Is the onshoring trend more hype than substance?
Exactly a year has passed since my six-part series on the top 10 compelling reasons fueling the onshoring trend. As I pointed out then, we are still a long way from a manufacturing Renaissance in the United States. However, the undeniable influx of jobs brought back from China and other offshoring hot spots gives us reason to hope the bleeding has at least slowed if not come to an end. At the same time, based on the flurry of media stories extolling the virtues of American manufacturing, it’s easy to get carried away.
While some numbers point in the right direction, others don’t. The number of companies that moved back to the United States increased from 64 in 2011 to around 300 in 2014. Primarily driven by electronics and transportation equipment companies, high-end apparel came in a close third to the surprise of some observers. Executives cited, in turn, improvement in delivery time, quality control, and brand image as the top three reasons to return to the United States.
Although it may all seem like good news, the impact on the economy at large is interestingly less significant than it might appear, according to Patrick Van den Bossche, a partner at A.T. Kearney, a global strategy and management consulting firm.
A.T. Kearney’s inaugural 2014 Reshoring Index, which looks at the rate and pace of the return of manufacturing operations to the United States, reveals a year-over-year decline of 20 basis points from 2013. The drop means offshoring to foreign manufacturing markets actually outpaces onshoring, a finding that runs contrary to most reports that maintain the number of companies that offshore and onshore are now practically the same.
The report also observed, “While there has been an overall lift in U.S. manufacturing for five straight years since 2009, imports of offshored manufactured goods into the U.S. have increased at a faster rate than any return of manufacturing operations to our soil and, for the 14 top offshoring locations combined, amounted to $630 billion in 2013.”
Van den Bossche recently told NPR: “There’s a trend here that says that, ‘Yes, we are starting to manufacture more, we are getting more and more competitive,’ but it’s not quite yet showing in the economic data.”
Some observers have even suggested terms such as onshoring, reshoring, homeshoring, or bac shoring – take your pick – don’t even reflect what is truly going on. Perhaps “regionalization” is a better fit as the importance of speed to market may play a larger role than previously thought when companies debate the strategic movement of key components of the manufacturing process.
That is also a finding of a study on outsourcing and global supply chains by the Global Supply Chain Institute at the University of Tennessee. All companies, not just those in the U.S., are adopting regional supply chain models, according to the study.
It reads: “Our research suggest that global supply chains across the world will eventually break into a series of supply pods where regional procurement and manufacturing operations will supply the major demand centers of the area, at least for a significant percentage of production requirements.”
Regardless of what the phenomenon should be called, one thing is clear: More companies need to make the move back to the United States – and more need to remain here – in order for the economy to take notice. The manufacturing Renaissance has yet to happen.
Source Article from http://www.ebnonline.com/author.asp?section_id=2171&doc_id=277073
