What is in this article?:
- Manufacturers Take a Global Approach to Reshoring Decisions
- Changing Economic Factors Prompt Jarden Move
- Getting Reshoring Past Par
Getting Reshoring Past Par
Harry Moser of the Reshoring Initiative estimated that 50,000 manufacturing jobs have been brought back to the U.S. since January 2010. However, he said about the same number of manufacturing jobs are leaving the country per year as being created. The challenge, he said, is to find ways to move manufacturing past parity.
Moser said manufacturers are reshoring primarily to be more economically sustainable, rather than out of patriotism. It makes sense for manufacturers in many cases to serve the U.S. market from domestic plants. While he prefers operations coming to U.S. facilities, Moser said companies that have work with very high labor content may do those operations in Mexico or Costa Rica and then have a U.S. team that handles the high-tech work.
“From the U.S. perspective, it is better to be part of the winning team than all of the losing team, which is what will happen if the work stays offshore,” says Moser.
Companies in the past often offshored work because they failed to take a comprehensive look at their manufacturing costs, he said. As a result, they frequently missed about 20% of the cost of offshore production.
Now, he noted, labor costs in China have soared in recent years. He cited a study by Boston Consulting Group that net labor costs in China and the U.S. should converge by around 2015. As a result, U.S. firms may want to start preparing to bring work back to the U.S.
Understanding total costs helps companies better justify when the investment in lean methodologies, technology and training will help them be competitive manufacturing in the U.S. rather than sourcing to China, Moser said.
“If you did total costs and there is only a 5% or 10% difference, rather than a 30 or 40% difference,” said Moser, then the return on investment from investing in lean manufacturing “is dramatically higher.”