December 20, 2012
Tim Cook, CEO of Apple, recently sat down for an interview on Roc...
Although a sharp decline in U.S. manufacturing over the past several decades has contributed to swelling unemployment rates and economic instability, the sector is starting to recover. With large corporations such as Walmart, GE, Caterpillar and Ford reshoring increasing amounts of manufacturing and sourcing, the future of U.S. manufacturing is looking up. Since 2010, more than 200 companies, many U.S.-based, have brought back production they once outsourced. This phenomenon, known as reshoring (also onshoring, insourcing and backshoring), has created approximately 80,000 new U.S. factory jobs since Jan. 2010 according to our analysis at the Reshoring Initiative. In addition, foreign firms like Nissan, Toyota, Siemens, and Airbus have laid down roots in the United States, investing hundreds of millions of dollars in “transplant” factories and generating much needed job growth. Reshoring and transplanting both are driven by the same phenomena: the increased competitiveness of U.S. manufacturing and the understanding that the savings from “localization” can offset higher U.S. wage rates.
Reshoring is important for strengthening the U.S. economy and creating desirable, high-paying jobs. For every $1 spent in manufacturing, another $1.48 is added to the economy— the highest multiplier effect of any economic sector. Companies are turning to reshoring for a variety of reasons. Domestic manufacturing to supply the domestic market improves quality and consistency of inputs, reduces travel cost and inventory levels, enhances innovation, reduces risks and strengthens a company’s ability to respond quickly to customer demands. Companies can quantify these benefits, and many more, by using the free online Total Cost of Ownership (TCO) Estimator to objectively compare the full financial impact of domestic vs. offshore manufacturing and sourcing. User data suggest that about 25% of what has been offshored would come back if companies used TCO instead of price or landed cost as their decision metric..
And yet, long, complicated supply chains for critical raw materials—like minerals and metals—could hinder and delay our nation’s manufacturing resurgence.
A strong, stable minerals and metals supply chain is imperative to continued domestic manufacturing growth. Without the raw materials needed for production, a company cannot affordably reshore operations. The longer a supply chain, the more risk in terms of quality, availability and cost. Therefore, companies already manufacturing in the United States, as well as foreign companies considering relocating operations to our nation, could remain unconvinced to return due to a limited domestic supply of the minerals and metals critical to production. An outdated permitting process impedes access to our $6.2 trillion worth of mineral reserves, hampering the United States’ competitive edge and hindering the growth of important sectors like manufacturing.
American companies that favor our foreign shores are an impediment to U.S. innovation and our global economic competitiveness. The manufacturing sector accounts for an unsustainably low level of about 12 percent of U.S. GDP and supports an estimated 17.2 million jobs in the United States. We cannot afford to lose domestic manufacturing opportunities due to a lack of a stable supply of minerals and metals. The trend of increased reshoring is a positive and sustainable one, but also one dependent on an abundance of minerals and metals resources. As congress returns to Washington, its time policymakers take a long, hard look at the duplicative regulatory system that holds back development and staves off economic opportunity.
Harry Moser is founder of the Reshoring Initiative, which aims to bring manufacturing jobs back to the United States. Readers are encourage to use the online tools and to contact Harry for help making souring decisions.