We are now seeing an emerging trend of “onshoring”. Companies are bringing home manufacturing facilities located in far flung places on the globe where labour is usually less expensive than at home and where you don’t have the same degree of oversight as you would in the domestic market. Some companies now believe offshoring has too many hidden costs.
According to this report, GE is relocating its appliance manufacturing, taking it from China back to the United States.
GE says it’s doing it for tax credits and more control over production.
The Wall Street Journal reports that equipment manufacturer Caterpillar is doing the same thing. The WSJ reports:
“The trend, known as onshoring or reshoring, is gaining momentum as a weak U.S. dollar makes it costlier to import products from overseas. Manufacturers are also counting on White House jobs incentives, as well as their ability to negotiate lower prices from U.S. suppliers who were hurt by the downturn and willing to bargain.
After a decade of rapid globalization, economists say companies are seeing disadvantages of offshore production, including shipping costs, complicated logistics, and quality issues. Political unrest and theft of intellectual property pose additional risks.
“If you want to keep your supply chain tight it’s hard to do that with a 16-hour plane ride from Shanghai to Ohio,” said Cliff Waldman, an economist with the Manufacturers Alliance/MAPI, a public policy and economics research group in Arlington, Va.”
Still in America, the National Tooling and Machining Association (NTMA), the Precision Metalforming Association (PMA) and the Association for Manufacturing Technology (AMT) have announced their support for onshoring.
The economics of manufacturing drove these companies offshore. Now the economics, combined with some political realities in the wake of the job losses caused by the financial crisis, are bringing back the jobs.
There is one danger. The move to promote domestic jobs after rigorous economic analysis could result in more protectionism and a winding back of a global focus. If that happens, it will hurt manufacturing and close off markets and innovation.
What do you think of the onshoring trend. Is it welcome or do you see dangers?
