our ability to service the world.”
With today’s economic situation, “Every state has money issues,” Moon says. “But it all boils down to priorities and a willingness to invest. We have to look down the line and determine how to invest for the future.”
Harry Moser has manufacturing in his blood, so to speak. His grandfather was a foreman and his father managed thousands of employees at the Singer Corporation, which made sewing machines (remember them?). The New Jersey Singer plant was once the largest single building in the world. Moser himself worked there during summers in his high school years.
“It’s all gone now,” he says. “All that production was moved outside the U.S.” In the process, he says, three generations of his family’s tradition were lost, and that was a major motivator for his founding the Reshoring Initiative, which works with U.S. manufacturers to help them recognize their profit potential, as well as the critical role they play in strengthening the economy by using local sourcing and production.”
Through reshoring, manufacturing in the United States is starting to gain momentum, Moser says, and companies are repatriating some of their manufacturing.
Labor costs in China are going up, Chinese workers are beginning to demand workable conditions and hours, breakdowns in global supply chains such as caused by the Japan earthquake/tsunami, political uncertainties, expensive transportation costs, the need to be more responsive to customer demands, and declining prices for U.S. natural gas and electricity are contributing to companies rethinking their offshoring decisions, Moser says.
“The Reshoring Initiative will continue its ‘return manufacturing home’ message to encourage all U.S. manufacturers to make objective sourcing decisions, and thus realize America is increasingly the place to produce and source goods to supply the U.S. market,” he says.
Reshoring can also be a bipartisan solution to the U.S. economic recession, Moser says.