Reshoring America's Manufacturing
After decades of jobs moving overseas, the tide has turned and companies are moving in favor of reshoring. Together, reshoring and related foreign direct investment by companies returning to the U.S. added 77,000 jobs in 2016, with an additional 13,000 reported for the previous six years, for a total of 338,000 manufacturing jobs reshored since 2010. The trajectory toward reshoring continues to accelerate under the Trump administration, with a substantial increase of reported reshoring jobs per month in January 2017, followed up by companies such as Softbank, GM, Spring, Infosys, and Apple announcing reshoring initiatives. Retailers are also climbing aboard the reshoring trend. Walmart’s manufacturing program, including its June 28 Open Call for U.S. products, is projected to bring back at least 250,000 manufacturing jobs.
Why are so many companies making the decision to bring jobs back to American shores? And how does this benefit manufacturers in the retail industry?
Reshoring Initiative Provides Positive Publicity
The Reshoring Initiative lists thirteen separate reasons why retailers can benefit from supporting their project to bring more manufacturing jobs back to America. The top reason is the opportunity to promote reshoring case studies, which translates into good public relations.
Supply Chain Control
Apple’s move toward reshoring reflects another motivation compelling manufacturers to move their operations back to America: supply chain control. Apple has traditionally been relying on a supply chain based in East Asia, using Korea to produce memory chips, Japan to produce displays and China to assemble products. But this leaves Apple potentially susceptible to disruptive political forces, such as instability on the Korean peninsula and trade disputes between China and the U.S. By pulling back to the U.S., Apple sidesteps potential disruptions to its supply chain.
The same strategy makes sense for retailers. For instance, British luxury clothing brand Burberry has reshored its production in order to maintain better control of its supply chain and underscore its brand commitment to quality. U.S. apparel retailers have been reshoring for similar reasons, as evidenced by the emphasis on reshoring by participants in last year’s Texprocess Americas trade show. For instance, North Carolina shoelace and braid manufacturer Hickory Brands says bringing its supply chain back to the United States from China has yielded greater efficiency due to greater proximity.
Reputation for Quality
Positive publicity, better supply chain control and a reputation for quality are a few of the reasons more retailing manufacturers are moving their production back to the United States. These benefits help explain why an estimated 20 percent of goods previously sourced in Asia have been reshored in recent years. All indicators suggest that this trend will continue as more retailers realize the benefits of reshoring their manufacturing.
There are many reasons for American manufacturers to reevaluate offshoring and consider reshoring. Companies are increasingly recognizing that costs, risks and strategic impacts previously ignored are large enough to overcome the shrinking emerging market wage advantages. They are seeing the benefits of proximity, i.e. producing in the market, especially when the home market is the U.S., still the world’s largest.
The top reasons that companies reshore include:
- Shorter lead times
- Higher product quality & consistency
- Rising offshore wages
- Skilled workforce
- Local tax incentives
- Image of being Made in USA
- Lower inventory levels, better turns
- Better responsiveness to changing customer demands
- Minimal intellectual property & regulatory compliance risks
- Improved innovation & product differentiation
Why Reshoring Makes Sense for America
Reshoring is the fastest and most efficient way to strengthen the U.S. economy because it:
- Helps balance the trade and budget deficits
- Reduces unemployment by creating productive jobs
- Reduces income inequality
- Motivates skilled workforce recruitment by demonstrating that manufacturing is a growth career.
- Helps maintain the broad industrial capability required for national defense
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