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Reshoring has practically become a buzzword in debates, across the media and in conversations with people in all communities. Americans want to stop seeing companies running overseas in what has become viewed as a desperate attempt to keep as much money at any cost. However, the Reshoring Revolution has begun, and some see it as only a passing fad.

Like any manufacturing event, there will skeptics and there will be proponents, but the final results will tend to favor those who listen to what the people want. For manufacturers, the reshoring conversation must begin and end with the facts, and some of the most surprising facts are found by simply looking at few factors involved in the Reshoring Revolution.  

Is Reshoring Outperforming Offshoring?

Regardless of what the internet hype suggests, offshoring rates have continued to surpass the rates of reshoring from 2012 through 2015, explains A.T. Kearney. Moreover, the rate of offshoring appears to be growing. In fact, the following evidence indicates this trend will continue:

  • Imported goods reached approximately $717 billion, but U.S. domestic gross output reached nearly $6 trillion.  

  • For every dollar spent on domestic manufacturing, 12 cents of offshore production take place.  

Some argue reshoring is the best policy for the U.S., and it has been brought up repeatedly in this year’s presidential election. However, manufacturers must also consider why reshoring may be a difficult option to pursue. While the A.T. Kearney report seems bleak, it does reflect data from several years prior. 

Why Are Manufacturers Struggling With Reshoring?

While an exact source is unknown, we can assume the majority of U.S. manufacturers want more reshoring. Unfortunately, the cost effectiveness may simply not be present. According to Sean Osborne, American Manufacturers must deal with continued offshoring of products by their competitors and problems with obtaining experienced workers in the U.S. Essentially, the problems with reshoring are reflecting the growing skills gap in America and traditional competitive advantage actions. In other words, manufacturers cannot realistically engage in 100-percent reshoring without risking some financial setbacks, but the court of public opinion is starting to change that tune.  

How Has the Reshoring Revolution Benefitted the U.S. Overall?

Reshoring benefits the U.S. in many ways, and quality of craftsmanship remains among the top priorities for manufacturers looking to reshore manufacturing centers. In a recent Quality Magazine article, companies actively reshoring manufacturing to the U.S. cited 18 factors contributing to their decisions. While the public generally sees reshoring as keeping investments local and of better quality, the true reasons for reshoring include the following:

  • Reshoring reduces lead time needed in shipping products.

  • Freight costs of offshoring may exceed the freight costs of domestic shipping.  

  • Delivery of goods manufactured overseas can be subject to additional inspection and problems.

  • Foreign communications can make manufacturing inventory management difficult.

  • Foreign governments may not have laws to enforce the intellectual property of U.S. manufacturers.

  • Green technologies are more readily available and embraced in the U.S.  

  • Customers prefer U.S. made products.

  • Automation is becoming an integral part of U.S. manufacturing.  

  • Engineering in the U.S. leads to positive outcomes for U.S. manufacturers.  

  • Customers are more involved in the product lifecycle when Made in America.

  • Workers in the U.S. have a higher productivity rate than other countries.

  • Skilled workers in the U.S. must demonstrate their skills via certification or diploma.  

  • The U.S. Government is offering incentives to companies engaging in the reshoring of manufacturing.  

The reshoring revolution in U.S. manufacturing has also led to some significant savings and opportunities for U.S. manufacturers. According to the infographic, titled Reshoring Manufacturing to the U.S. Just the Facts,” overall reshoring has been driven by the 300-percent increase in the cost of Chinese labor since 2000. Meanwhile, 60 percent of reshoring cases are from China, and up to 21 percent of the largest companies in the U.S. actively focused on reshoring in 2012, at a time when reshoring rates were slowly slipping. Ultimately, the goals of business are becoming more aligned with the goals of reshoring than offshoring today. As a result, more companies are using total cost of ownership (TCO) calculations to analyze continued production overseas or reshore production to the U.S.

The Big Picture.  

Reshoring is not simply a trend that manufacturers are taking on. It may very well become law in the coming year, depending on who wins the presidency. Only time will tell what will actually happen and what hypothesis will fall to the failed ideas of the past. However, one truth rings throughout the entire reshoring conversation: U.S. customers want products made in America. They want to do something to help their own neighborhoods, communities and economies.  

Entire days have been devoted to shopping locally, and the overall public morale of the U.S. is starting to feel more comfortable with paying slightly more for goods made in America than goods made in China. Clearly, manufacturers need to assess their current TCO and make a decision before the court of public opinion rules with a verdict not in the favor of existing manufacturers.