Reshoring: A Rising Phenomenon
By Samantha Brey, EMS Marketing
Take a moment to look around at your surroundings; chances are you’ll see several different objects, maybe things like pens, books, and little trinkets. I’m willing to bet that if you take a closer look at these things you’ll discover that at least one of them was made in a country other than the one in which you bought it.
Many companies choose to manufacture their products offshore and operate their factories in countries where workers are willing to work for less. But recently labor costs in other countries, including China, have been rising. Companies have begun to discover that the benefits that had previously resulted from offshore production are starting to decline. This has caused some to move their production plants back to the country from which they originated.
The technical term for this move, “reshoring,” can result in higher product quality, a more skilled available workforce, a better public image, and a faster response to changing customer demands. In fact, since 2010, 249,000 American manufacturing job opportunities have resulted from companies reshoring.
Some of the companies that have re-shored, or are planning to do so in the future, have made the decision because of Walmart. The corporate leaders of Walmart pledged to buy approximately $250 billion in products to support the creation of new American jobs by 2023. By doing this they are hoping to promote re-shoring and improve the declining U.S. economy.
So what does re-shoring mean for consumers? This new manufacturing trend ends up being a win-win situation for both companies and their customers. The products sold are considered to be higher quality, while transportation is faster and less costly. Pramod Gupta, A.T. Kearney principal said, “…some consumers are becoming more inclined to buy products made in America for their quality and sustainability, even if they are higher-priced.”
Just the image of manufacturing products in its home country has benefitted many American companies and convinced others to follow the example and re-shore.
There are some well-known companies who have taken this big step and are benefitting greatly from it. Under Armor, New Balance, Apple, Ford, and many others are beginning to re-shore sections of their manufacturing divisions, and others may eventually re-shore their entire companies. The Boston Consulting Group predicts that up to five million manufacturing and related service jobs will be returning to the U.S. by 2020.
It’s not just American companies who are following this trend. EEF, the UK manufacturer’s organization, conducted a survey and found that one in six UK manufacturing companies have re-shored their production in the years 2011-2014.
But not everything about re-shoring is entirely good. Many companies who re-shored to America have had difficulty finding capable and willing workers. They have also had to pay more for electricity and comply with regulations regarding land use and the environment. There are also companies with high foreign demand for their products that don’t benefit much from re-shoring due to added freight costs. These companies are more likely to offshore to the country with the highest demand.
There are costs and benefits to reshoring — some companies have found that the costs approximately equal the benefits. There is controversy over whether re-shoring is a passing trend or a future manufacturing norm, only time will tell. Will it become as common as offshoring has been? For the sake of consumers and the economy, let’s hope so.