Yakima County Development Association - Reshoring Trend Continues

Jean Brown

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Jean Brown

Jean publishes a blog called the Enterprise Corner.  It features articles on entrepreneurship, local industry trends, manufacturing news and periodic ‘toolbox’ articles showcasing assistance, incentives and other resources for local businesses.

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Reshoring Trend Continues

Reshoring Trend Continues

May 23, 2014

Business is coming back to the United States especially for manufacturers.  The Boston Consulting Group recently published survey findings that showed a third of manufacturers are considering "reshoring" back to the United States from China.  The study cited that when companies took production offshore a decade ago they mostly did it to save on labor costs.  Companies often overlooked other costs such as intellectual property, import/export costs and logistics challenges due to unpredictable variables like shipping. Since over 20 percent of United States production is still overseas, a small shift back to our soil would be significant. 

Manufacturing has also changed over the last decade and these dynamics are also bringing production back home.  Today producers are under pressure to shorten product cycles, offer a broader array of customization, and shoulder some of the risk once felt by distributors and retailers.  In other words, where to manufacture a product is a more complex problem today than simply calculating wages.  Manufacturers have to carefully consider many issues in terms of where to build products and how to source materials for their plants.  Important factors that weigh in our favor include, rising Asian wages and workforce issues, supply chain management, energy cost advantages, quality control and finally the ability to respond to specialized and rapidly changing markets. 

Changes in the retail marketplace are also driving production back to the United States.  Once upon a time, retail buyers would place an order for 100,000 pairs of a new style of athletic shoes and put the shoes that didn’t sell by the end of the season on the clearance rack.  Buyers now usually place smaller initial orders with the contractual expectation that the shoe manufacturer will keep their product in the pipeline and ship on demand.  With smaller more volatile order cycles an overseas plant can quickly become most costly or problematic. 

It is good to see a reversal in fortunes for American manufacturing.  Five years ago this sector’s output had dropped to a thirty-year low.  As I visit with our Yakima Valley manufacturers I know they now are faring better.  Some of them are realizing new export markets.  Other local companies are reaping the benefits of reshoring.  It is obvious that manufacturers are competing in a global economy and it will be interesting to see how new trends and issues impact production companies in our Valley and across the nation. 

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