By Kevin Meyer
We've mentioned the reshoring phenomena several times lately. Many companies are finally waking up to the realities of total cost when dealing with outsourced or offshore operations. The mainstream media is finally starting to take notice, such as this article in USA Today.
Faced with rising costs, General Electric is moving production of its new energy-efficient water heater halfway around the world. The country it's leaving? China. The one it's bringing 400 jobs and a newly renovated factory? The United States.
A small but growing band of U.S. manufacturers — including giants such as General Electric (GE), NCR (NCR) and Caterpillar (CAT)— are turning the seemingly inexorable offshoring movement on its head, bringing some production to the U.S. from far-flung locations such as China. Others that were buying components overseas are switching to U.S. suppliers.
Ford Motor said Wednesday that it's bringing nearly 2,000 jobs to its U.S. plants by 2012 from suppliers, including those in Japan, Mexico and India.
Yes, even GE, which was once at the point where it barely had any U.S.-based manufacturing and was actively working to push everything to "low cost countries." They, like other companies, have realized that "low cost" is a bit of a misnomer when you consider total cost.
There are myriad reasons for the shifts, often called "onshoring" or
"reshoring." Chinese wages and shipping costs have risen sharply in the
past few years while U.S. salaries have stayed flat, or in some cases,
fallen in the recession. Meanwhile, U.S. manufacturers have been
frustrated by the sometimes poor quality of goods made by foreign
contractors, theft of their intellectual property and long
product-delivery cycles that make them less responsive to customer
Several cite the drawbacks of tying up valuable
capital in huge overseas shipments, and want to bring assembly closer to
engineers, suppliers and customers, concerns that mounted as makers
slashed costs in the downturn. Others are simply weary of midnight phone
calls — and multiple annual trips — to Asia.
"A lot of companies who have gone there to take
advantage of cheap labor are starting to tell us that if you (calculate)
total … cost and don't just look at wages, it's actually not worth
it," says Jeremy Leonard, consultant for Manufacturers Alliance/MAPI, an
industry-funded research group.
Where have we heard that before? Yep, right here, beginning many years ago. It's sad that it took so long to figure out the practically obvious, but still we'll give them a hearty welcome home… and good luck. They may need it.