Is onshoring the new trend? Local manufacturers finding a more level playing field

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Published: November 29,2013

Tags: Business, manufacturing, Mississippi, onshoring

made-in-usa-300x225Mississippi’s manufacturing industry got some good news lately when it was announced Mississippi State University and partners had received a nearly $2-million federal grant aimed at, among other things, reshoring jobs lost to foreign countries and increasing the number of advanced manufacturing positions.

But optimism was already growing that Mississippi can not only recoup offshored jobs, but also reverse the playing field by landing more foreign investment, says Jay Moon, CEcD, FM, president and CEO of the Mississippi Manufacturers Association.

“The U.S. is still the number one market in the world,” Moon says. “We are seeing a lot of activity (in reshoring). We are also seeing more and more foreign countries looking at Mississippi and the Southeast (to site plants).”

Moon points to numerous factors that are steering reshoring and increased foreign investment:

» Rising foreign wage rates

» Increasing transportation costs and logistical issues

» Decreasing domestic energy costs

» Concerns about quality control in foreign markets, particularly high-profile issues in China

» The state’s proximity to markets in Central and South America

“A recent report from the Boston Consulting Group said that if this continues, we will be almost at parity with China,” Moon says. “In fact, China has accumulated so much capital that investor groups are forming that are looking at our region (to site plants).

“I recently met with some Japanese officials, and the Southeast continues to be attractive to them as a jumping off place for Latin America. Germany and Eastern Europe are also looking at the Southeast.”

Indeed, some “reverse shoring” and foreign investment news has made headlines of late. As example, AirGuide Manufacturing, an HVAC producer, recently announced it was shifting operations from Mexico and China to Clarksdale. Doug Marty, CEO of AirGuide, told the MBJ: “We’re making contingency plans for expansion of that already. We’re looking at adding another 60,000 to 65,000 square feet.”

Pelahatchie-based Multicraft International has also added jobs from Mexico after landing new work from Chrysler. Chrysler chose automotive components-maker Multicraft over concerns in South Korea, Europe and Mexico citing quality control issues in Mexico. Multicraft also won Chrysler’s hemi-magnetic and wire harness work once done in Mexico due to competitive pricing and quality control issues, among other factors.

Paul Jones, executive vice president of Multicraft, told the MBJ: “The buyer indicated that it came down to trust.”

Just last week it was announced that the Port of Pascagoula was asking the Jackson County Board of Supervisors for a loan in support of a new wood pellet exporting facility. Florida-based Green Circle Bio Energy Inc., which plans to build a $115-million wood pellet plant in George County, will use the site to export up to 500,000 tons of pellets per year to European utility companies.

Moon says he sees the aforementioned MSU grant ($1,931,935), part of the “Make it in America Challenge” and made possible through the U.S. Commerce Department’s Economic Development Administration, the U.S. Labor Department’s Employment and Training Administration and the Delta Regional Authority, as another tool in helping recoup and/or retain manufacturing jobs.

David Shaw, MSU vice president for research and economic development, agrees.

“The U.S. as a whole and Mississippi in some of our industry sectors have lost a number of jobs that have moved overseas. When considering the cost of transportation, the cost of logistics and the quality of the workforce, it’s very easy to justify bringing those jobs back to Mississippi and back to the U.S.,” Shaw said in a statement when the grant was announced earlier this month.

“Like every other market, we lost manufacturing jobs during the recession,” Moon says. The grant and other efforts put Mississippi and the Southeast in an advantageous position as the economy starts to turn, he adds.

Challenges remain, however. Having a quality, trained workforce in place to fill new manufacturing positions is one. The quality of the state’s roads and bridges is another issue dogging recruitment efforts.

Moon serves on the legislative committee currently exploring options to maintain the state’s crumbling infrastructure. At heart of the issue is a lack of funding under the 1987 highway program, which set an 18-cent fuel tax. The flat tax and escalating costs has left the state with insufficient funds for infrastructure upkeep. Manufacturing, agriculture/forestry and trucking are just a few of the industries lobbying for increased funding, though the groups still have questions as to the new mechanism, the process of identifying which roads and bridges would be given priority, among others.

Still, many feel that there is a reversal of fortune at hand.

Guy Lipscomb, co-founder, chairman and CEO of Southern Motion Furniture, told the MBJ that his company had been getting pressure from retailers to move its production to China, and admitted to getting “pretty beat up” over the issue. Those requests have faded of late, and other than fabric and leather materials work that the Pontotoc company could only find in Europe and China, Southern Motion remains totally domestic.

“Our state is going to be elite in the reshoring process,” Lipscomb says.

 

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