U.S. Is Now the Preferred Manufacturing Location to Serve U.S. Market as Interest in Reshoring Stays Strong
Almost a third of U.S. executives at large manufacturers plan to add U.S. production over the next five years for goods sold in the U.S. These shorter supply chains will also rely on automation to improve efficiency and control costs, according to a new study by The Boston Consulting Group (BCG).
Even though China will remain a major exporter to the U.S., which accounted for around 18% of its total exports through the first eleven months of 2015, the suggestion that the U.S. has surpassed China as the most likely destination for new manufacturing capacity is striking.
The share of executives saying that their companies are actively reshoring production increased by 9% since 2014 and by about 250% since 2012. This suggests that companies that were considering reshoring in the past three years are now taking action. By a two-to-one margin, executives said they believe that reshoring will help create U.S. jobs at their companies rather than lead to a net loss of jobs.
The results offer the latest evidence that a revival of American manufacturing is underway.
This survey also confirmed that factors such as logistics, inventory costs, ease of doing business and the risks of operating extended supply chains are weighing heavily in executives’ decisions to bring manufacturing back to the U.S. Seventy-six percent of respondents reported that a primary reason for reshoring production of goods to be sold in the U.S. was to “shorten our supply chain,” while 70% cited reduced shipping costs and 64% said “to be closer to customers.”
The decreasing costs and improved capabilities of advanced manufacturing technologies such as robotics and automation also make manufacturing in the U.S. more attractive than in economies whose chief advantage is cheap labor.
Fifty-six percent of respondents said that lower automation costs have improved the competitiveness of U.S.-made products compared with similar goods sourced from low-cost countries. Seventy-one percent said advanced manufacturing technologies will improve the economics of local production, and 75% said they will invest in additional automation or advanced manufacturing technologies in the next five years.
More automation means more and better jobs
Even though they plan to invest more in automation, manufacturing executives indicated that reshoring is still likely to create new U.S. manufacturing jobs. Fifty percent of respondents said they expect that U.S. manufacturing employment by their companies will increase by at least 5% over the next five years as a result of reshoring; 27% predicted a job increase of at least 10%.