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Manufacturing Shift to U.S. Accelerates

The number of American manufacturing companies looking to shift production from China to the United States has doubled since 2012, according to a new study from The Boston Consulting Group.

ManufacturingThe study found that 54 percent of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to “re-shore” production, or are considering it, up from 37 percent who responded to a similar survey in February 2012. When asked whether they expect to move production in light of rising wages in China, 21 percent of respondents—around twice as many as in 2012—said they are “actively doing this” or that they “will move production to the U.S. in the next two years.”

The new survey, conducted last month, is based upon responses from more than 200 decision makers at companies across a broad range of industries. Virtually all of the companies manufacture in the U.S. and overseas and make products for both U.S. and non-U.S. consumption.

The Boston Consulting study is consistent with a developing consensus among economists that rising wages overseas and the need for tighter control of supply chains is prompting manufacturers to boost their production in the United States. The 2012 U.S. Re-shoring Survey by the MIT Forum for Supply Chain Innovation similarly found that manufacturers are taking another look at domestic production due to higher labor costs in developing countries, energy costs, political stability issues, and time-to-market concerns.

The trend is good news for Massachusetts, where “manufacturing is alive and well, and has a healthy future,” according to a report last year entitled Staying Power II: A Report Card on Manufacturing in Massachusetts, by Professor Barry Bluestone and his team at Northeastern University.

Some key findings of the report about Massachusetts manufacturing:

  • Manufacturing employment has stabilized after a sharp decline during the recession;
  • Manufacturing is the state’s six-largest employment sector – and the second-largest (after health care) in terms of payroll;
  • Manufacturing’s share of gross state product has risen for the past two years, to 12.2 percent;
  • The number of manufacturing firms increased in 2011 for the first time in decades;
  • Manufacturing is more technologically intense than ever; in 1970 employment in low-tech sectors was twice that in high-tech; in 2006 they were equal, and by 2010 high-tech was 27 percent larger;
  • Most Massachusetts manufacturing companies are small and family-owned;
  • The manufacturing workforce is more diverse than the overall state workforce; and
  • Although most jobs in manufacturing are now “white collar,” only about one position in five requires a college degree

While cost issues and global competition are challenges, the study finds, the skills and work ethic of the state’s workforce are powerful reasons to stay in Massachusetts. But employers are already experiencing difficulty in hiring skilled workers, and an upcoming wave of retirements will create up to 100,000 job vacancies over the next ten years. The 70 percent of manufacturing firms foreseeing expansion of employment over the next five years must face up to this “recruitment challenge” by focusing on workforce development and promoting manufacturing careers. 

The Boston Consulting Group projects that production reshored from China and higher exports due to improved U.S. competitiveness in manufacturing could create 2.5 million to 5 million American factory and related service jobs by 2020.

“Over the past couple of years, we’ve projected an improvement in U.S. manufacturing competitiveness by 2015 that would help drive an American manufacturing revival,” said Harold L. Sirkin, a BCG senior partner. “The results of our latest survey make clear that a profound shift in attitude is beginning.”



Great article and great news. Especially important are the 2ndary implications for manufacturers. 
As US manufacturing becomes more competitive, through technology and lower energy costs, not only does that unlock domestic growth opportunities but also positions "Made in USA" products favorably in cost sensitive emerging markets. And for companies whose products facilitate manufacturing efficiency, huge opportunities exist in previously "low cost" markets which are struggling to compete as their cost advantage evaporates
Global sales represent more than simply incremental export revenue. A McGladrey study (which interestingly also featured the image AIM has used in this article) found that companies which export are stronger and more resilient. "60% of companies that are thriving have increased their exports, a significantly higher percentage than those companies holding their own. In other words, exporting sales is recognized by those thriving companies as a key driver for growth." 
The key though is a growth strategy adapted to today's markets. Traditional sales & marketing approaches are of diminishing effectiveness. Yet manufacturers often hesitate to leverage the remarkable power of internet marketing. Certainly many have been disappointed with the return on previous website and SEO investments. But just as they don't abandon their own R&D after a couple disappointments, they shouldn't discard the digital marketing baby with the ineffective, static and product focused website bathwater. A dynamic, strategic inbound marketing methodology offers economical and compelling B2B marketing results. 
Similarly global business development efforts often develop "accidentally" as a series of ad-hoc export activities in random markets. Companies are drawn by the siren's call of BRICs only to realize after several years and substantial sunk costs that the process is grueling. Often other emerging / frontier markets offer easier entry, shorter runway to profitability, compelling growth potential and greater diversification. But regardless of the markets, effective international sales growth requires an integrated, multi-disciplinary approach which maximizes opportunity and mitigates risks. 
MA manufacturers have the wind at their backs for the first time in recent memory. But converting the potential energy into kinetic will require not just efficiency on the shop floor, but an integrated growth strategy designed to #SellMoreHere & #SellMoreThere simultaneously.
Posted @ Thursday, September 26, 2013 5:42 AM by ed marsh
Reshoring, producing more of what we consume, is a key element in solving our nation’s economic problems.  
U.S.’ biggest advantage is being the world’s largest market. Our goal is to make 90% of what we consume instead of 75%. If we do that, we will stay the largest market for many years and thus offer companies an intrinsic advantage to manufacture here. 
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 
Readers can help bring back jobs and increase profitability by asking their companies to reevaluate offshoring decisions. Suppliers can use the TCO software to convince their customers to reshore.  
You can reach Harry Moser, founder/president of The Reshoring Initiative, at | 
Read ReMaking America AAM’s new book on how manufacturing may see a new dawn in America along with wealth and growth opportunities. Harry Moser wrote the chapter on Reshoring.  
Posted @ Thursday, September 26, 2013 7:46 AM by Sandy Montalbano
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