Is It Too Soon to Give Up on Reshoring?

The global management consulting firm A.T. Kearney released their fourth annual Reshoring Index last month. The findings have some people convinced that the onshoring movement isn’t quite the force we’ve been led to believe that it is over recent years. Should we accept that reshoring is just a myth, or is it too early to abandon ship?

Reshoring in the U.S.

Reshoring – otherwise known as onshoring, inshoring, or backshoring – is the process of bringing production back to the United States from overseas.

Over the past few years, there’s been more of an emphasis on U.S. made goods, and many companies have brought operations back home.

A.T. Kearney’s report, however, found that the U.S. is importing more goods from traditional offshoring countries than ever before.

In 2017, the U.S. imported an additional 8%, or $55 billion, in manufactured goods from 14 Asian countries: China, Taiwan, Malaysia, India, Vietnam, Thailand, Indonesia, Singapore, the Philippines, Bangladesh, Pakistan, Hong Kong, Sri Lanka, and Cambodia.

According to the report, relative growth of imports from traditional offshoring countries has increased faster than relative growth of gross manufacturing output from U.S. manufacturers in four of the past five years, and eight of the past ten years.

Since 2013, imports from the 14 largest offshoring countries have increased 19% or $118 billion, whereas U.S. gross output has increased 1%, or $81 billion

The firm concludes that United States is moving away from reshoring.

What’s slowing down reshoring?

There are several reasons why reshoring isn’t where many thought it would be by now, according to the report.

  • There are still cost saving benefits from low-labor countries.
  • Manufacturers can’t just up and leave operations already in place overseas. The loss on investments and additional costs to set up new plants discourages it.
  • The skills gap in the U.S. means that we don’t have the right personnel to make reshoring profitable or possible. Automation can help offset labor costs, but this requires skilled workers.

Reshoring won’t necessarily mean more jobs

Bringing production back to the U.S. doesn’t necessarily mean bringing jobs back. Factory robots and industrial automation are becoming increasingly important to the manufacturing process.

We’re developing machines to automate the tasks that were once performed by human workers. It’s feasible that even if production comes home, we won’t see it reflected in employment.

One certainty is that as important as factory machines are right now, they will be even more important in the future. Make sure your system is ready. Call 479-422-0390 for inspection, maintenance, service, repair or replacement for Indramat industrial motion control systems.