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.