{"id":1027,"date":"2020-12-23T03:13:06","date_gmt":"2020-12-23T11:13:06","guid":{"rendered":"http:\/\/savingusmanufacturing.com\/blog\/?p=1027"},"modified":"2020-12-23T03:13:06","modified_gmt":"2020-12-23T11:13:06","slug":"reshoring-of-manufacturing-increases-in-2020","status":"publish","type":"post","link":"https:\/\/savingusmanufacturing.com\/blog\/general\/reshoring-of-manufacturing-increases-in-2020\/","title":{"rendered":"Reshoring of Manufacturing Increases in 2020"},"content":{"rendered":"\n

The United States gradually\nlost manufacturing jobs from the peak of 19.5 million in 1979 to 17.3 million by\nearly 2000.  However, after China was\ngranted Most Favored Nation status that year, the loss of manufacturing jobs in\nthe U.S. accelerated dramatically as American manufacturers moved manufacturing\noffshore and cheaper Chinese goods drove U.S. manufacturers out of business.\nAccording to the Bureau of Labor Statistics<\/a>,\nwe lost 5.8 million manufacturing jobs from the middle of the year 2000 to the\nmiddle of 2010.  Fortunately, we have\nbeen slowly regaining manufacturing jobs since 2010 thanks to a great extent to\nthe efforts of the Reshoring Initiative.<\/p>\n\n\n\n

In April 2010, the\nReshoring Initiative<\/a>\nwas founded by Harry Moser, retired\npresident of GF AgieCharmilles LLC, a leading machine tool supplier in\nLincolnshire, Illinois.to facilitate returning manufacturing to America from offshore by providing the right\ntool at the right time to with the creation of the Total Cost of OwnershipTM  <\/sup>worksheet calculator spreadsheet. To help companies\nmake better sourcing decisions, the Reshoring Initiative provides the Total Cost of OwnershipTM  <\/sup>spreadsheet for free to help manufacturers calculate the real impact offshoring has\non their bottom line. The website provides an online library of more than 7,000\narticles about cases of successful reshoring.<\/p>\n\n\n\n

The brief\ndefinition of TCO is an estimate of the direct and<\/em> indirect costs related to the purchase of a part, sub-assembly,\nassembly, or product. However, a thorough TCO includes much more than the\npurchase price of the goods paid to the supplier. For the purchase of\nmanufactured goods, it should also include all of the other factors associated\nwith the purchase of the goods, such as: \ngeographical location, transportation alternatives, inventory costs and\ncontrol, quality control, as well as reserve capacity, responsiveness, and technological\ndepth of the vendor.<\/p>\n\n\n\n

Mr. Moser\u2019s TCO spreadsheet includes\ncalculations for the hidden costs of doing business offshore, such as\nIntellectual Property theft, danger of counterfeit parts, the risk factors of\npolitical instability, natural disasters, riots, strikes, technological depth\nand reserve capacity of suppliers, and currency fluctuation as well as effect\non innovation, product liability risk, annual wage inflation, and currency\nappreciation.<\/p>\n\n\n\n

Previous studies have shown that\nabout 60% of companies made the\ndecision to offshore based on comparing wage rates, FOB prices or landed costs,\nwhile ignoring the hidden costs and risk factors. Thanks to the Reshoring\nInitiative\u2019s TCO worksheet, companies are becoming familiar with the broad\nrange of factors they had previously ignored. The reasons that thousands of\nother companies have given for reshoring in the Reshoring Initiatives library\nof cases helps companies to determine whether those reasons are applicable to\nthem. <\/p>\n\n\n\n

According to the\nannual report<\/a>\nreleased on December 7, 2020 by the Reshoring Initiative, \u201cThe projected job\nannouncements for 2020 is 110,000, which will bring the total to over 1 million\nby year\u2019s end\u2026The combined reshoring and foreign direct investment (FDI)\nannouncements in 2019 totaled more than 117,000 manufacturing jobs, plus an\nadditional 24,800 in revisions to the years 2010 through 2018\u2026Additionally, the\nnumber of companies reporting new reshoring and FDI was at the second highest\nannual level in history:  1,100\ncompanies.\u201d <\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Jobs Announced, Reshoring and FDI, Cumulative\n2010-2019<\/strong><\/p>\n\n\n\n

The report states:\n\u201cOnly products that have been offshored\/imported can be reshored. Thus, the products\nleast suitable for offshoring never left, such as heavy, high volume minerals,\nhigh mix\/low volume items or customized automation systems.<\/p>\n\n\n\n

The most active\nreshoring is by those that left and probably should not have done so, including\nmachinery, transportation equipment and appliances. As the data indicates,\nreshoring is focused on products whose size and weight, e.g., transportation\nequipment, or frequency of design change\/volatility of demand, e.g., some\napparel, suggest that offshoring never offered great total cost savings.\u201d<\/p>\n\n\n\n

The term \u201cFDI\u201d\nmeans \u201cForeign Direct Investment\u201d and refers to foreign companies that are\ninvesting in manufacturing plants in the U.S. to produce products closer to\ntheir major market of the U.S.  Plants\nestablished by Japanese companies such as Toyota and Nissan, and plants\nestablished by German-owned BMW are examples of foreign investment.<\/p>\n\n\n\n

However, we still\nhave a long way to go as the report states: \u201cWhen measured by our trade deficit of about $500\nbillion\/year, there are still three to four million U.S. manufacturing jobs offshore<\/a> at current levels of U.S. productivity, representing a huge potential for U.S. economic\ngrowth.\u201d<\/p>\n\n\n\n

The report states, \u201cCompanies have consistently reported\nPositive Factors more often than Negative, probably because the companies place\nmore value on demonstrating the wisdom of their current reshoring decision than\non what went wrong with their earlier offshoring decision. \u201c<\/p>\n\n\n\n

