Reshoring, the concept of bringing manufacturing and services previously transferred overseas back to the U.S., continues to be a hot-button, and sometimes knee-jerk issue, for the manufacturing industry. Trade tensions and posturing around tariffs continue to place a spotlight on the initiative, but alongside these elements lie a growing sentiment that reshoring is not as easy or cut-and-dried as when summed up for a media soundbite.
While some companies are reconsidering prior offshore moves amid rising labor costs in Asia, there is more to the reshoring effect than meets the eye. Looking at the positives, reshoring can be an agreeable way to balance budgets, boost employment, introduce better jobs and attract a new generation of workers to the manufacturing industry. It’s also a feel-good story to tell during elections. Yet reshoring is not holding to levels previously seen in 2016.
Reshoring in Reverse Again, a research report from ATKearney, a global management consultancy, found that “imports from traditional offshoring countries are at a record high.” In its fourth edition of the report, the Reshoring in Reverse Again analysis shows imports into the U.S. from the 14 largest low-cost-county trading partners in Asia rose by $55 billion. At 8 percent, this is the largest one-year increase since 2011’s economy recovery, according to the report. In 2017, reshoring job announcements were up 52 percent from 2016, according to Industry Week’s “Reshoring is on the Rise: What it means for the Trade Debate.”
Despite a resurgence in reshoring and foreign job announcements and the attention shown for the topic in the 2016 presidential election, the Reshoring Index is down 27 basis points, according to research from ATKearney.
Trends Away from Reshoring
- Continued economic benefits of the production of products overseas
- Difficulty in abandoning existing offshore investments
- Shortage of skilled labor in the manufacturing industry
- Possible unknown risks because of tariffs on goods
A recent Forbes article written by Steve Banker stated reshoring does not have to be the main goal of increasing jobs and wages in the manufacturing industry. Considering the capital investment required, reshoring might not be the best solution for American manufacturers, particularly when costs of shipping across the ocean remain low according to Banker, vice-president of supply chain services at ARC Advisory Group.
Instead, some U.S. manufacturers are looking at alternatives to reshoring, including building collaborations with suppliers and free trade-agreement solutions. One example from Banker’s article included the use of digital services within the global supply chain to allow companies to collaborate and automate when sourcing from markets with low-cost labor.
Trends to Keep Jobs in the U.S.
- Rally for government incentives
- Improve existing infrastructures
- Mend the skills gap
- Provide on-going training to the workforce
- Optimize with automation, innovation and lean techniques
- Collaborate with industries or companies committed to reshoring
- Evaluate offshoring risks
- Consider power of Made in the USA branding
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