Large manufacturers are increasingly moving production back to the US from China, according to a new report released yesterday by the Boston Consulting Group (BCG).
In the third annual survey of US-based senior executives at manufacturing companies with annual sales of at least US$1 billion, the number of respondents who said their companies were currently “reshoring” to the US from China increased 20 percent from a year ago.
“Given the fact that China’s wage costs are expected to grow, do you expect your company will move manufacturing to the US?” the August survey asked executives at an unspecified number of companies that currently manufacture in China.
The executives who said: “Yes, we are already actively doing this,” rose to about 16 percent in the “Made in America, Again” survey in August from 13 percent a year earlier and 7 percent in the first survey in the series, in February 2012.
After watching the US bleed jobs for years as manufacturers offshored production to China, “Now we’re watching a switchback,” Harold Sirkin, a coauthor of the BCG research, told reporters.
The Boston-based global management consulting firm said the online survey was conducted across a wide range of industries, from electronic and computer equipment to transportation machinery, petroleum refining, apparel and food products.
Almost all of the decisionmakers work for companies that manufacture in the US and overseas and make products for both US and non-US consumption, BCG said, without identifying the companies.
The overall survey drew 252 responses.
The number of executives who said their companies would “consider” moving production back to the US from overseas in the near future climbed by about 24 percent.
More than half — 54 percent — of the respondents said they were interested in reshoring production to the US, about the same percentage as a year ago.
More than 70 percent cited better access to skilled labor as a reason to move production to the US, more than four times as many who cited it for moving production away from the US.
For goods that would be sold in the US, nearly 80 percent gave shorter supply chains and reduced shipping costs as a motive for reshoring.
In addition, 71 percent said it was easier to do business in the world’s largest economy and about 75 percent said the move provided local control over manufacturing processes and improved quality and yield.
“These findings show that not only does interest in repatriating production to the US and creating American jobs remain strong, but also that companies are acting on those intentions,” Sirkin said in a statement.
Looking at plans for shifting production in five years, respondents said that an average 47 percent of total production would be in the US, a 7 percent increase from last year’s responses.
Cutbacks in China were projected to be sharp, down to 11 percent of total production capacity, a decrease of 21 percent from last year’s survey.
Declines were also predicted for Mexico (minus-5 percent), western Europe (minus-19 percent) and the rest of Asia (minus-22 percent), whereas a 23 percent increase was seen for the rest of the world.
The survey found the US has topped Mexico as the most likely destination for new capacity to serve the US market.
Tied last year, at 26 percent each, this year 27 percent of executives preferred the US, while 24 percent favored Mexico.
A strong majority of respondents — 72 percent — plan to invest in additional automation or advanced manufacturing technologies in the next five years, saying that would allow them to cut costs, boost competitiveness and allow them to benefit from being closer to suppliers and customers.
“The US is strongly positioned to benefit from manufacturers that seek to increase regionalization, especially as automation costs decline,” BCG said.
The future also looked brighter for employment — fifty percent of the executives expected US manufacturing jobs to grow by at least 5 percent in the next five years, compared with 17 percent who anticipated net job losses.
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