In previous blog posts we discussed the rebound of American manufacturing that was partially being driven by the return of outsourced manufacturing to the US. This phenomenon is commonly referred to as “reshoring”. There have been a number of reported companies such as Apple, Caterpillar, GE and Ford that have announced bringing back some of it’s off shore manufacturing. There are some sound financial reasons to do this:
- The wage gap between US and China continues to shrink, where that gap might be 30% of what it was even 8 years ago
- Supply chain issues can prove to be more costly than originally thought
- In some cases bringing back at least the final assembly or fabrication operations gives companies more flexibility in serving the US market where consumers show a strong preference for customization
- Shipping costs have increased
- The US is now the leader in cheap energy, which is major economic factor for some heavy industry manufacturing
- US labor is becoming more productive
While we are finding a lot of individual cases where reshoring is occurring, many experts who are studying the data are concluding that reshoring has not had much impact on the manufacturing rebound. Many of the recent increases seen can be explained more with seasonal adjustments or other market factors. According to the bureau of labor statistics 50,000 jobs have returned to the US due to reshoring since 2006. This pales in comparison to the 6 million jobs that were lost due to off shoring.
There is another reason that may drive manufacturing back to the US. There are (and have been) a number of efforts to influence consumers to “buy American”, most recently the movie “American Made Movie” has started to show across the US. This movie reviews factories across America and what they are doing to stay in business. There is an ad guru who is trying to start a viral marketing campaign to promote this idea. There is some research that suggests that “buy local” campaigns have worked in some areas and that a major push for American made product could provide a small boost to US manufacturing. No one is really saying that a significant portion of those 6 million jobs could be recovered, but even recovering 15% could be a significant boom to the US economy.
The idea of “Buy American” has been around for a while, but when unemployment was at 4.5 % and the US was touting technology as the future growth mechanism, the issues probably had less significance. Today with unemployment stuck near 8% and with many of the new jobs being low wage retail and service jobs, “Buy American” is probably hitting home a little more.
There are a lot of compelling reasons to consider bringing back manufacturing from China, perhaps a major push by consumers could be the most compelling reason of all.