The top ten positive factors that influenced a reshoring\ndecision are: <\/p>\n\n\n\n

  1. Proximity\nto customers\/market<\/li>
  2. Government\nIncentives<\/li>
  3. Eco-system\nsynergies\/Supply chin optimization<\/li>
  4. Skilled workforce\navailability\/training<\/li>
  5. Image\/brand<\/li>
  6. Infrastructure<\/li>
  7. Impact on\ndomestic economy<\/li>
  8. Lead\ntime\/time to market<\/li>
  9. Automation\nTechnology<\/li>
  10. Customer responsiveness improvement<\/li><\/ol>\n\n\n\n

    The top ten negative factors influencing the decision to\nreshore are:<\/p>\n\n\n\n

    1. Quality\/rework\/warranty<\/li>
    2. Freight\ncost<\/li>
    3. Total\nCost<\/li>
    4. Delivery<\/li>
    5. Rising\nWages<\/li>
    6. Inventory<\/li>
    7. Supply\nchain interruption\/Natural disaster risk\/Political instability<\/li>
    8. Green\nconsiderations<\/li>
    9. Intellectual\nProperty Risk<\/li>
    10. Communications<\/li><\/ol>\n\n\n\n

      The report states that the top industries that are\nreshoring or benefitting from FDI are:<\/p>\n\n\n\n

      • Transportation\nEquipment<\/li>
      • Computer\n& Electronic Products<\/li>
      • Electrical\nEqu8ipment, Appliances & Components<\/li>
      • Chemicals<\/li>
      • Plastic\n& Rubber Products<\/li>
      • Wood\n& Paper Products<\/li>
      • Apparel\n& Textiles<\/li>
      • Fabricated\nMetal Products<\/li>
      • Machinery<\/li><\/ul>\n\n\n\n

        It\u2019s not surprising that China ranks number one as the\ncountry from which companies are reshoring, with Mexico, Canada, India, and\nJapan filling out the top five.  The top\ncountries that are investing in manufacturing sites in the U.S. are: Germany,\nChina, Japan, Canada, and Korea.  <\/p>\n\n\n\n

        The authors note that \u201cThe South and Midwest\ncontinue to dominate cumulatively. The Midwest and Texas dominate reshoring and\nthe South dominates FDI.\u201d It was surprising to me that Michigan and New York\nwere in the top five states for the number of jobs that were reshored, as they\nare not states where the cost of business is low. However, Texas ranked highest\nfor both number of jobs announced and the highest number of companies\nreshoring. <\/p>\n\n\n\n

        The report authors state, \u201cWe believe the continued\nstrength of the trends thru the end of 2019 is largely based on greater U.S.\ncompetitiveness due to corporate tax and regulatory cuts and increased\nrecognition of the total cost of offshoring.\u201d<\/p>\n\n\n\n

        It was interesting\nto note the impact of the COVID Pandemic on reshoring.  The authors report: \u201cThe COVID Pandemic has\nincreased in interest in reshoring as \u201cTwo in three (69%) manufacturing\ncompanies are looking into bringing production to North America (compared to\n54% in February).\u201d <\/p>\n\n\n\n

        In addition,\n\u201cRepeated surveys show that more companies, driven by the virus crisis, have\ndecided to reshore. We expect to see the data respond to this shift in 2021.\nAlso due to the pandemic, we are seeing U.S. reshoring outpacing FDI for the\nfirst time since 2014\u2026The national demand to shorten and close supply chain\ngaps for essential products to make the U.S. less vulnerable is most likely to\nbenefit the following industries: PPE, medical, tech, and defense. Already, 60%\nof cases after March mention the pandemic as a factor in reshoring decisions.\nMedical equipment and PPE are the first responders of new reshoring with cases\nalready double from last year.\u201d<\/p>\n\n\n\n

        In\nconclusion, the authors state: \u201cThe\nrevised rate of reshoring plus FDI job announcements in 2019 was up about 2000%\nfrom 2010. The 600,000+ jobs brought back represent about 5% of U.S.\nmanufacturing employment. The acceleration of jobs coming back combined with\nthe decline in the rate of offshoring has resulted in a plateauing of the goods\ntrade deficit at about $800 billion\/year. The COVID crisis has revealed the\nU.S.\u2019s over-dependence on imports. <\/p>\n\n\n\n

        This data should motivate companies to\nfurther reevaluate their sourcing and siting decisions by considering all of\nthe cost, risk and strategic impacts flowing from those decisions. Policy\nmakers can use the continued reshoring successes as proof that it is feasible\nto bring millions of jobs back.\u201d<\/p>\n\n\n\n

        Government policies do have an influence on\nreshoring and FDI. If the next administration reverses the corporate tax and\nregulatory cuts, it could have an adverse effect on the reshoring trend. <\/p>\n","protected":false},"excerpt":{"rendered":"

        The United States gradually lost manufacturing jobs from the peak of 19.5 million in 1979 to 17.3 million by early 2000.  However, after China was granted Most Favored Nation status that year, the loss of manufacturing jobs in the U.S. accelerated dramatically as American manufacturers moved manufacturing offshore and cheaper Chinese goods drove U.S. manufacturers […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[11,81,26,25],"class_list":["post-1027","post","type-post","status-publish","format-standard","hentry","category-general","tag-american-manufacturing","tag-loss-of-manufacturing-jobs","tag-reshoring-2","tag-reshoring-initiative"],"_links":{"self":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/1027","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/comments?post=1027"}],"version-history":[{"count":1,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/1027\/revisions"}],"predecessor-version":[{"id":1029,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/1027\/revisions\/1029"}],"wp:attachment":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/media?parent=1027"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/categories?post=1027"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/tags?post=1027"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}