Can Reshoring and Newshoring Revive American Manufacturing?

by Andrew Armstrong on January 19, 2016

rsz_manufacturing_trends_new_shoring-1024x512

In his final State of the Union address, President Barack Obama noted the creation of nearly 900,000 manufacturing jobs in the last six years. But America can do better. How? By two strategies that many are likely unaware of: Reshoring and Newshoring.

Another trend creating entirely new jobs in the U.S is known as newshoring. This concept refers primarily to smaller entities creating entirely new products who choose to manufacturer their products here in the U.S. rather than overseas. With new technologies such as 3D printing breaking down many the barriers to entry in manufacturing, making the choice to manufacturer locally is far more attractive than it has been in years’ past.

Together, reshoring and newshoring offer hope that American manufacturing may be back on the rise in the coming years. However, a litany of challenges still remain.

The Goal of Reshoring 

Reshoring has resulted in the return of thousands of previously off-shored manufacturing jobs to U.S. workers, reclaiming them from regions such as East Asia and Latin America.

It isn’t easy convincing owners that a return to “made in the U.S.A” is profitable. Other countries traditionally boast lower wages with fewer required benefits for workers. However, changing market forces have spurred new debate. Rising labor costs, rising shipping costs for transportation, and greater concerns about intellectually property theft taking place in overseas facilities have all diminished profit margins for companies offshoring their manufacturing in recent years.

Reshoring Success Stories

Examples of the reshoring phenomenon are apparent in multiple industries. One of the biggest reshoring examples occurred in 2012 when General Electric chose to move their appliance manufacturing operations back to the United States. Another recent example is K’NEX, the toymaker. Originally their toys were made in China, but today they are all made in Pennsylvania. Other companies that have moved some or all of their manufacturing back to the U.S. from abroad include Ford, Caterpillar, Whirlpool and NCR.

Brooks Brothers, one of the biggest apparel companies, also moved its operations back stateside. Garment makers are among the top industries moving their operations back to the United States in recent years. Owners cite energy costs overseas compared to less expensive alternatives in the U.S.

Another reason why moving manufacturing back to the U.S. makes good financial sense for those in the apparel field is flexibility. Apparel makers can more easily reduce production if a line isn’t popular, or increase production for certain models that are in high demand. This type of flexibility is difficult when production is in foreign countries.

Is it Working?

There’s no question that the trend in reshoring is real, but getting accurate data to gauge its effectiveness is hard. The big companies mentioned have made headlines with their moves, but there haven’t been large numbers of smaller businesses taking the leap.

Research has shown mixed results. One study conducted by The Boston Consulting Group in 2013 showed that a growing number of companies have initiated plans to re-shore, or are giving it strong consideration. However, a 2014 study done by A.T. Kearney, a management consulting firm, showed that success stories had been exaggerated.

What About Newshoring?

Many of the new businesses representing the ‘newshoring’ movement are individual inventors working from home. They’re young, highly educated and know how to make use of technology to create their designs and prototypes. They often collaborate with other individuals to bring their ideas to market. Technologies such as 3D printing, computer-aided drawing, and crowdfunding have empowered startups and these individual craftsmen to independently bring products directly to the marketplace in recent years.

The newshoring trend is in its infancy, but with the growing popularity and accessibility of 3D printing, crowdfunding, cloud computing, and other enabling technologies, it is considered a movement that will last for the long-term. With an increasing volume of resources for newshoring emerging, and increased government support, creating new jobs in American manufacturing is becoming more attainable.

#1 Again?

Does this mean the U.S. will soon reclaim its position as the world’s manufacturing giant? It’s not likely anytime soon. Because of better technology, fewer people are needed to produce a much greater number of goods, compared to the heady times of the 1950s and 1960s when the U.S. led the world. But jobs in the manufacturing sector are increasing thanks to reshoring and newshoring, which is a positive sign for the health of the American manufacturing industry.

Filed under: National Politics