Three months ago, a survey by MFG.com 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.
MFG.com, 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 MFG.com, said in a press release.
In spite of the solid hiring figures and business conditions, MFG.com 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.”