Wave of Reshoring in U.S. Manufacturing?

U.S. manufacturing is in a period of resurgence, and while it is too early to say if the positive momentum has staying power, the sector’s revival is being aided in part by the return of production to the United States that had been outsourced to lower-wage rate locations overseas, particularly China and developing Asian economies write  Bill McMeekin & Emily McMackin in Reshoring U.S. Manufacturing: A Wave of the Present on (Chosen excerpts by JMM follow)

Known as reshoring, inshoring or insourcing, this wave of activity, though still too soon to be called a major trend, is seismic enough that it has caught the attention of economic development policymakers, economists, researchers and governments.

Some key facts:

• After shedding some 7.5 million jobs and shrinking to 9 percent of the total nonfarm employment in 2010, the U.S. manufacturing sector has added 430,000 jobs since. A 2012 study concluded reshoring could add 2 million to 3 million jobs and an estimated $100 billion in annual output in a range of industries by the year 2015.

• The roster of companies returning production to the United States includes some of the nation’s largest manufacturing companies such as General Electric, Ford, Caterpillar and NCR.

• Surveys have found major companies either deciding to or actively considering reshoring. A Boston Consulting Group survey in April 2012 found more than one-third of U.S.-based manufacturing executives at companies with revenue greater than $1 billion planned to reshore production to the United States from China, or are at least considering it.

• A number of factors are driving the reshoring trend including rising wage rates in China, currency valuations and higher energy costs and their impact on shipping.
• Beyond cost considerations, other factors are also playing into reshoring decisions, including disadvantages from having research, engineering and design too far from production, supply chain disruption concerns and concerns over intellectual property.
• Reshored production favors such items as durable goods and heavy machinery that are expensive to ship relative to price, for example, expensive items subject to frequent changes in consumer demand
such as high-end clothing and home furnishings and appliances, and products where safety concerns are vital, such as food products or baby formula.
• Openings for skilled manufacturing positions are up more than 150 percent from 2009. The production most likely to be returned to the United States will require highly trained workers and even more oordinated efforts between government, education and business on workforce development programs.
• While lower-cost labor states in the Southeast and Southwest would have an advantage in attracting reshored manufacturing, states that offer a highly skilled labor pool can also be competitive.

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