There was a time in the 1950s and 1960s that “Made in Japan” had a very negative connotation. “Made in Japan” meant cheaply made, flimsy, and unreliable. Japan worked hard to correct this image in the 1970s and 1980s, primarily through the automotive industry. As China emerged as an economic power in the past few decades, they were able to produce at least acceptable quality goods at extremely competitive prices. Today, however, that too is changing. Knowing that American companies turned to them due mainly to price, the Chinese have sacrificed quality and in many cases, safety to stay competitive. In the meantime, American manufacturing has been maintaining and improving quality while becoming more price-competitive. “Made in the USA” not only has a patriotic feel about it, but one that denotes quality.
This has led to what has become a bit of a buzzword in US manufacturing. That word is “reshoring”. Reshoring is a relatively new term that reflects the fact that more US manufacturing companies are buying goods produced here. Less US manufacturing jobs are being outsourced to foreign countries and, as a result, more jobs in US manufacturing are being created. Is this just a buzzword or is it really happening? What is the cause of this buzz and what industries have yet to come to the party? Will it continue and at what capacity?
Buzzword or Reality?
To a great degree it depends who you ask. In 2016, IndustryWeek published an article that cited a Boston Consulting Group (BCG) survey that stated it was a fact. The story said that executives from 31% of the biggest US manufacturers (with at least $1 billion in sales) said their companies are actively reshoring production, compared to 20% who expect to add to their Chinese capacity. That’s a 9% increase since 2014 and 250% since 2012. These numbers, according the the article, suggests companies that were thinking about reshoring over the previous few years are now acting on it.
On the other hand, the same article quotes a A.T. Kearney report stating that for four straight years, reshoring of US manufacturing has failed to keep up with offshoring.
Could this mean that the largest US manufacturers have seen the writing on the wall and are reshoring, while smaller manufacturers have not?
The Causes of Reshoring
The causes of reshoring are directly related to why offshoring began in the first place…costs. Today, Chinese labor and raw material costs have increased. On the other hand, costs of labor in the US is more competitive. Reshoring also puts materials closer to end users saving considerably in logistics. There is also the issue of quality. Many manufacturers have tired of the waste and poor quality of parts they are receiving from China suppliers. The old negative connotations associated with “Made in Japan” are now being attached to “Made in China.”
There is also, many believe, a resurgence in spirit in the American manufacturing sector. It is once again being perceived as “cool” to have products manufactured in the USA. That’s unscientific, of course, but those of us on the front lines are seeing the positive effects of it.
Who Is Moving Back to the US?
From the survey conducted in the IndustryWeek article, it’s apparent many of America’s largest manufacturers are joining the party while many mid-to-smaller ones are not. That reality is while reshoring is actually occuring, US manufacturing is not what it was 20 or 30 years ago. It may never be. Those of us in manufacturing-related business must recognize that it’s a world-wide market. If we’re not competing with Japan, it’s China. If it’s not China it may be Thailand or Mexico or somewhere else. That’s not something to fear or bemoan. It should serve as motivation to be the best we can be. At Wiley Metal, we are proud to have been part of this “USA trend” for a generation.