Can reshoring really make a dent?

Positive signs continue to come in for the American manufacturer. The trend of reshoring—bringing back manufacturing that had been offshored to, say, China—appears to be more than a flash in the pan. As I’ve written before, more and more domestic companies are opening their eyes to the real costs of overseas manufacturing. While the price of a product might be somewhat cheaper to make in Shanghai, other costs have to be considered.

“What’s the cost of the piece on your loading dock?” asked Frank Russo, CEO of Fabricating.com, a new website that works to connect purchasers with American suppliers. “You have to look at total cost of ownership; transportation costs, labor costs are going up rapidly. These are underpinning this movement of reshoring.”

Russo, whose venture is less than six months old, already has 200 buyers and 1200 suppliers, and he sees a lot of interest across the country.

“I see a real renaissance in manufacturing,” he said. “That’s not campaign rhetoric or American patriotism—I see it every day in talking to suppliers and buyers. This is a great time for manufacturing.”

Manufacturers can find more resources online today, including sites like MFG.com and the Reshoring Initiative, at www.reshorenow.org. The Reshoring Initiative even includes an online Total Cost of Ownership estimator, to show companies how to compare domestic apples to foreign apples. The tool incorporates 29 cost factors, calculates freight from 17 countries and also includes duty fees and other steps that some procurement agents might miss.

The Boston Consulting Group sees a tipping point, where local manufacturing is cheaper in the U.S. compared to China, happening in 2015, as China’s labor cost continue to rise. By the same time, BCG says the U.S. will have an export cost advantage of 5 to 25% over Germany, Italy, France, the U.K. and Japan in a variety of industry sectors.

Tobias Schoenherr, assistant professor at Michigan State University’s Department of Supply Chain Management, co-authored a recent study that found that U.S. firms are moving or considering moving their manufacturing operations back to domestic soil from overseas

Schoenherr’s study found that 40% of the 319 manufacturing firms polled believe there is an increased movement of reshoring from countries such as China and India. Leading the trend were the aerospace and defense industries, along with industrial parts and equipment, electronics, and medical and surgical supplies.

The report also found that local companies are genuinely concerned about losing intellectual property to foreign manufacturers—and about quality issues. That’s hardly a surprise after all the horror stories I’ve heard over the years. Quality isn’t an easy thing to keep under control when your parts are being made literally on the other side of the world.