7 key factors for US reshoring

Gem , Labor , What's Happening in Our Profession Jan 03, 2017 1 Comment

Reshoring USAAfter making the case for reshoring in a previous article, PwC identified 7 key factors influencing potential US manufacturing resurgence. Obviously, labor cost is one of those factors but not the only one.

“Industrial manufacturers may increasingly rethink their U.S. strategies, including the merits of continuing to separate production and R&D and producing abroad and importing back to U.S. buyers. Depending on the industry, there may be considerable benefits to establishing regionalized supply chains and R&D facilities in the U.S.,” said Bob McCutcheon, PwC’s U.S. Industrial Products leader.

The PwC report outlines seven factors that play key roles in making reshoring decisions, as well as in determining whether or not the U.S. will become a more competitive and attractive market for manufacturing expansion:

  • Transportation and Energy Costs: transportation costs have increased due to the bull market in energy commodities.
  • Currency Fluctuations: the cost gap between a depreciated dollar and a moderately rising Yuan has decreased.
  • U.S. Market Demand: the size of the U.S. market, supports investment in new domestic production of goods targeted for U.S. consumption.
  • U.S. Talent: the gap in the level of higher education and training between the U.S. and China has narrowed, but the U.S. still holds a significant advantage.
  • Availability of Capital: there is evidence that borrowing in China has become more difficult due to increased capital requirements for banks and tighter lending for exporters.
  • Tax and Regulatory Climate: the current talks of tax reforms bring uncertainty to the current expansion of domestic manufacturing.
  • U.S. Labor Costs: higher labor costs in emerging economies, especially China, are challenging profitability for some industrial manufacturers.

via A homecoming for US manufacturing? Why a resurgence in US manufacturing may be the next big bet – PwC report A homecoming for US manufacturing?

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

One Comments

  1. We agree that reshoring is gaining momentum and helping to drive the American Manufacturing Renaissance.

    Some recent data on reshoring:

    New reshoring is now balancing new offshoring at about 40,000 manufacturing jobs/year, resulting in the first neutral year of job loss/gain in the last 20.



    According to Harry Moser, founder/president of the Reshoring Initiative http://www.ReshoreNow.org new offshoring is DOWN by 70% to 80% and new reshoring is UP by 1500%.

    

The most important accomplishment has been the net-loss of 100,000+ manufacturing jobs each year has ended.

    

Our user data shows that 25% of manufacturing would come back now if companies used TCO instead of PPV for decisions. Thus creating a 10% manufacturing increase.



    The not-for-profit Reshoring Initiative’s free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring.


    In many cases, companies will find that, although the production cost is lower offshore, the total cost is higher. TCO Estimator http://www.reshorenow.org/TCO_Estimator.cfm

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