Next year is projected to mark the arrival of a “confluence” of developments in manufacturing that will launch in earnest a long-awaited return of American manufacturers to the United States.
The Boston Consulting Group predicted the “confluence” several years ago through an analysis of reshoring trends and factors likely to contribute to a diminished appeal of China to U.S. manufacturers. A key conclusion: Labor costs in China would rise to within 10 percent or less of wages typically paid factory workers in the United States.
Coupled with increased transportation and energy costs, uncertain currency levels and the difficulties of protecting manufacturing patents and other intellectual property, returning to America would become an easy decision to make, the Boston Consulting Group study predicted.
The last couple of years have solidified the Boston Consulting Group’s belief in the arrival of the “confluence,” said Hal Sirkin, a senior partner in the Chicago office of the international research and consulting firm.
With Chinese factory wages growing 15 to 20 percent a year, “it is happening faster than we thought,” Sirkin said of the confluence in an interview late last month.
“Companies are starting to see the economics,” he said.
Meanwhile, the U.S. Department of Labor is helping to speed up the reshoring trend through helping states such as Mississippi to encourage reshoring of advanced manufacturing jobs.
Of $20 million the Labor Department awarded last October for its “Make it in America Challenge,” Mississippi State University received $1.9 million, as one of 10 grant awards made nationally. MSU’s Canton-based Center for Advanced Vehicle Systems, or CAVS, an arm of the university’s Bagley College of Engineering, is leading the manufacturing logistics segment of the challenge. A specific goal is show sourcing suppliers the benefits of moving operations closer to Mississippi’s manufacturing plants.
The CAVS Extension Center is a few months into a statewide campaign aimed at helping advanced manufacturers return to the United States as well as remain here. As part of the effort, CAVS is holding a two-day “Make It In Mississippi” reshoring conference May 14-15 at its headquarters at 153 Mississippi Parkway.
A key focus will be on helping manufacturers address supply-chain needs. A luncheon program, repeated both days from 10:15 a.m. to 1:15 p.m. will feature Harry Moser, the founder of the national reshoring movement. Moser’s presentation is titled “Is it Time for Your Company to Reshore?”
Moser, president of the Chicago-based Reshoring Initiative, has developed a cost-calculation method to help businesses more accurately compare the cost of manufacturing in China and in the United States. He has dubbed the calculation “The Total Cost of Ownership.”
The tallies increasingly show it is “as cost-effective to manufacture in the Southeast U.S. as in China,” Moser said in a recent interview.
He said he thinks a close look will show costs in the Southeastern U.S. to be within 15 percent, but that percentage goes down significantly when the total cost is considered.
“The end result is that 10 years ago we were losing 150,000 jobs a year to offshoring. Now, we are approximately neutral.”
The rate of decline has sped up significantly in the last couple years, Moser said.
Nationally, the Reshoring Initiative sends out “listening teams” to visit manufacturing executives and hear what they are doing in the way of offshoring and learn what it would take to keep them at home. That’s where the Initiative acquaints the executives with “total cost” calculations, Moser said.
The Initiative next acquaints the execs with U.S. workforce training opportunities and sources of grants to help with the costs of the training, according to Moser.
In advanced manufacturing, Moser said he has seen a “fair amount” of electronic assembly return, including makers of whole harnesses and circuit boards.
Mexico, which — like the United States — lost manufacturing jobs to China in past decades is having success bringing companies home from China. Surveys show, however, that the United States leads Mexico on the reshoring front, Moser noted.
Like Moser’s national effort, the CAVS Extension Center’s “Mississippi Make It In America” campaign has created “listening teams” to help assess supply-chain needs of manufacturers in the state or ones that could potentially move to the state.
The campaign has a lot of moving parts, said Clay Walden, director and research professor of CAVS Extension.
“We’re targeting companies that can use our help, particularly those that are expanding or are wanting to become part of a reshoring effort,” Walden said.
So far nine or so partners have been recruited, including the Franklin Furniture Institute on Mississippi State’s Starkville campus, the Mississippi Development Authority, South Delta Planning and Development District and the Three Rivers Planning and Development District. Several community colleges have been enlisted for workforce training, including Holmes Community, East Mississippi Community, Itawamba Community and Mississippi Delta Community.
“The big picture is the training piece,” Walden said, and added that 175 internships with advanced manufactures in the state are to be awarded this year.
Eighty-four “Tiger Teams” have also been created. Made up of members of the Make It In Mississippi In America campaign and, in some instances representatives of the manufacturer, the teams will identify new or alternative suppliers for the manufacturers with whom they are working, Walden said.
“These solutions will help manufacturers locate suppliers closer to their plants, which, at times, can include the reshoring of suppliers, work and jobs from outside the U.S.,” Walden said in a press release.
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