In 2015, reshoring of manufacturing activities to the U.S. failed to keep up with offshoring, for the fourth consecutive year, according to the A.T. Kearney U.S. Reshoring Index. The index dropped to –115, down from –30 in 2014, and it represents the largest year-over-year decrease in the past 10 years, Patrick Van den Bossche and Pramod Gupta, both partners at global management consulting firm A.T. Kearney and report co-authors, write.

 

"The reshoring phenomenon, once viewed by many as the leading edge of a decisive shift in global manufacturing, may actually have been a one-off aberration,” Van den Bossche and Gupta write. “Indeed, the 2015 data confirms that offshoring seems only to be gathering steam, while the U.S. reshoring train that so many predicted has yet to leave the station."

 

Industries vulnerable to rising labor costs in China have been successfully relocating to other Asian countries, rather than returning to the U.S., according to Van den Bossche and Gupta’s research. Furthermore, those companies have done so without incurring significantly higher supply chain costs, despite the weaker infrastructure and supporting ecosystems of these new low-labor-cost destinations, the authors continue. The recent increase of nearshoring to Mexico also seems to indicate that, even if U.S. companies consider leaving Asia, executives have some reservations about reshoring.

 

There is good news for U.S. manufacturing workers in the report. Although reshoring of manufacturing by U.S. companies is on the decline, non-U.S. companies, including Chinese companies, increasingly invest in establishing or expanding their manufacturing footprint in the U.S., according to the authors. That’s because the U.S. consumer market, the stable political and economic environment, and the benefit of tapping into American engineering skills and manufacturing know-how are main draws, Van den Bossche and Gupta explain.

 

There are, of course, countering perspectives. For instance, last month, Boston Consulting Group released a report noting that 31 percent of manufacturers planning to add production capacity over the next five years for goods consumed in the U.S. will add that capacity in the U.S., while just 20 percent of the companies planning to add capacity will do so in China. Furthermore, the number of executives saying their companies are actively reshoring production increased by 9 percent since 2014, and by about 250 percent since 2012. This suggests that companies which were considering reshoring in the past three years are now taking action, the BCG report explains.

 

“These findings underscore how significantly U.S. attitudes toward manufacturing in America seem to have swung in just a few years,” says Harold L. Sirkin, a BCG senior partner and a coauthor of the research. “The results offer the latest evidence that a revival of American manufacturing is underway.”

 

After seeing the A.T. Kearney Index, Harry C. Moser, founder and president of the Reshoring Initiative, said a database maintained by his organization shows a smaller 40 percent reduction in reshoring activity rather than the 70 percent drop cited in the A.T. Kearney findings, but adds that “reshoring is still at about twice the 2011 level.” He further argues that the A.T. Kearney Index does not actually measure reshoring but rather the trend in imports. He also adds that since “the U.S. has one of the world’s fastest growing economies now, it tends to import more.”

 

In the end, it took many companies years to decide to offshore, and—if they do reshore—it may take years for such a decision to be made. However, considering rising labor costs around the world, quality control concerns, and potentially long shipping times, a case can be made for reshoring—although it still may not be best for all.

 

What are your thoughts on reshoring? If your company has offshored operations, does it have a reshoring strategy? What about your key suppliers?