by Bud Meyers, published on May 11, 2015
First, you may want to acquaint yourself with this recent “feel-good” piece at Market Watch from May 1, 2015: “Record number of manufacturing jobs returning to America“. This is what Obama likes to quote while pushing for the TPP trade agreement.
But then we’ve just learned that this reshoring myth has been exposed…
University of Pennsylvania (May 05, 2015) New research by professors at Wharton and Stanford show that there is actually little reshoring on a net basis in the U.S., while supply chain movements are crisscrossing more than ever. Even within the same company, one department might be outsourcing while another is reshoring.
Key findings from the study, “Global Supply Chain Benchmark Study: An Analysis of Sourcing and Re-structuring Decisions”
- Talk about the return of manufacturing to the U.S. appears to be just that — talk. Our research revealed that the rate of production increase and decrease in the region is equal.
- EU countries are losing ground. Europe is the only region with more companies divesting than investing, primarily driven by costs, but also by market reasons. Even automated and/or high-value production has moved out of Europe.
- While China is still the most attractive region for sourcing production, it is also among the top countries for volume decrease.
- Companies leaving China do so for total cost reasons. ASEAN countries emerge as low-cost destinations to serve Asian markets.
- For European companies, North America represents a lower-cost and lower-risk alternative compared to production at home.
- For non-American markets, companies are divesting in North America in favor of locations closer to demand.
Here are few short news blurbs (in chronological order) leading up to this study:
July 31, 2013 — America’s Biggest Companies Continue To Move Factories Offshore And Eliminate Thousands of American Jobs: Despite a lot of talk and articles written about reshoring — bringing production back to the United States — offshore/outsourcing of manufacturing and service-sector jobs to foreign nations continues to plague the American economy. Hundreds of major American corporations are shipping thousands of jobs overseas … While the trend is down from its peak, it has not fully abated, and there are many times more outsourcing events than there are reshoring (or “insourcing” or “onshoring”) … If it were not for the Trade Adjustment Assistance program, few of these company decisions to displace American workers with foreigners would be known. (Here is the Department of Labor’s searchable datebase)
Oct. 14, 2014 — Offshore Manufacturing Trends for Mid-Market Companies: As manufacturing costs in low-cost countries have increased, there has been much discussion assessing whether it makes sense to re-shore production. However many of the cases have involved large companies … [but] a large percentage of mid-market companies also have some experience in offshoring and/or outsourcing [and] most do plan to continue offshoring … When selecting factory location, cost of labor and proximity to key customers are both common criteria … While lower labor costs will always be a factor in offshoring/outsourcing, a large percentage of respondents cited entry into foreign markets as a key motivator for offshoring … The growth of offshoring and outsourcing will continue as long as there is a global economy. While 20% of respondents buy lasix online with mastercard believed that more companies will begin to repatriate manufacturing back to the U.S., the majority (56%) believed more companies will consider or continue offshoring.
Feb 3, 2015 — Will International Trade Increase or Will We Reshore and Insource? With some recent articles being written about new domestic manufacturing and reshoring as a U.S. trend, and yet others showing more manufacturing being outsourced, the topic of opening new source markets continues to be present in the press. So are we reshoring or offshoring? Both are simultaneously true … Some companies had a mixed strategy — some specialized manufacturing in the U.S., but much of the work was still done offshore. We see this trend in most industries. Few have actually opted to close up shop internationally. And in fact, our nation, among others, continues to make global trade easier. Ultimately, this increases imports.
Feb. 19, 2015 — Meeting the Outsourcing Challenge: For over two decades, outsourcing of both manufacturing and logistics has been increasing at a pace more than double the growth in the overall economy … A survey of 125 manufacturers and their outsourced service providers had found that (on average) they expect to increase their outsourcing in both manufacturing and logistics at a healthy pace — about 5% more a year from now than they do today (for both manufacturing and logistics) … The number one reason for outsourcing is still cost savings. Lower cost labor is certainly an important part of the equation. But the equation is not so simple anymore … Furthermore, labor rate arbitrage is less compelling as wages and the standard of living have been continually rising in China and other developing countries. Thus companies can no longer rely purely on lower labor costs, but are looking for outsourcing partners that drive cost out in other ways, such as novel uses of technology.
* Editor’s Note: That article failed to mention that as labor costs go up in one country, companies offshore to even lower wage countries … like Cambodia or Vietnam.
May 9, 2015 — The U.S. had 67,161 less manufacturing facilities in April 2015 than it did in December 1997.
- In April 2000 the U.S. had 17.3 million workers in manufacturing. This was the year Clinton gave PNTR to China. It should also be noted that in April 2000 was also when the labor force participation rate in the U.S. had hit its historical all-time high.
- In April 2015 the U.S. had 12.3 million workers in manufacturing. So instead of having 5 million MORE workers in manufacturing over the last 15 years, the U.S. has 5 million LESS workers in manufacturing over the last 15 years — which makes it 10 million less than we should. Now Obama is pitching the TPP trade agreement.
- Study Shows 1/3 of Jobs Prone to Offshore/Outsourcing (July 1, 2013)
- Losing Sparta: The Bitter Truth Behind the Gospel of Productivity (By Esther Kaplan, Summer 2014 Issue)
- Prosperity at Risk: Findings of Harvard Business School’s Survey on U.S. Competitiveness (by Michael E. Porter and Jan W. Rivkin in January 2012)
- The Looming Challenge to U.S. Competitiveness (by Michael E. Porter and Jan W. Rivkin in March 2012)