A guest blog post by Harry Moser, founder of the Reshoring Initiative.
Reshoring—the return of offshored manufacturing—has been steadily gaining momentum, reversing the decades-long, herd-like trend of companies sending manufacturing overseas. Companies, consumers and the government are recognizing not only the economic feasibility of making more things competitively in the U.S., but also the importance of local manufacturing in the holistic cycle of production, innovation, R&D and intellectual property protection.
Simply stated, local manufacturing improves product development and process control, increasing companies’ competitiveness. The visible, strong beginning of the reshoring trend is helping to attract recruits to manufacturing skills training programs in order to create the professional skilled workforce that is necessary to make all of the above possible.
Reshoring is based on the economic logic of producing near the customer. This logic applies to all manufacturing companies in their own facility siting and sourcing decisions and in their domestic sales efforts versus offshore competitors. As companies adopt a more
comprehensive total cost analysis, they are finding that rising offshore labor rates (going up by 18 percent a year in China, 500 percent in the last 12 years) often are combined with other hidden costs of offshoring to counterbalance any remaining savings from cheap price or labor abroad. One key to successful reshoring is for companies to use a comprehensive total cost of ownership (TCO) analysis that calculates the true cost of offshoring. The nonprofit Reshoring Initiative provides free TCO Estimator software on its website, www.reshorenow.org. Also on the website is a database of 425, soon 600, reshoring articles and a case studies feature where companies can share their cases of reshoring.
The transition from offshoring to reshoring is tangible and growing. Here is what we calculate:
1. 2000 to 2008: offshoring was growing at 100,000 to 150,000 mfg. jobs/year. Reshoring was not mentioned or recorded, maybe 2,000 jobs/year.
2. Currently: offshoring is probably growing at 30,000 to 50,000 jobs/year and reshoring is growing at about 30,000 jobs/year.
3. Conclusion: new offshoring is down by about 70% to 80% and new reshoring is up by about 1,500%. The ratio of new annual offshoring to new reshoring is down from about 50:1 to 1:1 or 2:1.
4. About 25% (1 million jobs) of what has been offshored would have a lower TCO produced here. That % will increase as Chinese wages rise.
There is a strong logical link between rethinking robotics and rethinking offshoring. Rethink Robotics’ Manufacturing Robot, Baxter, is one solution to the U.S.’ skilled workforce shortage and its need to increase competitiveness. By enabling the actual workforce to program inexpensive automation of manufacturing tasks, Baxter makes it possible for a broader range of manufacturing, especially of relatively labor intense and commoditized products, to be reshored. Similarly, use of the Reshoring Initiative’s TCO, instead of price, dramatically improves the ROI on domestic automation investment vs. offshore sourcing.
Harry founded the Reshoring Initiative to bring manufacturing jobs back to the U.S. after worked for GF AgieCharmilles, starting as President in 1985 and retiring 12/31/10 as Chairman Emeritus. Largely due to the success of the Reshoring Initiative, Harry was inducted into the Industry Week Manufacturing Hall of Fame 2010 and was named Quality Magazine’s Quality Professional of the year for 2012. Harry participated actively in President Obama’s 1/11/12 Insourcing Forum at the White House and won the Jan. 2013 The Economist debate on outsourcing and offshoring. He received a BS in ME and an MS in Engineering at MIT in 1967 and an MBA from U. of Chicago in 1981.
About the Author
I'm Jeff Green, senior content and social media strategist at Rethink Robotics. When I'm not socializing Sawyer and Baxter, our smart, collaborative robots, I'm usually caught up in the home tornado, also known as my three kids. Love them, my wife, old-school Chinese food, movies, and of course game-changing technology.