An increasing number of US manufacturing companies are moving their businesses back onshore.
Although that item doesn't top the recent fourth-quarter 2010 survey results from MFG.com, it's one of the most significant. A full 25 percent of buyers from more than 800 companies in the automotive, aerospace, medical, industrial equipment, and consumer products industries say their businesses have returned work to North America from a low-cost production country. That's up from 21 percent in the second quarter 2010.
This activity suggests that repatriating work to North America has grown from a trickle to a trend, according to the survey, MFGWatch. Activity in the coming quarters should confirm this, but small North American manufacturers should see these latest figures as encouraging for future opportunities for local prospects. The survey represents responses from 852 supply-side manufacturers, buy-side OEMs, and sourcing professionals throughout North America.
“It’s been a long, rough ride, but it looks like manufacturing in North America is turning the corner,” said Mitch Free, founder and CEO of MFG.com, in a press release:
While larger sourcing manufacturers in the region have seen some growth spurts over the past 6 months, small and midsized manufacturers say they’re seeing growth and increased activity. And they’re hiring now – which is the most encouraging of all benchmarks. These small companies account for the majority of jobs in this sector, and this where expansion has been sorely lacking. Now it’s time for us to seize on these opportunities and sustain this momentum.
As the report points out, these are mostly small and midsized manufacturers. But these companies represent the most populous group in the US: For every mega-factory in the US, there are at least a dozen smaller enterprises producing goods.
MFG.com also reports job growth among small manufacturers in North America exploded to higher rates than previously seen in any MFGWatch survey cycle, and more small supplier manufacturing businesses indicate improved business conditions in the fourth quarter. North American suppliers reporting they had added jobs rose to 31 percent, significantly up from 26 percent in the previous period. These responses indicate meaningful expansion in the space closing out 2010, and manufacturers see strong growth for 2011.
A few other tidbits from the report:
For the fourth consecutive quarter, just about one-third (32%) of buyers expect to explore moving production closer to North America from a low-cost sourcing destination. This consistency is particularly noteworthy, in that the numbers of buyers that are actually moving work closer to North America are trending upward and nearly matching those predicting to do so in the previous quarter.
The "availability of competent suppliers" narrowly beat out "logistics & shipping costs" by only a single vote as buyers identified the greatest threats to their supply chains. However, when volatile fuel costs (coming in third) are factored in, logistics issues are far and away the biggest headache for buyers, purchasers, and spend management. These factors, along with product quality issues, paint a picture of extended supply chain management taking its toll on buyers needing to bring products to market under cost and up to customer expectations.
The number of buyers reporting significant supply chain disruptions fell to 37 percent from 40 percent in the previous quarter. This makes the second straight quarter where reports of disruptions have fallen. This downward trend suggests a stabilization of supply chains managed in and from North America, and likely indicates improved controls over suppliers and logistics channels. However, for the fifth straight quarter well over one-third of North American sourcing manufacturers reported significant supply chain disruptions -- a startlingly consistent number that points to major costs for industrial companies managing extended supply chains.
(I'll be interested to see first-quarter 2011's disruption stats, given the continual snowfall throughout the middle and eastern US.)
The onshoring and increased-job trends are good news, as are the incentive programs recently outlined by the Obama administration. (See: Why the Industry Should Support the US Railway Initiative.) However, I still think this optimism has yet to filter down to the majority of US residents. I live near a large industrial park, hosting a lot of companies in the electronics industry, that still has a lot of vacancies and no announcements of "opening soon." The parking lot of the radio-component manufacturer down the street is never full, and there hasn't been a night shift there in at least five years.
I feel as if I've been reporting "optimistic" and "encouraging" stats for a long time now. Maybe I'm getting impatient -- the first quarter of the year isn't over yet. But I could use some more direct evidence that manufacturing really is moving back onshore. We'd love to hear from you if you have some.
I am willing to pay a premium for US made goods. Two reasons: 1. Quality, something that will last more than months and I am assured does not have cadmium,lead or other heavy metals. I would pay $ 80 for a blender that I know will last 5 years instead of $ 20 for a blender that burns it motor out in one year ( I actually had a motor burn out within four mixes; probably the cheapest of imports) 2. American workers pay taxes and we all know Uncle Sam needs the income. Just think if we could increase the tax base and cut spending!!! Perhaps I am dreaming but it is a nice dream. Regarding wages: We Americans must be careful and not again become too greedy. Have we learned our lesson, I doubt it. But if you want to get ahead, do not rely on unions to get you outrageous wages/benefits for simple work but improve your education to gain higher paying employement, work more jobs, or just be happy with life and having a job. The wages and benefits of 1970s unionized industries are gone for good. Nothing we can do about until people in China/third world also want 3K sq. ft. homes, three cars, a boat, etc....
