Finance:Reshoring

Reshoring (also known as onshoring, inshoring and backshoring) is the act of reintroducing domestic manufacturing to a country. It is the reverse process of offshoring, where manufacturing is moved to another country where labor is cheaper. The World Bank's 2019 World Development Report on the future of work considers the potential for automation to drive companies to reshore production, reducing the role of labor in the proess, and offers suggestions as to how governments can respond.

United States

For the last twenty years, American companies have been "offshoring" manufacturing to low cost countries such as China , Malaysia and Vietnam. Even as recently as 2008 many companies were offshoring or nearshoring their manufacturing. In 2010, a group of manufacturers started the Reshoring Initiative, a movement focusing on bringing manufacturing jobs for American companies back to the country. The Reshoring Initiative reports that 140,000 American jobs were lost in 2003 due to offshoring. Eleven years later in 2014, the United States recovered 10,000 of those offshored positions; this marked the highest net gain in 20 years. America was deep into a recession and American citizens were pressuring companies to keep jobs in country. Reshoring efforts have become increasingly popular because of the positive impact on the domestic job market, as well as lowering the overall production cost for American manufacturing companies. The voice of America says that bringing manufacturing and jobs back to America is the right thing to do.

Government response

In response to the recession, President Obama launched the SelectUSA program in 2011,the first federal program to promote and facilitate U.S. investment in partnership with our states. This program and website helps companies connect with resources available on a Federal, State and local level. In January 2012, President Obama Issued a Call to Action to Invest in America at the White House "Insourcing American Jobs" Forum. At this forum, he met with representatives from companies such as Otis Elevator, DuPont, NOVO1, Master Lock and many more, all of which had recently brought jobs back or made significant investments in the United States. In 2013, during his State of the Union speech President Obama stated that he wanted America to be a magnet for new jobs and manufacturing. He asked that manufacturers like Ford Motor Company and Apple Inc. bring manufacturing back the U.S. He talked about the new Innovation Institutes that are working on innovation and technology such as 3D printing that will help companies with Lean Manufacturing. He talked about the innovation in renewable and clean energy and how our future is dependent on both. The cameras panned the crowd and focused on Tim Cook, CEO of Apple, and explained that Apple had made a commitment to bring some of its manufacturing back to Silicon Valley. Apple did open a US assembly operation to make the latest 21.5" iMac for the US market and in May 2013 shipped its first products.

Success stories

Companies such as ET Water Systems, GE Appliances and Caterpillar found that with the increase of labor costs in Japan and China, the cost of shipping and custom fees, it cost only about 10% more to manufacture in America. Advances in technology such as Digital Manufacturing and Automation have made bringing manufacturing back to the United States both cost effective and possible. Especially advances in 3D printing technologies bring manufacturers closer to their customers. Adidas, for example, plans producing highly customized shoes with 3D printers in the U.S. With this advanced technology companies are creating new innovative products for the U.S. market.

Not all manufacturing should return to the U.S. The rise of the middle class in China, India and other countries has created markets for the products made in those countries. As the U.S. has a "Made in U.S.A." program other countries support products made in their countries as well. Localization, the process of manufacturing products for the local market, is an approach to keeping some manufacturing offshore and bringing some of it back. Besides the cost savings of manufacturing closer to the market, the lead time for adapting to changes in the market is faster.

There have been several very successful stories of companies that have reshored including most of the companies mentioned above. In most cases hundreds if not thousands of jobs were created or reinstated. In the case of Starbucks, in 2012 it saved American Mug and Stein Company in East Liverpool, Ohio from bankruptcy. Initially only twelve people were put back to work but it was just the beginning for Starbucks. CEO Howard Schultz was compelled to take action; he teamed up with Opportunity Finance Network to found Create Jobs for USA. He seeded the foundation with an initial grant of $5 million. Later that year Starbucks announced that they are building another manufacturing facility in Georgia that will employ 140 people. Although they originally only hired twelve people Starbucks got months of positive press.

