Reshoring Movement Should Get a Shot in the Arm
In 2018, a record 1,389 companies announced the return of 145,000 jobs to the United States through reshoring or foreign direct investment. It was not just a one-year anomaly. The year 2016 was the first time since 1970 that we gained more jobs from reshoring than we lost to offshoring. Those numbers are courtesy of The Reshoring Initiative, a non-profit organization led by longtime manufacturing executive Harry Moser which has been helping U.S. companies calculate the business case for bringing work back from Asia, Europe and other locales. The American Foundry Society (AFS), which publishes this magazine, is a longtime member of The Reshoring Initiative.
A Renewed Focus Born of a National Crisis
This progress notwithstanding, reshoring is still a nascent movement, following many years of heavy offshoring. Now, COVID-19 has presented us with a public-health and economic shock the likes of which most of us have never seen in our lifetimes. We are left to contemplate how things will change going forward, and what decisive actions manufacturing leaders should take to be best prepared for the future.
One certain impact already underway at many manufacturing companies is the reexamination of supply-chain practices and foreign sourcing of key parts and materials. Most of the media attention during recent weeks has concerned shortages of medical equipment, personal protective gear, and pharmaceutical ingredients. But Americans are also coming to realize that the United States is dangerously dependent on foreign sources of manufactured equipment and parts that are vital to our national defense and critical infrastructure. This latter problem was highlighted in a groundbreaking report requested by President Trump that was published in 2018. The Defense Logistics Agency followed up in 2019 by forming three task forces to examine military procurement challenges. AFS was represented on all three task forces and provided insight to help the military achieve better results in domestic acquisition of critical parts.
We should never lose sight of the fact that one primary reason that the United States has become dependent on unstable foreign sources, and China in particular, for these parts is that country’s predatory trade practices. Currency manipulation, government subsidies, dumping, and rampant intellectual property theft have been documented, affecting countless U.S. industries, including metalcasting. In short, China has not lived up to the commitments it made when it joined the World Trade Organization back on December 11, 2001. That has to change and it is the subject of ongoing discussions between the Trump Administration and Chinese communist leaders. AFS, which wages an assertive advocacy program from its Washington, D.C., office, has been strongly advocating for aggressive enforcement of foreign trade agreements for years and will continue to do so. A growing number of lawmakers in the nation’s capital are focusing on bringing critical manufacturing back from Asia.
Total Cost of Ownership
In the past, some manufacturing leaders looked only at the price tags of parts and labor when justifying outsourcing. The Reshoring Initiative has helped shine a light on the more accurate measurement, which is Total Cost of Ownership (TCO). When factors such as shipping costs, timeliness of delivery, and reliability of sourcing are also considered, the decision to bring parts-sourcing closer to home often can be demonstrated. That organization’s TCO Estimator, which takes into account 30 different cost factors to yield five-year cost estimates, is an excellent, free resource that foundries can deploy when helping potential OEM customers make their own reshoring calculations.
Also working in favor of reshoring are the increasing role of robotics and artificial intelligence. These trends will further make the cost of U.S. production more favorable, according to a number of industry experts. Automation can help solve another problem, too: Foundries are finding certain positions are consistently difficult to fill, in tight labor markets and softer economies alike. By automating the work performed by some of those positions, foundries are making sound long-term investments in the competitiveness of their own operations, and reducing the burden of a constant challenge for hiring managers.
More information about reshoring can be found at ReshoreNow.org. If you have a reshoring success story you would like to share, please let us know.