Monday, February 24, 2014



Since the beginning of twenty-first century production sector in the United States has seen a decline owing to a fast paced increase in off-shore manufacturing and outsourcing. Between years 2000 and 2004 manufacturing jobs were lost for a stunning 43 consecutive months and there was a reduction in the number of manufacturing plants by 12.5 percent from 1998 to 2008 – seriously effecting the middle class workers who had always been the backbone of the country’s economy.[1]

Various studies have identified the following primary reasons due to which major manufacturing concerns were forced to look for more efficient and cost effective solutions outside the country:[2]

·         Cheap Labor
·         Less Capital Intensive
·         Inexpensive energy
·         Speed to transform Ideas into Reality
·         Almost zero Legal Obligations

As it is believed that one who can jump from invention to production in the shortest possible time is the winner, all of the above stated factors had all the attraction for the leading manufacturing concerns to get that winning spot.

This winning race was good for some time but now a serious realization of losing hold on innovation is raising serious concerns for the leading businesses of the United States. With manufacturing they have also started to lose the power to innovate and implement new ideas, and it is now the host countries that are making use of this creativity.  

Maybe this is one of the major reasons for the start of reshoring activity by the major industrial players. This change started in 2012 and is gaining momentum with time.[3] Trade and Industry Developoment’s article - provide very interesting information on the current spree of reshoring with six very informative charts. I would like to share one here:

This shows Freight Cost, Delivery, Travel Cost and Inventory as major factors that are convincing companies to reshore, bringing our attention to the importance of supply chain management and the costs associated with it.

The question at hand is if the companies will keep bringing manufacturing back to the United States, is it financially viable to do so, what other factors might hinder this return? A very well thought-out strategy suggests to “right-shore” instead of “off-shore” or “re-shore”. To right-shore means to “optimize locations to take advantage of cost, market, and resources for the best overall margin performance and customer satisfaction.” [4]

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