Avoiding failure

There have been some cases of reshoring that weren't successful. Otis Elevators’ reshoring effort did not go well. Otis says it failed to consider the consequences of the new location and tried to do too much at once, including a supply-chain software implementation. This is not an uncommon reshoring scenario. Bringing manufacturing back to the United States isn’t so simple, and there are a lot of considerations and analyses that companies must do to determine the costs and feasibility of reshoring. Some companies pursue reshoring with their own internal staff. But reshoring projects are complicated and involve engineering, marketing, production, finance, and procurement. In addition, there are real estate concerns, government incentives and training requirements that require outreach to the community. To help with these projects, companies often turn to consultants that specialize in Reshoring.

United Kingdom

In the United Kingdom , companies have used the reintroduction of domestic call centres as a unique selling point. In 2014, the RSA Insurance Group completed a move of call centres back to Britain. The call centre industry in India has been hit by reshoring, as businesses including British Telecom, Santander UK and Aviva all announced they would move operations back to Britain in order to boost the economy and regain customer satisfaction.

Further reading

• Marcum, Ed (7 August 2010). "Some businesses learning value of bringing factories back to the U.S.". Knoxville News Sentinel. http://www.knoxnews.com/business/no-place-like-home. 
• Baxter, Annie (13 March 2012). "Factories 'Reshore' Some Work From Overseas". All Things Considered (National Public Radio). https://www.npr.org/2012/03/13/148470066/factories-reshore-some-work-from-overseas. 
• Belz, Adam (13 January 2013). "Report shows U.S. manufacturers continue to lag". Star Tribune (Minneapolis). http://www.startribune.com/report-shows-u-s-manufacturers-continue-to-lag/186574671/. 
• Bounds, Andrew (10 May 2013). "Survey says reshoring ‘symbolic’ and will not lead to jobs boom". Globe and Mail (Toronto). https://www.theglobeandmail.com/report-on-business/economy/jobs/survey-says-reshoring-symbolic-and-will-not-lead-to-jobs-boom/article11855864/. 
• Carmichael, Kevin (4 June 2013). "Canada's 'reshoring' opportunity". Globe and Mail (Toronto). https://www.theglobeandmail.com/report-on-business/economy/canada-competes/canadas-reshoring-opportunity/article4230748/. 
• "More Support to Push Reshoring". Coventry Evening Telegraph. 28 October 2013. http://www.highbeam.com/doc/1G1-347096212.html. 
• Northam, Jackie (27 January 2014). "As Overseas Costs Rise, More U.S. Companies Are 'Reshoring'". All Things Considered (National Public Radio). https://www.npr.org/sections/parallels/2014/01/22/265080779/as-overseas-costs-rise-more-u-s-companies-are-reshoring. 
• Talton, Jon (22 February 2014). "Outsourcing not what you think, say researchers". Seattle Times. http://www.seattletimes.com/business/outsourcing-not-what-you-think-say-researchers/. 
• Griffin, Jon (3 March 2014). "Bosses Back to UK in Reshoring Moves". Birmingham Mail. http://www.highbeam.com/doc/1G1-360322625.html. 
• Hennessy, Mark (5 March 2014). "Wheels of Industry Turn Faster as UK Brings Manufacturing Back Home". The Irish Times. http://www.highbeam.com/doc/1P2-35763238.html. 
• "Industrial Property Boost as Manufacturers Return Home". Birmingham Post. 4 December 2014. http://www.highbeam.com/doc/1G1-392302782.html. 
• Zarroli, Jim (16 December 2014). "'Reshoring' Trend Has Little Impact On U.S. Economy, Study Finds". Morning Edition (National Public Radio). https://www.npr.org/2014/12/16/371059896/reshoring-trend-has-little-impact-on-u-s-economy-study-finds. 
• "'Is 'Made in the USA' Back in Vogue?', Study Finds". Whitepaper (Intelligence Node). http://www.intelligencenode.com/knowledge/whitepapers/made-in-usa/.