The Boston Consulting Group published the results of an interesting survey in April that showed a third of manufacturers are considering "reshoring" back to the United States from China. The survey received a lot of attention, but not for the reasons I thought it would.
Initial articles resulting from the survey have focused on rising wages in China, and improved plant automation in the U.S. But buried several paragraphs down is what I consider the real story: manufacturers are beginning to understand the true cost of manufacturing overseas, and 70% of those responding agreed that "sourcing in China is more costly than it looks on paper."
It's not just about sourcing in China. Consumption is no longer a one-way street. Once you built a cell phone in China with the plan to ship it to the U.S. Today, some of those phones are being sold in China, too. Opening a tractor plant in India is less about seeking a low-wage workforce and more about serving the growing need for tractors in India. Manufacturers also are under pressure to shorten product cycles, offer a broader array of customization, and shoulder some of the risk once felt by distributors and retailers. In other words, where to manufacture a product is a more complex problem than simply calculating wages and shipping costs. Reshoring is merely a symptom of that. Manufacturers need to think about several factors as they choose where to build products and how to source materials for those plants.
Among them: Supply chain decisions, mass customization demands and shorter lead times.