Manufacturers Reshore as Global Costs Mount

US Manufacturing_Reshoring

Manufacturing is returning to the United States. More than half a million new jobs have been created in the U.S. manufacturing sector since a 10-year low in 2010, according to a new study by CoreNet Global and recent data from the U.S. Bureau of Labor Statistics (BLS).

The job growth equates to a 4.4 percent increase, up from 11,458,000 in January 2010 to 11,962,000 at the end of June 2012.

The reshoring of jobs to the U.S. and other western developed countries will continue strongly through the year 2020, says CoreNet Global—an association of corporate real estate executives which earlier this year released Corporate Real Estate 2020 (CRE 2020), a forward-looking study of corporate workplace and real estate trends.

In a survey conducted in conjunction with the CRE 2020, 51 percent of corporate real estate asset managers either agreed or strongly agreed that there would be a rebound in domestic manufacturing from offshore locations. This recovery will be driven both by companies bringing manufacturing plants and jobs back to the U.S. or choosing not to off-shore in the first place, according to the report.

Reshoring is due to a variety of reasons. Perhaps less discussed, companies are relying more on technology and automated production processes which reduce the need for cheap labor while boosting productivity. The Manufacture of parts has become highly digitalized, cheaper, and faster, giving companies the ability to locate where they choose—often closer to their customers so they can compete both in terms of speed and innovation.

And there’s an added bonus to reshoring – it goes hand in hand with a general trend toward home-grown, local and sustainable brands. And while the American consumer market has traditionally been about more for less (i.e. manufactured in China), lately it seems to have reached a tipping point and the demand for U.S.-made, quality products is rising.

But reshoring is largely a result of changing global costs and supply chain dynamics. As developing nations experience rapid urbanization and industrialization, cheap labor cost is no longer a strategic driver. Labor costs have been rising dramatically in China—a major competitor for U.S. manufacturing operations. Southern China is at 20 percent of U.S. labor costs, according to the CoreNet Global study.

Growing labor costs are coupled with quality concern across the supply chain, as well as rising costs to transport goods. There’s also been growing anxiety over security and the lack of protection of intellectual property in countries like China.

The CoreNet Global study comes as demand for skilled workers in the manufacturing industry is soars. Earlier this week CNNMoney reported the enrollment in trade schools nationwide was at record highs.

Trade school officials say manufacturing programs are experiencing an influx of students— young people starting out, mid-career workers who are retraining after a layoff, and incumbent factory workers, CNNMoney reports. Workers are drawn by starting salaries of $50,000 to $60,000.

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