Onshoring Trend Cooling Off

Three months ago, a survey by indicated domestic manufacturers that had moved production offshore were considering bringing facilities back to North America. (See: Evidence of ‘Onshoring’ – But Where Are the ‘Help Wanted’ Signs?.) A follow-up report shows that trend is slowing., which calls moves back to the US and Canada “reshoring,” reports that only 15 percent of respondents said they had moved production back to North America from offshore in the second quarter. That's down from the 27 percent that reported reshoring in the first quarter. The report gives a possible reason behind this reversal:

To shore up supply chains impacted by the Japanese disasters, it is likely that these companies focused attention on recovery based on existing logistics channels in lieu of any reshoring plans. Still, this downward trend over the last three quarters presents a clear cooling down in the reshoring phenomenon entering into the last half of 2011.

That's discouraging news for potential employees and supply chain partners wanting to see manufacturing return to North America. Nevertheless, the rate of companies contemplating reshoring has maintained a level of 31 percent since the first quarter of 2010.

The overall sentiment of the manufacturing community seems mixed. Supply chain disruption in the second quarter rose to its highest level in a year (48 percent). Hiring among manufacturers has increased — 36 percent of respondents added jobs, versus 27 percent who had predicted they would in the first quarter. But those numbers were still below expectations: “While the gains in employment are encouraging, the consistent inability to accurately predict layoffs since Q4 ’09 points to strong, unexpected economic instability in many companies and markets.”

Manufacturers also have not seen the costs of logistics and fuel decline. But there is a positive note in the report:

In the most encouraging and surprising response in this MFGWatch survey, job shops and contract manufacturers report a level of hiring not seen since the survey was launched in Q3 ’09. The 36% reporting they had increased staff also rebounds from the drop shown in the last quarter, when that number dropped from the previous high of 31% in Q4 ’10.

It appears that investment in manufacturing will stagnate in North America over the next few months. “Looming expansion of regulation, operating costs, and the specter of rising taxes could impede this growth, and manufacturers are rightly reluctant to go 'all in' with regards to investments in technology and employment,” Mitch Free, founder and CEO of, said in a press release.

In spite of the solid hiring figures and business conditions, says, “small job shops and contract manufacturers in North America are showing a relatively strong reluctance to invest in the coming months. The likely cause of these contradictions is economic instability and uncertainty.”

8 comments on “Onshoring Trend Cooling Off

  1. Taimoor Zubar
    August 31, 2011

    I don't think a move towards onshoring can be successful without government support. Firstly, companies in North America cannot compete directly with the developing countries in terms of the manufacturing costs. Unless there's government subsidy that can cut down on the labor costs, manufacturers would not be able to move production back onshore without compromising on profitability.

    Secondly, since it's been several years since OEM's outsourced their production to offshore partners, the research and development facilities have also shrunk in the parent countries. If companies want to bring manufacturing back to onshore sites, they have to re-establish research centers. That too may require assistance from the government in the form of research grants.

  2. Mr. Roques
    August 31, 2011

    So what are some of the possible causes it took off? Japan? China's rising labor costs?) and what are some of the reasons why it cooled off? … no clues here! 

    September 1, 2011

    I cannot see how reshoring will increase when corporations need to chase the lowest cost possible or improve the bottom line.  The only reshoring I have seen in the UK is to reshore call centers from places like India.  However this was done to drive up profits as customers (preferring to deal with local support people) were abandoning companies with offshore support only.  At the end of the day it was all about the bottom line.

  4. garyk
    September 1, 2011

    The problem is Tax rate and profit margin. Lets look at Nike Golf shirts, $60 to $80. Lets also look at Taylormade drivers, new R11 Driver $500 plus dollars, all made in Asia. Are these US owned manufactures? Manufacturing is cheaper in Asia? It sure doesn't look like it. (Profit Margin, stock holders)

    Tax the goods made out the US by US company's and Tax breaks to company's manuafacturing in the US and audit the manufacturing.

  5. Daniel
    September 2, 2011

    Garyk, you are right. Companies are very calculative about their margins and profits. Manufacturing and labour costs are very less in Asian and nearby countries when compared to US states.

  6. Harry Moser
    September 5, 2011

    Clearly the economic trends favor reshoring.   Boston Consulting Group recently reported: Chinese net unit manufacturing costs are rapidly converging on U.S. costs.   For the economic trends to have a rapid impact on the behavior of major U.S. companies, however, the companies will have to calculate their total cost of offshoring.  Unfortunately, most companies’ calculations are rudimentary, rather than complete, mainly comparing prices rather than the entire cost of offshoring, as reported by Accenture and Archstone Consulting.  As a result, companies have offshored more than is in their own self interest.

    To help these companies make better sourcing decisions the non-profit Reshoring Initiative, , provides for free a Total Cost of Ownership (TCO) software that helps them calculate the real offshoring impact on their P&L.  With clear evidence of the fragility of global supply chains, Chinese and other LLCC (Low Labor Cost Country) wages rising rapidly, the U.S. $ declining and oil soaring, this is the perfect time for U.S. companies to reevaluate their offshoring strategies and bring some of the sourcing home.

    Readers can bring back jobs by asking their companies to reevaluate offshoring decisions. Suppliers can use the TCO software to convince their customers to reshore. 

    You can reach me at

  7. maou_villaflores
    September 27, 2011

    But there is always Taiwan, Vietnam, Indonesia and Philippines as an alternative for offshoring. IMO offshoring will continue as long there are countries that can offer better and competetive prices and same quality output compare to onshore manufacturing vendors.

  8. hwong
    October 5, 2011

    The onshoring reduction is basically folllowing the pull back of our recovering economy. Plus, the steps taken by China to curb the overheated economy has negative impact on onshoring activity.

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