Top 13 In 2013, #2: A Year Of Re-Shoring
Between December 9 and December 21, we'll be counting down the 13 biggest stories on Manufacturing.net throughout 2013. From pig problems (see below), to Tesla's on fire, and being held captive in China, we'll be looking into just why these stories resonated with readers here and elsewhere. For the full list, updated daily at 1:00pm EST until the 21st, visit the Top 13 In 2013 page.
Manufacturing.net has been covering the “re-shoring” trend for years, but in 2013, the trend finally hit mainstream, and became a real possibility for far more companies than previously thought possible. Re-shoring was discussed in the news and within important economic circles, and even the President mentioned it multiple times during the State of the Union and other key speeches.
A number of factors came together in 2013 to make it the biggest year of re-shoring yet. Experts at globally-renowned A.T. Kearney offered Manufacturing.net readers some great insights early in the year: “A number of macroeconomic factors seem to have tipped the balance in favor of domestic manufacturing. Among them, for example, are the appreciation of China’s currency versus western currencies, labor rate inflation, increased concerns about supply interruption and adulterated product and lowering energy cost in the United States due to prospects of shale gas. Even President Obama’s administration, banking on these trends, is actively encouraging companies through its ‘Make It In America’ campaign to shift manufacturing back to the United States to create jobs and increase the country’s competitiveness on the international stage.”
Add to that, the changing labor situations in a number of low-cost countries, like China. While the Chip Stares story, clocking in at #5 for the top stories of 2013, might not have change many minds alone, it contributed to the accumulation of bad news about low-cost countries that have many executives re-thinking their old off-shoring plans. The incredibly tragic garment factory collapse in Bangladesh is yet another example.
On the local side, the economy continued to grow throughout the year, and has added 500,000 manufacturing jobs since February 2010. In certain industries, such as automotive manufacturing, there have been massive surges of growth in America, proving to many that ambitious investment locally can be profitable, especially when it comes to the increased quality and eased transportation costs.
In August, Wal-Mart made a splash when it announced that it would be holding a summit on revitalizing American manufacturing. The company committed to spending $50 billion on U.S.-made products over the next ten years, adding that it was “just the start.” And multiple speakers within that summit reiterated the fact that labor costs were rising rapidly in countries like China, and that due to additional import costs, the U.S. actually had a cost advantage when it came to many of the products Wal-Mart sells.
At the summit, a number of companies announced expansions, new plants, new products or more hiring across the U.S. Kayser-Roth Corporation announced that it would hire 100 new employees in North Carolina and invest $28 million in product facilities via its No nonsense brand. Element Electronics Corp. will start making TVs in Winnsboro, S.C. with 500 new jobs. Renfro is investing $14 million in Tennessee and Alabama, creating 195 jobs. Chobani talked about its massive yogurt manufacturing facility in Idaho. And Hampton Products International announced its intent to add 150 jobs at a Wisconsin facility.
Of course, I was personally a bit skeptic as to why Wal-Mart wanted to create American jobs now, after decades of encouraging them to go overseas in a race to the bottom, there’s little use in complaining about new investments and more manufacturing jobs.
And while some companies have already began to move assets back to the U.S. from overseas, or even Mexico, American manufacturing still faces a number of barriers high enough to stop completely widespread adoption.
According to the experts at A.T. Kearney, the average age of manufacturing assets and equipment is close to 20 years, which dramatically affects productivity as aged machinery experiences more downtime and unscheduled maintenance. If a company wants to dramatically increase the amount of manufacturing they’ll do in the area, they’ll have to make significant investments. When one factors all those costs into the overall picture, it might tilt back in favor of China or India.
The aging workforce is another big concern, which relates somewhat tangentially to the massive talent shortage that many are seeing in manufacturing. As more of the Baby Boomers retire, companies will need to do more work to ensure that their tribal knowledge translates effectively down to the newer workforce. Without that commitment, many companies may find their re-shoring efforts do under without the necessary knowledge to keep a plant operational.
While it’s hard to distinctly calculate just how many jobs were re-shored during 2013, we can say with certainty that it was higher than any year previous, and that the trend is now receiving more public attention than ever. After such a progressive year, 2014 is shaping up to be a great year in re-shoring.
PREVIOUS: #3, 3D Printed Guns Excite, Scare
PREVIOUS: #1, The Shutdown Takes All