This article was originally published on ASSEMBLY Magazine and is written by Harry Moser, President of the Reshoring Initiative and guest speaker at Made In America 2019. To read more articles by Harry Moser, go to https://www.assemblymag.com/topics/4276-moser-on-manufacturing
More than 170,000 new U.S. manufacturing jobs were announced in 2017 as a result of either reshoring or foreign direct investment (FDI). That’s an increase of 52 percent from 2016 and an incredible 2,800 percent from 2010. Such announcements typically lead to hiring within six to 24 months. This is proof that work can be successfully brought to the U.S. from offshore.
With the right policies in place, there is significant potential for many more jobs to come back. When measured by our trade deficit of about $500 billion per year, there are still 3 million to 4 million U.S. manufacturing jobs offshore at current productivity levels, representing a huge potential for economic growth. Measured by our $700 billion non-petroleum goods trade deficit, there are about
5 million jobs still offshore.
Reshoring and FDI are responsible for more than half of the increase in U.S. manufacturing jobs since the employment low of 2010, and they represent 90 percent of the increase in 2017.
It is now clear that U.S. manufacturing capacity can be grown to support a substantial flow of work back to this country. U.S. and foreign companies increasingly recognize that it is in their interest to supply more of the U.S. market through local production and sourcing.
Based on the timing of project announcements, much of the surge was due to the anticipation of lower taxes and regulations and higher tariffs. Approximately 1 million more jobs would come back if companies used TCO (total cost of ownership) instead of price for making sourcing decisions. Reshoring more jobs will require greater U.S. competitiveness and more leveling of the playing field, including some combination of a lower dollar, better workforce training, still lower corporate tax rates, and a value-added tax.
Why are manufacturers reshoring? Since 2010, the Reshoring Initiative has compiled a database of hundreds of reshoring and FDI announcements. Included in our data are the reasons, both positive and negative, that companies cited for reshoring. Most companies decide to offshore based on wage rates or ex-works prices. In contrast, the reshoring trend has been fueled by companies becoming familiar with cost and risk factors that they had previously ignored.
Among the positive reasons, government incentives are the No. 1 factor. Infrastructure and skilled workforce are also highly ranked. Education and skills training must be improved in almost all regions. Skills training is a corporate responsibility. Without a larger and better-trained workforce, the reshoring flow will decline rapidly.
The ability to brand one’s products as “Made in USA” is the fourth most common reason for reshoring. Ask yourself: Would greater volume and a moderately higher price cover the cost differences on some offshored products?
Automation, productivity, innovation and lead time are also key reasons for reshoring. Have you optimized your assembly process?
Such factors as quality, delivery, inventory and intellectual property theft are often ignored when offshoring, but they are among the top 10 reasons for moving out a low-wage country.
Top 10 Factors for Reshoring and FDI, 2010-2017
|Reasons Against Offshoring||Citings||Reasons for Reshoring||Citings|
|1. Quality concerns&||292||Government incentives||527|
|2. Freight cost||196||Proximity to market||493|
|3. Total cost||147||Skilled workforce||446|
|4. Delivery problems||100||Made in USA branding||398|
|5. Increased inventory||91||Eco-system synergies||336|
|6. Rising wages||88||Lead time or time to market||251|
|7. Supply chain interruptions||78||Infrastructure||239|
|8. Intellectual property theft||64||Automation||211|
|9. Communications issues||61||Innovation||155|
|10. Green considerations||53||Higher productivity||141|
Source: Reshoring Initiative