More US Manufacturers Consider ‘Reshoring’ from China

More than half of US-based manufacturing executives at companies with annual sales in excess of US$1bn either plan to bring back production to the US from China or are actively considering it, according to a survey by The Boston Consulting Group (BCG).

The share of executives who plan to ‘reshore’ or are considering doing has risen to 54%, compared with 37% of executives who responded to a similar BCG survey in February 2012. The new survey, conducted last month, elicited responses from more than 200 decision makers at companies across a broad range of industries. Virtually all of the companies manufacture in the US and overseas and make products for both US and non-US consumption.

The survey also found a sharp increase in the percentage of executives who are actively engaged in the process of shifting production to the US. When asked whether they expect to move production in light of rising wages in China, 21% of respondents – around twice as many as in 2012 – said they are “actively doing this” or that they “will move production to the US in the next two years.”

The increase in willingness to reshore supports earlier BCG findings that are part of the firm’s
‘Made in America, Again’
series, which explores the shifting economics of global manufacturing and how the changes are starting to favor the production of certain goods in the US.

In a report released in August, entitled
’Behind the American Export Surge: The US  as One of the Developed World’s Lowest-Cost Manufacturers’
, BCG projected that production reshored from China and higher exports due to improved US competitiveness in manufacturing could create 2.5m to 5m American factory and related service jobs by 2020.

“Over the past couple of years, we’ve projected an improvement in US manufacturing competitiveness by 2015 that would help drive an American manufacturing revival,” said Harold Sirkin, a BCG senior partner and a coauthor of the study. “The results of our latest survey make clear that a profound shift in attitude is beginning.”

The top three factors cited as driving future decisions on production locations were labour costs (cited by 43% of respondents), proximity to customers (35%), and product quality (34%). More than 80% of respondents cited at least one of these reasons as a key factor. Other leading factors include access to skilled labor, transportation costs, supply-chain lead time, and ease of doing business.

“The wide range of reasons executives cite for shifting production shows that companies are becoming more sophisticated in their understanding of all the factors that must be considered when deciding where to manufacture,” said Michael Zinser, a BCG partner who leads the firm’s manufacturing work in the Americas. “When you look at the total cost of production for many goods, the US appears increasingly attractive.”

“These findings confirm that the reshoring trend is more than anecdotal,” said Justin Rose, a BCG partner who along with Sirkin and Zinser is a coauthor of
‘The US Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback’
. “As the costs and benefits become more apparent, we expect more companies to consider manufacturing in the US if their products are to be consumed in the US.”

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