Executives at large, U.S.-based companies remain bullish on American manufacturing, and they continue to act on those beliefs as well, according to new research released last week by The Boston Consulting Group (BCG).
The firm’s third annual survey of senior manufacturing executives at companies with sales of $1 billion or more found that the number of respondents who said that their companies are already bringing production back from China to the U.S. had risen from roughly 13 percent to 16 percent over the past year. The number who said their companies would consider returning production in the near future also grew from about 17 percent to 20 percent of the respondents since last year. A majority (54 percent) of the respondents also expressed interest in reshoring, further validating the findings of last year’s survey results, BCG explains.
The 2014 survey, conducted by BCG’s Center for Consumer and Customer Insight in August, drew responses from 252 decision makers across a broad range of industries.
There are some findings I find most interesting. For example, the respondents predicted that the U.S. would account for an average of 47 percent of their total production in five years, which is a seven percent increase in their projected U.S. capacity, compared with last year’s results. Only 11 percent of the respondents’ companies’ capacity would be in China, a 21 percent decrease from last year. Respondents forecast that the share of production in Mexico, Western Europe and the rest of Asia will also drop.
By a three-to-one margin, respondents also predicted that reshoring would create U.S. manufacturing jobs within five years, BCG reports. Indeed, 50 percent of the respondents indicated they expect to boost their U.S.-manufacturing workforces by five percent or more. Only 17 percent of the respondents predicted that their companies would be employing at least five percent fewer manufacturing workers in the U.S. five years from now. The survey findings reinforce a previous BCG estimate that reshored production, along with rising exports, could create between 600,000 and 1 million direct manufacturing jobs by 2020, BCG explains in the report.
Finally, another trend seen in the findings is that U.S. manufacturers are increasingly considering factors other than direct costs such as labor when they create production strategies. More than 70 percent of the respondents cited better access to skilled talent as a reason for moving operations to the U.S.—more than four times as many respondents as those who cited access to talent as a reason for relocating production outside the U.S., according to BCG. For goods that would be sold in the U.S., roughly 80 percent of the respondents cited logistical factors such as shorter supply chains and lower shipping costs as the primary reasons for moving operations to the U.S. from other countries.
“We have long advised companies to look at the total cost of manufacturing in the U.S. and to consider the entire supply chain—not just obvious factors such as wages,” says Michael Zinser, a BCG partner who leads the firm’s manufacturing practice in the Americas. “When companies take a holistic view, the U.S. increasingly comes out ahead, particularly if those products are to be consumed in the U.S.”
What I am more interested in, however, are your thoughts on reshoring. Is your company planning to reshore some manufacturing—particularly if the goods will be consumed in the U.S.? If so, what are the primary reasons for considering the shift in operations?