What is reshoring?
Reshoring = Unwinding offshoring.
Or, bringing jobs back to the US that previously had been moved overseas.
There isn’t much reshoring taking place, yet it is happening. It goes against conventional wisdom of what is happening in the U.S. economy so it is something we ought to ponder.
I’ve been reading for some time that China has lost its place as the low-cost producer. Manufacturers seeking the lowest cost are going to Vietnam and other places in Asia.
This has changed the economics of offshoring.
Yesterday’s Wall Street Journal has three articles on point. Articles are behind paywall, so I think the following links will just give you a few paragraphs of each article.
Otis Elevator is moving some production to South Carolina from Mexico. The reason?
Transportation costs are offsetting savings in labor costs. The article says the company will save 17% of transportation costs and will save a lot from having all of its design and engineering staff co-located with production. Also easier for customers to visit the plant.
The same article mentions several other companies that are bringing manufacturing jobs back to the US.
John Bussey, in Buck Up America, China is Too Expensive, discusses the very small trend of reshoring. He cites one furniture manufacturer who says the price advantage of manufacturing in China used to be 50%. That is down to 10% or 15% today.
Wouldn’t take much of a swing in transportation costs to wipe out that savings. What would the savings be from cutting all the international travel time and costs for your staff?
Another article reported a tire manufacturer’s plans to build a new plant in South Carolina.
Mark Perry discusses the shifting cost relationships and impact on bringing jobs back to the U.S. in his post, More on the U.S. Manufacturing Renaissance.
I don’t know what to make of this in terms of understanding the change that is taking place around us.
One thing I realize: Those jobs coming back are not going to be the same jobs that left. They will require a higher level of computer skills.
For example, the number of new production jobs in Otis’ new South Carolina plant will be less than the number of current jobs in their Mexico plant. Reduction is due to increased automation.
Also, one commentator on Mr. Perry’s article indicated those plants coming back to the U.S. will require forklift operators, but instead of driving one forklift, they will be directing 20 forklifts from a keyboard. You can still call that a forklift operator position but it is a very different job.