27
Dec
15

The “Manufacturing Reshoring Trend Has Subsided”

Offshoring is still beating reshoring — and reshoring is dropping off fast.

Source: The “Manufacturing Reshoring Trend Has Subsided” | Alliance for American Manufacturing

story by Elizabeth Brotherton-Bunch, December 22, 2015 from Alliance for American Manufacturing

 

While some pundits predicted rising Chinese labor costs would bring manufacturing back to the United States, much of the work simply shifted to other Asian countries. Above, a worker in a garment factory in Vietnam. | Photo by ILO in Asia and the Pacific via Flickr Creative Commons

While some pundits predicted rising Chinese labor costs would bring manufacturing back to the United States, much of the work simply shifted to other Asian countries. Above, a worker in a garment factory in Vietnam. | Photo by ILO in Asia and the Pacific via Flickr Creative Commons

Offshoring is still beating reshoring — and reshoring is dropping off fast.

Just like the mullet, shoulder pads and parachute pants, it looks like that whole reshoring thing might be nearing its end — and in fact, it might not have actually ever even been a trend at all.

Global management consulting firm A.T. Kearney just released its annual U.S. Reshoring Index. The findings show that reshoring not only failed to keep pace with offshoring in 2015, it actually saw the largest one-year drop in 10 years.

Roughly 700 reshoring cases have been announced over the last five years, but only around 60 reshoring cases are expected for 2015. That’s a big drop from 2014, which saw 208 cases.

And while reshoring pundits have pointed to rising labor costs in China as a chief reason why companies will bring manufacturing operations back to the United States, many have just been moving their facilities to other Asian countries. A.T. Kearney reports:

“They have done so without incurring significantly higher supply chain costs, despite the weaker infrastructure and supporting ecosystems of these new low-labor-cost destinations. Vietnam has absorbed the lion’s share of China’s manufacturing outflow, especially in apparel. U.S. imports of manufactured goods from Vietnam in 2015 will be nearly triple the level of imports in 2010.”

A.T. Kearney’s findings are in line with other recent manufacturing sector developments. Manufacturing simply is in terrible shape. Hiring continues to flat line and factory production has stagnated.

Meanwhile, imports continue to hurt American manufacturing. The most recent trade figures show that the deficit with China alone in 2015 sits at $306 billion, compared to $285 billion at the same point in 2014.

It’s a far cry from what many reshoring advocates argued would happen just a few years ago, when they pointed to rising labor costs as one reason why manufacturers would move their operations back to the United States.

Rumors of China’s manufacturing death have been greatly exaggerated, A.T. Kearney notes, with researchers writing that Chinese manufacturers are evolving and “their growing capabilities will challenge their Western rivals in new ways.”

Other findings of note from the index:

  • Some of the sectors that led the reshoring effort in recent years also have shown the highest increase in offshoring, including the electronics, appliances, furniture and machinery industries.
  • Researchers predict that if ratified, the proposed Trans-Pacific Partnership between the United States and 11 other Pacific Rim countries “may weaken the business case for reshoring further.”
  • One trend on the rise? Nearshoring. Many companies are leaving Asia to move their operations to Mexico.

Although the researchers write that “it’s fair to say that reshoring as a ‘trend’ is officially dead,” they also argue that the “United States still tops the list of countries where companies from all over the globe want to invest in the coming years.”

It seems that while many U.S. companies aren’t interested in moving their manufacturing back home, many foreign countries see a lot of growth potential here.

Chinese companies in particular have invested heavily to create facilities on U.S. soil, spending about $46 billion since 2000 to build plants and create U.S. manufacturing jobs. Of the 60,000 new manufacturing jobs created due to reshoring in 2014, about 8,000 were at China-owned companies, according to A.T. Kearney.

And although the reshoring trend might appear to be going the way of the Trucker Hat, there is still a lot we can do to revive it. The United States needs a strong manufacturing strategy, one built on balancing trade, investing in our infrastructure, enhancing our workforce training programs and rebuilding our innovation base.

Editor’s Comments

We have seen some optimistic reports in the past couple of years that American manufacturing has been reshoring (bringing back jobs) from China due to the increased wages of Chinese workers and the inability to control quality. But, this has happened only in small spurts. In the meantime, offshoring has continued unabated. There are plenty of Chinese companies on hand ready to sweep away American manufacturing jobs.

Obviously there is a continued net loss of manufacturing year after year. And our government does not care. Of course, there is one party that always wants government to stay out of any business, even though they are responsible for the decimation of American manufacturing. I suspect their ultimate goal is no American manufacturing at all (and no regulations either). Chinese wages will continue to increase making it less profitable to offshore products, but as long as the Chinese can manipulate their monetary unit (The Yuan), they will continue to dominate. And once if costs in China gets too expensive, don’t expect these companies to come back to the United States, they will just find another country to exploit for the extremely poor work force. It is not a rosy future for American manufacturing. How long can America survive on service jobs that can also be easily offshored?

As the report states American business are not interested in bringing jobs back to the United States, but many foreign companies are interested in having factories built in America with American workers. Maybe that is the next boom. We will all be working for Chinese companies. So, who do should we be loyal to? The American based company that offshores all of its jobs or the foreign company that hires American workers? The answer may surprise you, but the one that feeds you, the one that hires American workers. Of course, number one is American company and American workers, but the form that hires American workers is number two.

Buy American-made, keep an American employed – maybe it is your neighbor’s job, maybe it is your own job that you are saving.

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1 Response to “The “Manufacturing Reshoring Trend Has Subsided””


  1. January 10, 2016 at 9:29 pm

    Now that oil in under $35/barrel shipping costs wont drive manufacturers home either. I know low oil wont last for ever, or even very long, but it takes away one reason for companies to bring manufacturing back home.
    Eventually they will run out of “the next low-cost nation.” China had over a billion people, no other low-cost nation will ever come close to that.
    When oil goes back over $100/barrel and the next low-cost country isn’t so low anymore, then perhaps we will see growth in on-shoring.


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