Industry Week recently reported on the state of reshoring — the transition of manufacturing from overseas back to the USA. In their article, Industry Week referred to a survey conducted by L.E.K Consulting of decision-makers in 10 U.S. manufacturing industries, at companies with $500 million in revenues or more. Their survey indicated a modest improvement in U.S. manufacturing but not a dramatic wave of reshoring.
Management consultant A.T. Kearney estimated there would be about 300 cases of reshoring in 2014 compared to 16 in 2010. “Even though there is no torrent of renewed manufacturing activity moving the needle just yet, it’s clear that the reshoring movement is growing” Kearney said in a 2014 report titled Solving the Reshoring Dilemma.
The Boston Consulting Group has said that “back in 2010, we projected that it (reshoring) wouldn’t really get started until 2015….because it takes time for a company to consider all of the factors on where to locate a plant. Our estimate is that reshoring will bring around 2.5 million to 5 million jobs to the US over the next five-plus years”.
These reports tend to support five critical themes in manufacturing identified in the Industry Week article:
- End User Demand is Driving Companies to Produce Closer to their Customer Base
- Proximity to the customer base allows for greater responsiveness, better market positioning, more accurate demand forecasts and ability to offer end-market customization.
- Note: Remke Engineered Solutions is all about end-market customization
- Better Management of Supply Chain Risk
- Re-locating closer to customers results in shorter lead times, increased flexibility, enhanced efficiency and customer responsiveness
- Narrowing Differences in Energy and Labor Costs
- The discovery of shale gas within the borders of the US has positively affected the competitiveness of U.S. manufacturing, especially in the chemicals industry. AND companies aren’t saving as much on wages in formerly ‘low-cost’ countries. China’s hourly rate has nearly doubled from 2008 to 2013.
- Importance of Innovation, Differentiation and Speed to Market
- As manufacturers seek growth in local markets they find that they must tailor some of their products to the local market and become faster at getting products to market in order to thrive.
- Note – tailoring products for its customers is something Remke does every day
- The Importance of Business Environment & Regional Attractiveness
- The U.S. has stronger laws and institutions relative to developing economies which provides manufacturers with greater intellectual property protection and higher safety standards.
L.E.K. Consulting said that their survey results indicated that “companies won’t close their existing facilities in China….instead these companies will expand into the U.S. with new, expanded and productivity-enhanced facilities in sectors such as aerospace, defense, industrials, oil and gas.” The Welcome Advance to American Manufacturing is that companies will locate close to where growth is coming from — at home in the USA.
Has reshoring had an impact on your region? And if so did this result in sales opportunities for your company? Please SHARE and LIKE this blog………and as always Thank You for subscribing to EVERYTHING’S CONNECTED.