Are American companies reshoring after years of sending production offshore? It’s not that simple, according to Wharton professor Morris Cohen, “Is the Reshoring of U.S. Manufacturing a Myth?” Cohen confirms some of the points I made last year in Reshoring or Offshoring: U.S. Manufacturing Forecast 2015-2016. The interview is worth watching in its 24-minute entirety for anyone concerned about manufacturing, but here are some highlights.
Manufacturers are shifting production in many directions—all at the same time. Some companies are offshoring certain operations while simultaneously bringing other activities back to the United States.
Some reshoring to the United States is happening, but it’s not huge.
Companies are looking at a wide variety of factors beyond labor costs, including availability of quality workers. Access to the foreign market is a very large factor. Companies are now going to China not only for lower production costs but also to serve the Chinese market.
There is no one decision that is right for all companies, all products and all cost structures. A labor intensive product will probably be made in a different location than a capital intensive product.
With the many factors at work, location decision is not a “no-brainer.” In fact, the key issues are continuing to change. This year’s best decision may not be best in years to come as foreign markets continue to grow, foreign labor becomes more skilled and also more expensive.