Hi Ariella--I'm funny that way, wanting a warranty and all. I guess Eminem's word should be good enough, though... :-)
Today we received more confirmation that costs in China are increasing and component makers are beginning to raise prices. So, assuming costs are coming more in line, other factors, such as weak/strong currency, are still competitive factors. But let's say the playing field evens out a bit and offshore costs are not so advantageous. What are the pros/cons of manufacturing the Americas vs/ offshore? I think it's a good start for a dialog. Off the top of my head, taxes and politics are two things to consider...
You mean it's not enough that Eminem gave the whole pitch for American cars in a top-ranked Super Bowl ad? You want a warranty, too? From what I understand, though, even American cars can have components manufactured abroad; it is not 100% American.
Isn't the weak dollar a factor, as well? That would make imported goods more expensive even without the increased transportation costs.
Transportation costs are definitely one reason cited for the onshoring trend. I also think managing a supply chain to and from the Far East is more complex than a lot of companies expected. As these are mostly small to midsize compnaies I expect they found it more expensive than they thought as well.
I'd be willing to pay a premium for certain goods--most of the big-ticket items I buy today qualify. And, since I've been spending a lot of time at the dentist lately, I note the brands of the medical and dental equipment used--again, big bucks. But this stuff is a long-term investment and we aren't talking pennies on the dollar.
I have to admit I gave US-made cars a shot before buying Japanese. Unfortunately, my experience with American cars has been very negative and the investment is too high to deal with the kind of problems I had with my cars. But I'd be willing to give it a shot again with the right warranty.
It seems like there has been a growing sentiment from consumers that want to purchase products made in America. Here's a question: Would you be willing to pay a premium for a product that is made domestically as a consumer? How about as a purchasing agetnt for a company?
Onshoring will be a major bloster for US economy. Big companies like GE, Ford and Caterpillar are joining this onshoring trend in which some operations would come back to the country, resulting in the creation of new jobs. A weak dollar, complex logistics and quality issues are pushing companies to bring back the work they offshored.Onshoring improves the quality of customer service which makes customers happy.
We have seen major change of numbers in last quater and before that too, I hope this quater results will increse more employement rate in US.If this onshoring trend continues it will not take longer to see Made in America label.
The reversal of the oursourcing trends for the North America could be the result of the continued inflation in the developing nations. This has resulted in a steady increase in the cost of living in the developing nations. This must have reflected in the cost of outsourcing also rising and rising. Against this the dollar has remained steady over many years now. When I compare the Dollar and the Indian Rupee, the exchange rate for dollar to rupee has hardly changed over the last 7-8 years whereas the cost of living in India has almost doubled over these years. So this chnaged economic scenario may be working in favor of taking the manufacturing activities back to US for the US based companies
Barbara, it’s happy to read that companies are moving back to America. As pointed by anandvy, it can be of many reasons like transportation cost, rising crude oil price, instability in other countries like Egypt, Middle East etc. I think the new economic policy of Obama government may also motivated companies to shift the production line to US. More over the new outsourcing policy also makes them to think twice, before expanding their territory outside the main land.
Any way it’s good for US and techies. Hope more and more employment opportunities may create, which intern enhanced our economic growth also. But at the same time, just keep and watching how this companies are going to addressing the problems while moving their base-line.
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Thailand Stages a Comeback Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Euro-Crisis: What It Means for High-Tech Firms Join EBN Editor in Chief Bolaji Ojo and Contributing Editor Jennifer Baljko on Thursday, July 12, at 10:00 a.m. EDT for a Live Chat on high-tech and Europe's economic difficulties.
Microsoft Surface: Potential Winners & Losers What are the implications for the electronics industry supply chain of Microsoft Corp.'s decision to launch its own tablet PC? Join industry veteran and EE Times' systems and OEM expert Rick Merritt on Tuesday, July 3, at 12:00 pm EDT for a Live Chat on this subject.
Join EBN contributor Jennifer Baljko on Thursday August 23, 2012, at 11:00 a.m. EST for a live chat on how electronic manufacturers in Thailand have shored up their supply chain to reduce the impact of future natural disasters.
Peter Drucker famously said "Trying to predict the future is like trying to drive down a country road at night with no lights while looking out the back window." Yet in the razor's-edge world of electronics—with a lean supply chain and just-in-time demands—the need to know the future is vital.
While no one really can accurately predict the future, we can take guidance from another Drucker saying which is the best way to predict the future is to create it.
You've heard the saying "the No. 1 supply chain risk is your people." That hasn't always been the case. But today's complex global supply chain requires a new type of multitalented employee. It's one who understands, finance, marketing, economics, is savvy with technology, graceful with relationships and can think analytically.
Where are these people? Are universities properly preparing the next generation supply chain professionals? How do train your existing workforce for these new, demanding positions?
Brian Fuller, editor-in-chief of EBN, will lead a 60-minute Avnet Velocity panel discussion that will ask and answer these and other questions swirling around today's supply-chain talent challenges.
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