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Reshoring and the Resurgence of U.S. High-Tech Manufacturing

By IEEE-USA Staff

If you aren’t yet familiar with the term “reshoring,” you may soon be.  Reshoring, sometimes called backshoring, onshoring or insourcing, is the reclamation of manufacturing jobs that had been previously lured away to other countries that offered lower wages or other incentives to U.S. manufacturers to move their operations or outsourcing overseas. In what many are hoping is a lasting trend, more and more American businesses are deciding to bring manufacturing jobs back from places like China, Mexico and Central America — and more importantly, high-paying, skilled manufacturing jobs.

Experts are cautiously optimistic that the reshoring phenomenon will continue to gain momentum, and many — including the Obama Administration — are betting that a rejuvenated, hi-tech manufacturing base will help to create much-needed jobs for skilled American workers, and help to offset the nation’s growing trade deficit. In June 2011, the President launched the Advanced Manufacturing Partnership (AMP), a national effort to bring together industry, universities, and the federal government to make strategic investments in the development of emerging technologies that will create high-quality manufacturing jobs and enhance U.S. global competitiveness. The federal government has a natural role in supporting manufacturing, because manufacturing is vital to our national security and economy.

The AMP National Program Office (NPO), which is hosted by the National Institute of Standards and Technology (NIST), coordinates all federal agencies involved in U.S. manufacturing: Department of Energy (DOE), Department of Commerce, Department of Defense, the National Science Foundation, and NASA. The NPO also provides a central link to the growing number of partnerships among manufacturers, universities, state and local governments, and other manufacturing-related organizations.

In order to create an economy built to last, America needs to make more of what it consumes and more of what the rest of the world wants to buy. After losing millions of good manufacturing jobs in the years before and during the deep recession, the economy has added nearly 500,000 manufacturing jobs since February 2010—the strongest period of sustained job growth since the 1990s — and more companies are making the decision to bring jobs back to the United States and make products here.

To capitalize on this trend, the president’s FY 2013 budget has a strong focus on strengthening advanced manufacturing capabilities and calls for $2.2 billion for federal advanced manufacturing R&D at the National Science Foundation, Departments of Defense, Energy, and Commerce and other agencies, a 19 percent increase from fiscal year 2012 and over a 50 percent increase from fiscal year 2011.

In October, the Obama administration announced that 10 public-private partnerships across America will receive $20 million in total awards to help revitalize American manufacturing and encourage companies to invest in the United States.

The 10 partnerships were selected through the Advanced Manufacturing Jobs and Innovation Accelerator Challenge, which is a competitive multi-agency grant process announced in May 2012 to support initiatives that strengthen advanced manufacturing at the local level. These public-private partnerships consist of small and large businesses, colleges, nonprofits and other local stakeholders that “cluster” in a particular area. The funds will help the winning clusters support local efforts to spur job creation through a variety of projects, including initiatives that connect innovative small suppliers with large companies, link research with the start-ups that can commercialize new ideas, and train workers with skills that firms need to capitalize on business opportunities.  

“A strong manufacturing base in America is critical to the health of the U.S. economy, and these awards further demonstrate the Obama administration’s commitment to keeping this country on the cutting edge of innovation in manufacturing,” said Acting U.S. Commerce Secretary Rebecca Blank. “This investment will help accelerate and unleash the most promising ideas in advanced manufacturing, and bring those ideas to market. This will lead to good jobs for American workers, increase the nation’s competitiveness, and strengthen an economy that’s built to last.”

“By partnering across the federal government, these grants will help us leverage resources and ensure that training programs for advanced manufacturing careers provide the skills, certifications and credentials that employers want to see from day one,” Secretary of Labor Hilda L. Solis said.

“If we were to lose manufacturing we would lose our capacity to do R&D,” said NIST Director Patrick Gallagher told scientist, industry leaders and public officials who attended The Atlantic's “From Inspiration to Innovation Summit,” held at Ronald Reagan Washington National Airport in Arlington, Va., last May. “We’ve got to make this an imperative.”

Reshoring is Happening Now

Of the nearly 500,000 manufacturing jobs created since 2010, some 50,000 are attributable to reshoring efforts.[1] And it’s not just low-skill, assembly line type jobs that are coming home, but rather advanced manufacturing sectors that require workers with strong technological skills, such as aerospace, industrial and energy equipment, automobiles and medical devices.

Some of the companies that have already reshored some of their offshore operations include Caterpillar, GE, Ford, Google, and Whirlpool, to name a few. Even Apple, whose China-based Foxconn manufacturing plant has been well-documented and the subject of criticism, has pledged to bring more manufacturing of its cutting-edge electronics back to the United States. In December, BloombergBusinessweek posted an in-depth Q&A with new Apple CEO Tim Cook, in which he revealed that Apple will bring some Mac production to the United States. [2] Cook later told NBC's Brian Williams that Apple would manufacture one of the existing Mac lines (he didn't specify which) entirely in the States.

So, reshoring is happening now, and even more are planning to, or considering reshoring in the future. The Reshoring Initiative, which seeks to bring “good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess the total cost of offshoring, and shift collective thinking from ‘offshoring is cheaper’ to ‘local reduces the total cost of ownership,’” has numbers that illustrate a trend. According to Harry Moser, founder and President of the Reshoring Initiative:

• 61 percent of larger companies surveyed “are considering bringing manufacturing back to the U.S.” (MIT forum for Supply Chain Innovation 1Q12)

• 40 percent of contract manufacturers have done reshoring work this year (MFG.com 4/12)

• the percentage of U.S. consumers who view products Made in America very favorably: 78 percent (2012) up from 58 percent (2010) (AAM 28 June - 2 July 2012)

Why Reshore? Why Now?

Why the change of heart for U.S. companies? Reshoring isn’t a decision driven by nostalgia or patriotism — it just makes sound business sense. Since the economy began its slow recovery several years ago, U.S. manufacturers have found themselves in an increasingly competitive position. Thanks to automation advances at home and rising costs in places like China, U.S. labor is now more affordable. Moser's Reshoring Initiative helps U.S. manufacturers recognize the Total Cost of Ownership (TCO) of both offshoring and reshoring by providing free tools that can be used to calculate profit and loss impact of reshoring or offshoring. According to Moser, some of the top reasons that companies are choosing to reshore operations to U.S. soil include:

• Reduces Total Cost of Ownership

• Improves quality and consistency of inputs

• Reduces pipeline and surge inventory impact on just-in-time operations

• Clusters manufacturing near R&D facilities, enhancing innovation

• Reduces intellectual property and regulatory compliance risk

• Eliminates the waste and instability caused by offshoring

• Strengthens companies’ ability to respond quickly to customers' demands

Top reasons for the nation to reshore:

• Brings jobs back to the U.S.

• Helps balance U.S., state and local budgets

• Motivates recruits to enter the skilled manufacturing workforce

• Strengthens the defense industrial base

Manufacturing accounts for just 12 percent of U.S. gross domestic product and less than 10 percent of national employment, so alone reshoring cannot fix the economy. However, 70 percent of private-sector R&D focuses on manufacturing, so the potential for creation of good jobs for middle- to high-skilled workers, coupled with the  potential to improve the staggering trade deficit, warrants serious consideration from policy makers who want to create a climate favorable to bringing manufacturing back to the United States.

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