Thursday, September 27, 2012

Reshoring: The New Manufacturing Trend

Offshoring, or sending a portion of a company’s business overseas, became a common business practice during the economic recession when our nation was struggling to stay afloat. Since 2002, about 3.5 million manufacturing jobs have been lost across the nation.

However, the more recent trend in manufacturing is re-shoring, or the opposite of offshoring. Shifting a portion of business back to U.S. soil has been occurring more often these days. According to a recent survey conducted in April by Forbes contributor Vivek Wadhwa, "40% of companies indicated that they have won new manufacturing business this year that had been previously offshored."

Why the return home? There are a number of reasons why manufacturers are returning their operations to America. Re-shoring:
  • Reduces total cost of ownership
  • Improves quality and consistency of inputs
  • Reduces pipeline and surge inventory impact on just-in-time operations 
  • Clusters manufacturing near Research and Development facilities, which enhances innovation
  • Reduces intellectual property and regulatory compliance risk 
  • Eliminates the waste and instability caused by offshoring
  • Strengthens companies’ ability to respond quickly to customers’ demands
  • Brings jobs back to the United States and Michigan
  • Helps to balance federal, state and local budgets
  • Motivates recruits to enter the skilled manufacturing workforce
  • Strengthens the defense industrial base

Many of these benefits have translated into substantial amounts of manufacturers returning home. The return of offshore production to the United States has been a bright spot in our recovery. The hope that those lost manufacturing jobs will come back is coming to fruition, with companies such as Toyota, Siemens and Rolls-Royce announcing that they will ramp up production in the United States and export their products across the globe.

Since 2009, MMTC has been tracking the Cost to Output ratio or Global Cost Index, between US companies and their global counterparts, to help companies understand where improvements can be made to become more globally competitive. In addition, several MMTC clients have reduced operating costs through increased efficiencies and process improvements, thereby increasing their competitiveness with an offshore producer of the same products. Detroit Chassis and International Specialty Tube are two such companies that were able to bring outsourced work back to fill the additional capacity.

If you are looking for ways to bring your production back to Michigan, Contact MMTC to learn about our Manufacturing Solutions.



Picture by Discover the Trip.com. 

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