A number of studies circulating suggest that companies plan to reshore manufacturing operations to the U.S.
Are manufacturing companies and operations coming back to the U.S.? Yes, in some cases. Are they bringing back jobs? Yes, but not enough to counter what has been lost. Could this economic tide change radically? Some believe it could with the right national policies.
A number of studies circulating suggest that companies plan to reshore manufacturing operations to the U.S. A new Michigan State study, for example, said 40% of manufacturing firms surveyed believe there is increased movement of production back to the U.S. The sample size was just 319. Other studies predict huge job gains. A survey by the Boston Consulting Group is touting job gains of 2.5 million to 5 million based on costs advantages that will shift in favor of U.S production. While these might be indicators of future behavior, for now it’s a mixed bag when looking at the impact of the reshoring that is currently taking place.
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Why are companies coming back? Some cite the increase in the cost of labor in China that has made offshoring to China less of a bargain than it once was. Other reasons given for returning to the U.S. include transportation costs, supply chain issues, lead times, quality and intellectual property protection. Another factor, say some observers, is that manufacturers are now assessing their costs more completely and finding the numbers favor a U.S production base.
Some manufacturers are bringing back specific lines while others are turning to domestic suppliers. Often new jobs are created, but not always. GE (IW 500/5), for example, is building up its appliance business in the U.S. with new plants and lines, adding 1,300 new jobs by 2014. But in the case of tool maker Channellock, a component returned to the U.S., but jobs weren’t added.
Still, the big question that looms over reshoring is whether or not it will result in the replacement of the 5.5 million manufacturing jobs that were lost in the last decade.
One example of a company that is on both sides of reshoring is Whirlpool (IW 500/63). The company has both closed factories in the U.S. and is reopening plants as well as bringing back products to be manufactured in the U.S.
“Whirlpool has complete confidence in the competitiveness of U.S. manufacturing, which is evident by the fact that we have been investing and growing here for 101 years,” Jeff Fettig, chairman and CEO of Whirlpool Corp., told INDUSTRYWEEK.
The company’s investment in its U.S. footprint, which began in 2010, will reach $1 billion by 2014.
“We look at ‘best cost’ as opposed to ‘low cost’ when deciding where to make manufacturing investment, from design to manufacturing to delivery into a consumer’s home,” he added. “That broader perspective, along with true, consumer-relevant innovation, has enabled us to continue to lead the global appliance industry and employ more U.S. manufacturing workers than all of our competitors combined.”
The company, which employs 22,000 workers in the U.S., points out that 80% of the products it sells in the U.S. is made here. And by next year 100% of its large residential washing machines will be manufactured stateside.
Interestingly, the company doesn’t use the word reshoring to describe the process of bringing operations back to the U.S. “We call it upshoring,” says Jeff Noel, vice president of communications and public affairs for Whirlpool. “We never really left the U.S.”
He explains that often the company begins manufacturing a product outside the U.S. with the intent to bring it back to the states if the product captures a strong market share in the United States.
Whirlpool’s belief in the strength of the U.S. market, despite higher rates of growth in other regions, is the reason the company has committed to a number of U.S. investments including $120 million for a new cooking products plant in Tennessee adding 130 jobs, $200 million in an Ohio laundry facility adding 50 jobs, $20 million in a refrigeration plant in Iowa and an $18.6 million outlay in a Michigan design facility.
The company also acquired the former WC Wood facility in Ottawa, Ohio, adding 400 jobs and bringing total employment in Ohio to approximately 10,000, making it the largest manufacturing center for appliances in the United States.
However, the company also closed a plant in Iowa in 2008 due to decreasing demand for the refrigerator model produced at that plant and laid off 400 employees. And in 2012 the Fort Smith plant in Arkansas was closed due to weak demand and rising material costs, accounting for a total job loss of 1,000.
