As many U.S. manufacturers are aware, outsourcing continues to be a hotly debated topic. It was particularly a major issue in the 2000s when outsourcing became popular. Data from the U.S. Department of Commerce estimates that major corporations eliminated about 2.9 million U.S. positions in the 2000s while adding 2.4 million jobs overseas.
There has been growing commentary in manufacturing lately about what’s considered to be the opposite of outsourcing: re-shoring. Re-shoring is bringing back production to the U.S. that had been previously outsourced. Area Development recently published a comprehensive article on this topic, titled Manufacturing in America: Bigger, Better and Bolder. It’s a good read. Referenced in that article was data from the Re-shoring Initiative indicating an increase in new Re-shoring jobs of 1500% from 2003 to 2013.
There are many factors driving this re-shoring trend. Some of the most compelling include:
Production Costs: The disparity between labor costs overseas and in the United States is diminishing. Many companies initially moved their manufacturing operations overseas because labor costs were so low. Today, wages in outsourcing hotbeds such as China and Vietnam remain less than what United States employees earn, but the difference is lessening each year. In recent years, for instance, wages in China have increased by 15 percent annually. Meanwhile, major companies in the United States have been able to manage their stateside labor costs through restructuring and renegotiating contracts.
Tightening the Supply Chain: Supply chain management demands attention to sourcing, manufacturing, inventory management, logistics, and customer service. Tired of having to hold excess inventory, face disruptions from natural disasters, and endure long wait times, companies are looking to have more control over the end product and increased flexibility and speed to market. As the costs of moving finished goods from one country to another increases, companies prefer to make goods close to the customers’ purchasing location(s). Unlike recent increases in international transportation costs, domestic energy costs have remained relatively stable.
Quality: Consumers are finally realizing the quality of American-made products. Value trumps cheap. A Gallup poll found that 60% of Americans are willing to pay more for a product if it’s Made in America. Call us a little biased, but we believe that Michigan produces the best quality in the U.S.! To see all of the incredible products being produced in our state, check out our Proud to Manufacture in Michigan program.
Notable Companies are Moving Back
Companies large and small have moved work back to the United States. One of the household names that has re-shored is GE, which remodeled one of its plants in the United States so they could manufacture high efficiency water heaters. Whirlpool and Ford are two other major companies that have returned operations to the United States in recent years, including to operations in Michigan and Ohio. Along with these Fortune 500 companies, numerous small companies have also moved production back to the states. Michigan Ladder Co., has been in the business of assembling wood and fiberglass ladders for over 111 years. Recently, it brought work outsource to China back to Ypsilanti and began assembling its own fiberglass ladders in Michigan. CollegiateBead Co., in Madison Heights, brought its jewelry work back from China as well, citing quality issues and rising labor costs as the main reasons for bringing work home. A 2012 Detroit Free Press article on the company led to added jobs not only for the bead manufacturer, but also for Michigan company, Terryberry, which saw an article on the Collegiate Bead Co., and which went on to win a contract to mass-produce the metal molds for its jewelry.
If you are looking for ways to bring your production back to Michigan, contact MMTC to learn about our Manufacturing Solutions.
Since 1991, MMTC has assisted Michigan’s small and medium-sized businesses compete and grow. Through personalized services fitted to meet the needs of clients, we develop more effective business leaders, drive product and process innovation, promote company-wide operational excellence and foster creative strategies for business growth and greater profitability. Find us at www.mmtc.org.