Jan. 01–The number of companies bringing manufacturing operations back to the United States continues to increase, but a recent study found the pace is slowing and the economic impact of those reshoring initiatives is relatively small — especially compared to the headlines it has generated.
“I think there is still a lot of activity and companies are still actively considering reshoring, but the growth in that activity has not kept up with the expectations,” said Pramod Gupta, principal at Chicago consulting firm A.T. Kearney.
A number of large companies have made high-profile decisions recently to bring production back to the United States. Perhaps the biggest commitment was that of Walmart, which said it would increase spending with domestic suppliers by tens of billions of dollars over the next five years.
Here in Ohio, Whirlpool Corp. decided last year to move production of some washing machines from Mexico to Clyde. Ford Motor Co. made a similar move this year, committing to bring production of some heavy-duty trucks from Mexico to Avon Lake, Ohio.
For the last five years, researchers at A.T. Kearney have been tracking published reports of those projects and others. In 2010, they counted just 16 cases. That number grew steadily to 210 in 2013. They expect about 300 reshoring cases in 2014.
Their list isn’t all-inclusive, but it does offer one of the first data-driven looks into what industries are bringing manufacturing back to the United States, why they’re choosing to do that, and what effect it’s having on the U.S. economy.
At this nascent stage, researchers say, there’s been little effect. In fact, A.T. Kearney says imports of offshored manufactured goods have grown more over the last five years than U.S. domestic output.
“The impact of that has been very small as we look at the overall macroeconomic trends,” Mr. Gupta said. “Our finding has been that the trend has been waning from a reshoring perspective, and the impact has been minor or minuscule this time.”
Mr. Gupta insists this isn’t all to throw a wet blanket on the idea that U.S. manufacturing is getting stronger. It is. A.T. Kearney says output grew by an average compound rate of almost 6 percent from 2009 to 2013.
They are just saying at this stage, reshoring hasn’t been among the chief reasons. (The auto industry, on the other hand, has been a major factor, particularly in states such as Ohio, Mr. Gupta said.)
Despite the less-than-stellar grade card for reshoring efforts thus far, A.T. Kearney officials said reshoring is still an active debate in the business community.
“I wouldn’t say companies aren’t thinking about reshoring,” Mr. Gupta said. “That’s very much part of the equation as companies start thinking about expanding production in the U.S. or expanding their operations.”
Researchers found the top reasons cited by those who did make the choice to bring work back to the United States were improvements in delivery time and in quality.
There’s also a number of companies who see their brand image getting a boost from U.S. sourcing. That’s particularly true within the higher-end apparel industry, an area that surprisingly has made significant inroads back into the United States.
Companies are also increasingly trying to position themselves closer to their customers. That’s brought some jobs back to the United States, but it’s also sent some U.S. investment elsewhere.
“A lot of people who badmouth U.S. companies that are expanding overseas, they don’t realize the U.S. companies that are making the investment in China, in Mexico, in India, are making those investments to supply those markets, not shipping back to the U.S.,” Paul Zito, who is vice president of international development at the Regional Growth Partnership, said.
Mr. Zito points out it works both ways. A recent Japanese trade organization report found 66 percent of Japanese companies doing business internationally plan to either increase or make new investments in the United States in the next several years.
Officials with A.T. Kearney say it’s still worth it for economic development officials and others to try to lure back jobs by promoting the benefits of U.S. manufacturing — many of which are highlighted in their report.
A prominent supporter of U.S. manufacturing, Mr. Zito’s tune hasn’t changed. And although he’d rather see more positive reports about reshoring, he still believes very much that the United States can offer a number of things low-cost locations cannot.
“One very big reason is they are scaling back on their investment in the traditional offshoring countries like China and other low cost of labor countries because of political instability in those countries, concerns for quality, and concerns for logistics,” he said.
Contact Tyrel Linkhorn at tlinkhorn@theblade.com or 419-724-6134 or on Twitter @BladeAutoWriter.
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