More US manufacturers want to bring back production from China

The number of large US manufacturers that are bringing back production from China to the US or are planning to do so is rising rapidly, according to research by The Boston Consulting Group.

One-fifth (21%) of the more than 200 executives polled by BCG in August said they are reshoring production, about twice as many as in February 2012, according to the surveys’ key findings. The companies participating in the survey had more than $1 billion in annual sales, operated manufacturing plants around the world and produced for US and non-US consumption.

More than half of the executives said they are planning or actively considering moving production operations from China to the US. Fifty-four percent of the respondents in the August BCG survey planned to manufacture goods in the US that they currently made in China, up from 37% in February 2012.

Rising labour costs in China (43%), the distance the goods must travel to reach customers (35%) and the quality of the goods (34%) were the key drivers for the increased reshoring activity, according to BCG. Access to skilled labour ranked fourth; taxes and other financial considerations came in fifth.

“Over the past couple of years, we’ve projected an improvement in US manufacturing competitiveness by 2015 that would help drive an American manufacturing revival,” Harold Sirkin, a BCG senior partner and a co-author of the study, said in a statement. “The results of our latest survey make clear that a profound shift in attitude is beginning.”

A survey the Massachusetts Institute of Technology conducted last year among 340 companies, including 156 US-based manufacturing companies, also found the mood shifting towards bringing overseas production back to the US.

Among the US-based manufacturing companies, 15.3% said they were definitely planning to reshore activities to the US, and 33.6% said they were considering it.

Nearly three-fourths of the US manufacturers responding to the MIT survey said reducing the time to bring goods from the production plant to market was the reason for their plans to reshore. Two other main reasons were efforts to reduce costs (63.9%) and improve product quality (62.2%).

The respondents also identified five US government actions that would attract more manufacturing jobs to return to the US from overseas:

• Lower corporate taxes (68.3%)
• Tax credits (65.9%)
• Research-and-development incentives (60%)
• Better worker education and training (43.8%)
• Better infrastructure (38%)

Related CGMA Magazine content:

“Manufacturing’s Future Includes Localised Supply Chains, Talent Shortages”: Manufacturers face operational and recruiting challenges that are leading to localised supply chains, investment in energy-efficient processes and new-worker training initiatives, according to research by the World Economic Forum.

“Why the US Manufacturing Rebound Could Turn Into a Revival”: Domestic manufacturing has gone through a rebound in the past four years, but structural changes that go way beyond rising labour costs in China may be able to sustain a revival of US manufacturing, a PwC analysis suggests.

“Offshoring of Back-Office Jobs to Level Off, Study Predicts”: Employers continue to move business services jobs from the US and Europe to low-cost countries, but research suggests that the number of IT, finance, human relations and procurement jobs that can be offshored is dwindling.

—Sabine Vollmer (svollmer@aicpa.org) is a CGMA Magazine senior editor.