The pace of reshoring, or bringing work from overseas back to the U.S., has slowed and the scope of the returns are smaller as manufacturers struggle with fallout from the COVID-19 pandemic.
The U.S. ran a trade surplus with the rest of the world until 1979, says Harry Moser, a veteran of the machine-tool industry who now heads the Reshoring Initiative.
The mission of the organization is to prod companies to bring production and jobs back to the U.S., Moser says during the Center for Automotive Research’s annual Management Briefing Seminars, which were held virtually this year because of the pandemic.
COVID-19 has exposed the shortcomings of moving production overseas, Moser says. However, reshoring faces longstanding obstacles, including the value of the dollar, which has increased 300% percent in the past 40 years, and a focus on short-term profits that make management look good but miss the total cost of setting up production in places such as China, he says.
Chinese labor costs five times as much as it did a decade ago, and concerns about rising transportation costs are forcing companies to re-evaluate global supply chains and prompting interest in reshoring, Moser says.
“Reshoring is happening,” he says. “The U.S. is relatively more competitive in manufacturing than it was 20 years ago.” However, foreign companies such as Toyota are more aggressive in bringing work to the U.S. than traditional U.S.-based manufacturers are at bringing it back to the U.S. from overseas, Moser observes.
Overall, the percentage of the U.S. workforce involved in manufacturing continues dropping, he says.
“There is still a lot of worry about where the next generation of workers are going to come from,” Chad Moutray (pictured below during MBS presentation), chief economist for the National Association of Manufacturers, tells MBS attendees during the same virtual session.
Moutray says thousands of manufacturing jobs have been lost as the pandemic forced manufacturing companies to curtail or halt production. Even as the U.S. economy restarted and factories reopened, some 750,000 manufacturing jobs have disappeared since February, and he expects recovery won’t take place until 2022.
In addition, capital spending in manufacturing was flat last year and has dropped significantly this year. “It will take a while for us to dig out of this mess,” Moutray observes.
Reshoring and diversification of supply chains were key issues for manufacturing companies even before the pandemic triggered a recession, Moutray notes.
Finding ways to encourage and expand the reshoring movement after the pandemic and recession is one of NAM’s priorities, Moutray says.
The national agenda must include more money for training and retraining workers, major improvements in infrastructure and bolstering trade relations with countries such as Germany and Japan that are major markets for products manufactured in the U.S., he says.