Onshoring Trend Spurs “Made in USA” Comeback

June 30, 2011
Jessica DuLong profile photo
Jessica DuLong

Call it what you will—reshoring, insourcing, repatriating, onshoring—the movement toward manufacturers expanding production on U.S. soil has established itself as a trend, according to a survey by MFG.com and Reuters.

MOJO, the MFG.com blog, reported:

Forty percent of North American manufacturers with offshored production are investigating bringing that work back to the US within the next year. Of all the companies surveyed … 15% say they have repatriated production back into the US in the past 2 years.

A Reuters Insider video, “Made in the USA Makes a Comeback,” cites a “sea change” for the U.S. labor market, due to more manufacturers choosing to reinvest in domestic plants.

Last month, meanwhile, Boston Consulting Group announced predictions that a “manufacturing renaissance” would occur within the next five years, explaining that rising Chinese labor costs, among other factors, would spur repatriation of manufacturing operations.

“All over China, wages are climbing at 15 to 20 percent a year because of the supply-and-demand imbalance for skilled labor,” said Harold L. Sirkin, a BCG senior partner. “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015. As a result of the changing economics, you’re going to see a lot more products ‘Made in the USA’ in the next five years.”

According to BCG, the trend has already begun:

Caterpillar Inc., for example, announced last year the expansion of its U.S. operations with the construction of a new 600,000-square-foot hydraulic excavator manufacturing facility in Victoria, Texas. Once fully operational, the plant is expected to employ more than 500 people and will triple the company’s U.S.-based excavator capacity.

“Victoria’s proximity to our supply base, access to ports and other transportation, as well as the positive business climate in Texas made this the ideal site for this project,” said Gary Stampanato, a Caterpillar vice president.

NCR Corp. announced in late 2009 that it was bringing back production of its ATMs to Columbus, Georgia, in order to decrease the time to market, increase internal collaboration, and lower operating costs. And toy manufacturer Wham-O Inc. last year returned 50 percent of its Frisbee production and its Hula Hoop production from China and Mexico to the U.S.

Reuters reports that the onshoring trend will affect, in particular, the manufacture of “higher-value goods made in lower volumes, such as home appliances and construction equipment … especially if they are large and expensive to ship.” The four-year, $600 million expansion of General Electric Co’s appliance unit in Louisville, Kentucky is just one example. The company has said it plans to add 830 new jobs.

CNN, meanwhile, tells the story of Ebonite, a company that has brought its bowling pin production back to the U.S. CEO Randy Shickert explained the benefits of the move this way: “Here we’d have much better control over our manufacturing, our quality, and our cost structure,” adding that compared with the Mexican plant, “our actual dollars of labor per pin is less here in Hopkinville.”

These companies will, no doubt, be the first of many to bring manufacturing back home. And the impact on the economy remains to be seen.