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The Jury is Still Out on The Reshoring of US Manufacturing

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The practice of bringing manufacturing back “home” has been greeted with cheers.

A recent MIT survey of 108 US-based multinational industrial manufacturing companies with annual sales between $20 million and $25 billion and multichannel operations found that 14% of them definitely planned to move some manufacturing back to the US market.

So what’s going on here? Have the economics changed in favor of domestic manufacturing?

Yes, they have.

Recent trends have made many hopeful that manufacturing may be coming back to the United States and the United Kingdom. Elevated transportation costs, the potential for an erosion of the traditionally wide wage gap from East-Asian labor and the additional (often unforeseen) costs of training workers who may not pick up on the nuances of western cultures have provided compelling reasons for manufactures to employ workers domestically.

According to global accounting firm PwC,

Even if an increase in the relative competitiveness of United States labor costs were to unfold, that seems unlikely to be sufficient to result, in itself, in a domestic manufacturing resurgence. Instead, a host of other factors – particularly transportation and energy costs, and currency fluctuations – are more likely the most salient reason United States manufacturers will choose to produce closer to their major customer bases. And, for manufacturers with principal customer bases located in the United States, this means re- shoring production back to the United States market.

Manufacturers may be able to save a considerable amount of money if they do their due diligence when offshoring, but are learning that a relatively simple problem like a rework or a design issue can turn into a big and expensive headache quickly. Onshoring offers solutions to the problems that companies may not have considered when outsourcing work.

And though not everyone is on-board with onshoring just yet, government action is anticipated to nurture the movement, helping provide incentive to companies on the fence about bringing jobs back to the US.

This is good news going forward for US-based industrial manufacturers who are searching for signs of resilience in the domestic economy, and a trend that CoreElement expects to continue through the remainder of the decade.

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  • 27 Jan, 2014
  • Posted by coreElem3nt
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