I’ve been a little skeptical of the hype over reshoring of manufacturing for some time. For me, this story is a little bit but like Santa Claus. I want it to be true, but the data just don’t seem to back it up. The latest bad news comes from the A.T. Kearney Reshoring Index, which showed its largest decline in reshoring activity in ten years. And, sadly, this has been a relatively consistent trend—with declines occurring in most recent years and growing in 2015. Meanwhile, offshoring to new overseas locations appears to be picking up. This index is only one data source, but other researchers also agree that patterns of large-scale reshoring do not exist. (NOTE: You can access a critique of the Reshoring Index data here.)
So, what does it mean? Primarily, it reminds us that there is no free lunch. We can’t just assume that higher costs in China and other factors will automatically send jobs back home. It means that we need to double down on the harder long term slog of building a world class workforce and enhance the skills and qualifications of workers in manufacturing and other sectors. This data should also be seen as a sign of strength in some ways. The ability to capture and manage global supply chains is a key competitive advantage in today’s global economy. This is a great underlying strength of U.S. firms that can and should benefit our economy for years to come. I will continue to wish for the reshoring story to become reality. In the meantime, I’ll still consider the glass to be half full.