What is reshoring? Definition and meaning
Reshoring is essentially the opposite of offshoring, it is a term used to describe the act of bringing back offshored manufacturing and other types of jobs to a country.
A number of American and European companies moved their manufacturing facilities and service centers to Asia in search of lower costs. However, rising third world wages, increasing manufacturing costs offshore, and delayed design/manufacture to market times, are forcing many companies to bring jobs back home (reshoring).
According to an article in The Economist, titled “Coming home”, a 2012 Boston Consulting Group (BCG) survey of US manufacturing companies found that a little over a third (37%) of those with annual sales above $1 billion said they were planning or are seriously considering moving their production facilities away from China and back to America.
When asked why they would be bringing back manufacturing to the US, most companies said it was because of the increasing labor costs in China.
The International Labour Organisation revealed that real wages in Asia rose by 7.1-7.8% a year between 2000 and 2008.
Harold Sirkin, a senior partner at Boston Consulting Group, said:
“In the beginning of 2011, for the most part, most people thought that this was just impossible, that there would be no reshoring to the U.S., that everything was going to China, manufacturing was leaving the country and will never come back. And I think the striking thing is how much that’s changed in the last three years.”
He added:
“You went to China because it was just so cheap you couldn’t help it, But if you’ve got the engineers and people in the U.S., and the customer base in the U.S., you’d like to be close to the customer. It gives you a shorter supply chain.”
The Reshoring Initiative, an industry-led effort to bring manufacturing jobs back to the US, highlights a number of reasons why companies are reshoring, such as:
- Improving the quality and consistency of inputs.
- Enhancing the ability to respond to customer demands.
- Reducing the Total Cost of Ownership.
Many government are keen to encourage reshoring, because it would boost employment, help balance budgets, provide young adults with better job prospects, and improve the nation’s defense industrial base.
Video – Reshoring