How can we propel the re-shoring of manufacturing? – Manufacturing Digital

Written by Derek Singleton

I’ve been watching the news with great interest as North American manufacturing has been placed in the media spotlight. Last month, the Wall Street Journal reported that European aerospace manufacturer Airbus will be building a large plant in Alabama. A little earlier, the Detroit Free Press reported that the high-end watchmaker Shinola is locating in Detroit to assemble watches. Beyond this news, there were several reports of companies “re-shoring” their production.

For anyone that hasn’t heard the term “re-shoring,” it’s a term currently being popularised to describe companies that once off-shored production to China (or another overseas location) and are returning production to North America. I first heard of re-shoring back in 2010 when Harry Moser of the Re-shoring Initiative was starting to build momentum around the idea that manufacturers should consider relocating their production to the U.S.

Since I heard of the term, I couldn’t help but wonder why companies were deciding to come back. As one might expect, the reasons tend to be more economic than altruistic. Here are a few of the popularly cited reasons:

• Chinese labour costs are expected to rise at a rate of 13 percent per year through 2015
• The cost of shipping products around the world is dramatically increasing
• Distance is making it difficult to design and collaborate on products
• It’s increasingly difficult (and expensive) to protect intellectual property in China.

Beyond that, there are intangible benefits to re-shoring production such as generating goodwill amongst the community, and being able to sell the ‘Made in America’ label.

Let’s turn the trickle into a trend
I should note, however, that the concept of re-shoring is not yet a full-blown trend. Rather, it’s the start of a trend. As Mitch Free, CEO of MFG.com said in a recent phone conversation, “Not everyone in the industry is on board with this yet. It takes time for the mind-shift to happen.” I agree with Free, and I think that’s an apt observation.

Naturally, however, I had to ask what needs to happen to create that mind-shift. Free and Moser identified three main components that need to fall into place in order to propel re-shoring from trickle to trend. We need to:

• Create a more educated workforce that can fill skilled labour gaps and get Americans interested in manufacturing careers at all levels (e.g., assembly, engineering, management, etc.)
• Use automated assembly processes to limit the labour input of production more extensively
• Help companies evaluate their true total cost of ownership (TCO) to help model the risks and costs of off-shoring production

If you have any other thoughts on making this happen, I want to hear from. You can contact me via the Software Advice blog at: What Can be ‘Made in the USA’?Or you can reach me directly by emailing derek@softwareadvice.com.

Derek Singleton joined Software Advice after graduating from Occidental College with a degree in Political Science. He writes about various topics related to ERP software with particular interests in the manufacturing and distribution software markets.

You can read more of Derek’s writing here