It may have started as a trickle, but the wave of reshoring is picking up momentum as more U.S. manufacturers make the decision bring some or all of their overseas operations back home.
We’ve been tracking this trend at BusinessClimate.com since it first started gaining traction more than a year ago. Just a handful of companies were doing it at the time, including GE in Louisville and Caterpillar in Victoria, Texas, which were the first major corporations to move manufacturing back to U.S. from Asia. Since then, many others have followed suit, especially as labor, fuel and transportation costs continue to mount in lower-wage countries, while real estate and construction costs in the U.S. continue to fall.
Reshoring hit an all-time peak last week with announcements from two more major corporations, Ford and Oracle.
To meet rising consumer demand for its 2.0-liter EcoBoost engine, Ford is shifting North American production of the product from Valencia, Spain to Cleveland, Ohio. Though the Valencia operation will continue to produce the engine for Ford’s European-built vehicles and supply parts for its North American operations, Ford is focusing its resources on the Cleveland Engine plant, where the auto giant is investing $200 million and expects to add 450 jobs.
Oracle Corp. is also relocating production of its data center servers and storage systems from Mexico to its Hillsboro, Ore. facility. The commitment will keep 300 jobs in Oregon and add 130 new jobs to the company’s operations there.
Reshoring is occurring in pockets throughout the country, but it’s especially concentrated in lower-wage labor states in the South. Athens, Ga. made headlines last February when Caterpillar Inc. revealed plans to move one of its major manufacturing facilities from Japan there. Several states were vying for the project, which created 1,400 jobs in northeast Georgia. Other big reshoring news happened over the past year in Louisiana, Tennessee and North Carolina.
Critical Factors: Costs, Risk and Timing
Even manufacturers resistant to the idea of reshoring production before are coming around, said Simon Grant, president and CEO of California-based Automation GT, in an interview with Manufacturing.net. Cost, the desire to protect intellectual property and time to market play a big role in reshoring decisions, but so does proximity to the supply chain, according to Grant, whose design and manufacturing firm works with automotive, aerospace, pharmaceutical and medical device makers.
“In a time when consumer expectations for superior goods and services continue to grow, operating closer to the demand allows companies to reduce lead times and keep up with the market’s incessantly changing demands,” he said.
By 2015, reshoring is expected to add 2-3 million jobs and an estimated $100 billion in annual output. Which industries are poised to benefit and how can regions best position themselves to capture reshored manufacturing? Download our white paper, Reshoring U.S. Manufacturing: A Wave of the Present, for a closer look at this trend and its role in the revitalization of U.S. manufacturing.