Manufacturers bringing operations back to US by reshoring

17 May 2013 00:07  [Source: ICIS news]

HOUSTON (ICIS)--Reshoring has yielded about 50,000 US manufacturing jobs and contributed to about 10% of manufacturing job growth since the January 2010 low, the founder of an industry-led effort said on Thursday.  

Reshoring is when a product was manufactured here in the US where the consumers are, taken overseas to be made somewhere else for a while and then bought back to the US, said Harry Moser, founder of Reshoring Initiative.

By understanding the advantage of producing nearer to customers and the small total cost of ownership gap instead of the large prices gap, US customers can justify domestic investment, process improvement, automation, training and other costs, he said during the National Association for Business Economics (NABE) Industry Conference.

“A lot of companies went offshore because they didn’t do the math,” Moser said. “They looked at real simple measures of cost – for example wage arbitrage.”

Wage arbitrage involves moving jobs to a country where the labour and cost of doing business is lower.

“A lot companies make their decision on purchase price variance – relying on so many units a year for so much and finding that quantity for some lesser amount, and the difference of the total spent is the metrics,” Moser said, “although [a] more sophisticated [metric] would be landed costs – something like priced two to three packaging.”

By applying one of those three “rudimentary” total costs models, a large number of manufacturers ignore 20% or more of the total costs of offshore products, Moser said.

However, reshoring is happening in the US as a number of manufacturers are finding that the total cost after moving their business is actually higher than if they had kept operations in the US.

The MIT Forum for Supply Chain Innovation estimated in 2012 that 34% of larger companies surveyed are “considering bringing manufacturing back to the US”.

Meanwhile,, an online marketplace for the manufacturing industry, reported in April 2012 that 40% of contract manufacturers have done reshoring work that year.

In addition, most US consumers said they favour products made in the US and would more likely buy the products made here, Moser said.

“You do not have to sacrifice quality, delivery, time-to-market or employees to be competitive and profitable,” he added.

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By: Tracy Dang
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