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Marketing Viewpoint by Ruth Winett

Reshoring Activity Could Boost Your Business

Energid Technologies, a Cambridge, MA, robotics company has returned manufacturing to Massachusetts from India. AO Eyewear, a Southbridge, MA, company that sells aviation eyeglasses, plans to move production from China to the US. Ford, Apple, NCR, Google, Michelin, Walmart, and other large American companies have also decided that reshoring makes economic sense. If the trend continues, it will be good for workers and the economy. Companies that reshore need additional products and services from other U.S. companies.

Reshoring should create opportunities for companies that serve manufacturers. Companies that reshore need more raw materials, parts, and services. Every new manufacturing job created generates on average another 1.42 additional jobs, according to Henry Moser, President of the Reshoring Initiative in a July 8, 2014 telephone interview.

Why Reshoring Makes Sense

The main reason for reshoring is that labor costs continue to soar in China, Mexico, Brazil, and other countries. Improving inventory control is another reason. During the 2008 recession companies had to inventory unwanted items that were already in the pipeline when demand plummeted.

Reshoring:

  • Decreases the time to market.
  • Eliminates the costs of converting currency.
  • Results in higher quality products and services.

Other reasons for reshoring are:

  • Decrease in U.S. energy costs.
  • Less risk to intellectual property.
  • Fewer supply chain interruptions.
  • Lower transportation costs.
  • Decrease in waste and increase in productivity from moving manufacturing closer to R&D, design, and customers.
  • Lower total cost of ownership (TCO). Henry Moser of the Reshoring Initiative says that manufacturers fail to factor in 20% of the real cost of offshoring.

Commonwealth of Massachusetts Subsidizes Reshoring

The Commonwealth of Massachusetts is helping to fund local reshoring initiatives. For example, AO Eyewear and Dunn & Co, a Clinton, MA, producer of paper stock, received MassDevelopment funds, the Reshoring Initiative reports. Additionally, a July 2, 2014, Massachusetts Senate economic development package included $10 million for the Advanced Manufacturing and Information Technology Workforce Training Trust Fund. The purpose of the Fund is to train 4,000 workers in 4 years for "middle skill jobs."

How Widespread Is Reshoring?

The Reshoring Initiative estimates that U. S. companies created about 550,000 new manufacturing jobs from 2010-2013 and that 120,000 of these were reshored jobs. They found that 100 companies have begun reshoring since 2013. Meanwhile, the number of new offshoring initiatives declined from about 150,000 in 2003 to 20,000-30,000 in 2013, according to Reshoring Initiative estimates. These changes suggest growing opportunities for companies that provide products and services to manufacturers.

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