Is Reshoring for Real in 2014?

It seems like I’m receiving hundreds of articles lately that tout the prospects for the reshoring of manufacturing to the U.S. in 2014.  The basic economic rationale for reshoring is pretty simple to understand.   As labor costs decline in the US and rise elsewhere, shifting jobs back home starts to make more sense.  Combine these trends with rise of lower cost energy inputs (due to shale energy) and other benefits (e.g. better quality products, fewer logistics complications), and you’ve got a solid case for reshoring.   And, manufacturers are getting the message.   The latest MAPI (Manufacturing Alliance for Productivity and Innovation) Index is quite bullish, reaching its highest level since 2011.  The index has been indicating growth in manufacturing for 17 straight quarters.  A recent Grant Thornton survey on reshoring yields similar results.  This survey of manufacturing executives found that 37% of businesses were likely to reshore work in 2014.   IT Services, one of the first sectors to embrace offshoring, ranked the highest on this question, with 42% of firms saying that they plan to reshore in 2014.

While I’m as pleased as anyone that manufacturing jobs come back home, I hope that we can make this shift more sustainable.   The US’s ability to succeed as a low cost manufacturing center is limited, and may not even be a desirable outcome in an economy starving for quality jobs.    So, as reshoring gains traction, let’s also focus on supporting the real competitive advantages that exist here at home.  These are well addressed in a new analysis by Booz and Co.  Long-term success in manufacturing will depend on proficiency and excellence in product design, production planning, engineering, execution, and service. These competitive advantages won’t arise and be sustained out of thin air; they will require real and sizable investments by companies and by local, state, and federal agencies.   In the past, many manufacturing innovation investments were defensive–seeking to save jobs or to block the shift of jobs overseas.  Today, the stars are aligned in a new direction where these investments can help reinforce and accelerate positive market trends.  New manufacturing research centers, more aggressive and effective workforce development, and continued support for rebuilding the industrial commons all make sense.   Let’s go on the offensive and and invest to ensure that the positive prognosis for 2014 is sustainable for the long haul.

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