Reshoring

Reshoring (also known as onshoring, inshoring and backshoring) is the act of reintroducing domestic manufacturing to a country. It is the reverse process of offshoring, where manufacturing is moved to another country where labor is cheaper.

United States

For the last twenty years, American companies have been "offshoring" manufacturing to low cost countries such as China, Malaysia and Vietnam. Even as recently as 2008 many companies were offshoring or nearshoring their manufacturing. In 2010 companies started looking into ways to keep costs low and how to bring jobs back to America. America was deep into a recession and American citizens were pressuring companies to keep jobs in country. The voice of America says that bringing manufacturing and jobs back to America is the right thing to do.[1]

Government response

In response to the recession, President Obama launched the SelectUSA program in 2011,the first federal program to promote and facilitate U.S. investment in partnership with our states. This program and website helps companies connect with resources available on a Federal, State and local level. In January 2012, President Obama Issued a Call to Action to Invest in America at the White House "Insourcing American Jobs" Forum.[2] At this forum, he met with representatives from companies such as Otis Elevator, DuPont, NOVO1, Master Lock and many more, all of which had recently brought jobs back or made significant investments in the United States. In 2013, during his State of the Union speech President Obama stated that he wanted America to be a magnet for new jobs and manufacturing. He asked that manufacturers like Ford Motor Company and Apple Inc. bring manufacturing back the U.S. He talked about the new Innovation Institutes that are working on innovation and technology such as 3D printing that will help companies with Lean Manufacturing. He talked about the innovation in renewable and clean energy and how our future is dependent on both. The cameras panned the crowd and focused on Tim Cook, CEO of Apple, and explained that Apple had made a commitment to bring some of its manufacturing back to Silicon Valley.[3] Apple did open a US assembly operation to make the latest 21.5" iMac for the US market and in May 2013 shipped its first products.[4]

Success stories

Companies such as ET Water Systems, GE Appliances and Caterpillar found that with the increase of labor costs in Japan and China, the cost of shipping and custom fees, it cost only about 10% more to manufacture in America.[5] Advances in technology such as Digital Manufacturing and Automation have made bringing manufacturing back to the United States both cost effective and possible. With this advanced technology companies are creating new innovative products for the U.S. market.

Not all manufacturing should return to the U.S.[6] The rise of the middle class in China, India and other countries has created markets for the products made in those countries. As the U.S. has a "Made in U.S.A." program other countries support products made in their countries as well. Localization, the process of manufacturing products for the local market, is an approach to keeping some manufacturing offshore and bringing some of it back. Besides the cost savings of manufacturing closer to the market, the lead time for adapting to changes in the market is faster.

There have been several very successful stories of companies that have reshored including most of the companies mentioned above. In most cases hundreds if not thousands of jobs were created or reinstated. In the case of Starbucks, in 2012 it saved American Mug and Stein Company in East Liverpool, Ohio from bankruptcy.[7] Initially only twelve people were put back to work but it was just the beginning for Starbucks. CEO Howard Schultz was compelled to take action; he teamed up with Opportunity Finance Network to found Create Jobs for USA.[8] He seeded the foundation with an initial grant of $5 million. Later that year Starbucks announced that they are building another manufacturing facility in Georgia that will employ 140 people.[9] Although they originally only hired twelve people Starbucks got months of positive press.

Avoiding failure

There have been some cases of reshoring that weren't successful. Otis Elevators’ reshoring effort did not go well.[10] Otis says it failed to consider the consequences of the new location and tried to do too much at once, including a supply-chain software implementation. This is not an uncommon reshoring scenario. Bringing manufacturing back to the United States isn’t so simple, and there are a host of considerations and analyses that companies must do to determine the costs and feasibility of reshoring. Some companies pursue Reshoring with their own internal staff. But Reshoring projects are complicated and involve engineering, marketing, production, finance, and procurement. In addition, there are real estate concerns, government incentives and training requirements that require outreach to the community. To help with these projects, companies often turn to consultants that specialize in Reshoring.[11]

United Kingdom

In the United Kingdom, companies have used the reintroduction of domestic call centres as a unique selling point. In 2014, the RSA Insurance Group completed a move of call centres back to Britain.[12] The call centre industry in India has been hit by reshoring, as businesses including British Telecom, Santander UK and Aviva all announced they would move operations back to Britain in order to boost the economy and regain customer satisfaction.[13]

References

  1. ↑ Bernard Shusman. "US Experts See Growing Desire to Curb Outsourcing to China". Voice of America. Retrieved 28 April 2014.
  2. ↑ Office of the Press Secretary. "President Obama Issues Call to Action to Invest in America at White House "Insourcing American Jobs" Forum". The White House. Retrieved 11 January 2012.
  3. ↑ Office of the Press Secretary. "Remarks by the President in the State of the Union Address". Retrieved 12 February 2013.
  4. ↑ Lee Hutchinson. "Apple CEO: “We’re going very deep” with US manufacturing". Retrieved 17 May 2013.
  5. ↑ "Coming home A growing number of American companies are moving their manufacturing back to the United States". Retrieved 13 January 2013.
  6. ↑ Daisie Hobson. "China – It’s in the Cards". Blue Silk Consulting Reshoring Blog. Retrieved 17 March 2014.
  7. ↑ John Grgurich. "What's So Special About This Starbuck's Mug?". Daily Finance. Retrieved 15 June 2012.
  8. ↑ "Create Jobs for USA". Opportunity Finance Newtwork.
  9. ↑ John Grgurich. "Jobs 'Insourcing' Gets Another Boost from Starbucks". Daily Finance. Retrieved 20 July 2012.
  10. ↑ Rosemary Coates. "How To Avoid a Failed Reshoring Project". CFO. Retrieved 9 June 2014.
  11. ↑ Rosemary Coates. "US-based companies anticipate reshoring 20% of their manufacturing capacity within the next 5–7 years! Are you ready to evaluate Reshoring?". Blue Silk Consulting Reshoring.
  12. ↑ "http://www.insurancetimes.co.uk/rsa-completes-move-to-uk-only-call-centres/1409402.article". Insurance Times. 5 August 2014. Retrieved 20 May 2015.
  13. ↑ "India may no longer be outsourcing hub as UK companies such as Aviva, BT & Santander move work to home country". The Economic Times. 14 July 2011. Retrieved 20 May 2015.

Further reading

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