Reshoring manufacturing work is a subject of great interest, and one we have commented on frequently. Recently, we found some disquieting news about reshoring from A. T. Kearney:
“In 2015, the A.T. Kearney (www.atkearney.com) U.S. Reshoring Index shows that, for the fourth consecutive year, reshoring of manufacturing activities to the United States has once again failed to keep up with offshoring. This time the index has dropped to –115, down from –30 in 2014, and it represents the largest year-over-year decrease in the past 10 years.
“Based on our data, we conclude that the reshoring phenomenon, once viewed by many as the leading edge of a decisive shift in global manufacturing, may actually have been just a one-off aberration. Indeed, the 2015 data confirms that offshoring seems only to be gathering steam, while the U.S. reshoring train that so many predicted has yet to leave the station”.
Fortunately, we found several articles indicating this was false. In particular, what Kearney used as criteria was questioned and reshoring is proceeding nicely. Other articles seemed to support Kearney’s decline in reshoring and one noted the overall economic impact of reshoring is generally overstated.
So—what are the facts? More importantly perhaps, what are the factors at play here? We will do further research on this subject and report in a future newsletter.
Because we are interested in working with OEM’s in need of outsourced manufacturing, we can only hope for lots of reshoring. If your company is contemplating reshoring, there are some handy resources available to help your decision making.
The first go-to resource is the Reshoring Institute, at https://www.reshorenow.org/. The mission of the Reshoring Institute is to bring manufacturing jobs back to the US. Their website has a useful worksheet for comparing total costs of manufacturing for competing countries. This is the “TCO Estimator” available as a dropdown on the Institute’s website. The point of the estimator is to include all relevant costs, not just unit price or labor costs. For example, the US’s superior labor productivity can be overlooked when evaluating an hourly wage differential. The US may also have a significant advantage in energy cost/availability.
Assets Costs Everywhere (ACE) Tool is a second resource (https://acetool.commerce.gov/). What follows is from www.expansionsolutionsmagazine.com, November/December 2015, and the article is “Considering Reshoring”.
“The US Department of Commerce provides this free tool for companies to develop an analytic framework, links to public and private resources, and case studies that are intended to “provide manufacturers with the top reasons for investing and sourcing in the United States.
“Once a company has run the numbers and decided to reshore, it may still face numerous challenges when returning to the US, including recruiting a skilled workforce, finding new suppliers [let us at Proficient Sourcing help], and securing necessary permits.”
Upon reaching a decision to reshore, companies should proactively reach out to both local and state-level economic development organizations (EDO”S) for customized assistance. Economic developers will be able to:
- Facilitate access to local, regional, and state-level workforce training programs
- Connect reshoring business with suppliers and assist with supply-chain mapping.
- Coordinate with local iutilities to effectively address the srshoring company’s infrastructure needs.
- Arrange financial incentives such as tax credits.
Apparently, EDO’s are a potentially valuable, but underutilized resource. The Expansion Solutions article further notes: “…the International Economic Development Council (https://www.iedconline.org/) conducted over 30 interviews with CEO’s and other C-Suite representatives of reshored companies. Only a small fraction of those interviewed indicated that their company had utilized the services of a local or state-level EDO.
…IEDC’s will be publishing a Reshoring Toolkit in 2016 that aims to help economic development practitioners to better understand their available resources and develop a robust set of tools that will be valuable for assisting companies interested in reshoring.”
So whether overall reshoring is up or down, if you are considering reshoring you have several resources available. We hope you’ll also keep Proficient Sourcing in mind to assist with needed manufacturing sources.