Reshoring gives a boost to U.S. manufacturers

WESLEY CHAPEL, Fla. (Feb. 26, 2014) — "Reshoring" has added more than 100,000 jobs in the U.S. in the last three years — and the trend shows no signs of slowing down.

That's the word from Harry Moser, founder of the Kildeer, Ill.-based Reshoring Initiative. He spoke Feb. 24 at the Executive Forum in Wesley Chapel sponsored by Plastics News, a Detroit-based sister publication of Tire Business.

Since 2000, unit labor costs in the U.S. have roughly been flat, while those costs have increased rapidly in China. That country's costs have increased at a compounded annual rate of 18 percent vs. an increase of 2 percent in the U.S. The U.S. increase also was matched by a similar increase in productivity.

Even though China's labor costs remain lower than the U.S., the gap isn't as great anymore, Mr. Moser said. China's labor supply also is tightening as a result of 35 years of that country's one-child policy, added Mr. Moser, who has more than 40 years of manufacturing experience.

"A lot of good work went offshore, and [U.S.] companies followed each other like lemmings — it was herd behavior," he said. "They improved their margins, but their overhead and shipping got worse.

"The strategy of getting so much work done offshore no longer makes sense."

The number of U.S. jobs being added from reshoring each year now stands at 30,000 to 40,000 — roughly equal to the 30,000 to 50,000 jobs that are offshored each year. "We've stopped the bleeding," Mr. Moser said.

In fact, he added, plastics and rubber is one of several "tipping point" industries, in which by 2015 it will make more economic sense to have products made in the U.S. rather than in China.

In 2013, 21 percent of large U.S. companies invested in reshoring — double the rate of 2012. According to a 2012 survey, 40 percent of contract manufacturers in the U.S. were doing reshoring work.

Although some arguments against reshoring continue — such as a shortage of skilled labor and experienced management in the U.S. and the cost of making the transition — Mr. Moser explained that many U.S. companies now can justify domestic investment in training and automation without sacrificing quality, delivery and time-to-market.

U.S. plastics firms that have resourced in recent years, for example, include Wright Engineering Plastics — an injection molder of medical products in Santa Rosa, Calif., and medical tubing extruder Precision Extrusion Inc. of Glens Falls, N.Y.

Mr. Moser's firm helps companies with reshoring by offering to help fix supply chain problems, providing free software for companies and suppliers, and by reviewing freight and duty rates.

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Frank Esposito is a senior staff reporter with Plastics News. This article appeared on that publication's website.