Over the last four decades, a combination of outsourcing and offshoring sent thousands—if not millions—of manufacturing jobs overseas. But recently, a strange thing began happening: Manufacturing began to return home.
Experts say the “reshoring” trend stems from a variety of factors, from rising Chinese labor costs to improvements in American innovation and efficiency.
Here’s a look at some American firms that are coming home. —Eric Markowitz
Peerless Industries, which manufactures audio-visual mounting systems, recently moved production of its products back to Illinois, where the company is incorporated. The company’s president and CEO, Michael Campagna, cites a common concern among American companies that have reshored: rising labor costs. "The labor costs in China are rising, even more so now than when we left,” Campagna told The China Daily. “We quoted some new projects this year to double-check costing in China and we discovered that they have gone up.”
The president of Intertech Plastics, which manufactures custom injection molded plastic products, says the company will double its 2011 revenue by the end of 2012, growing from $20 million to nearly $40 million—partly because of its reshoring decision. Noel Ginsburg says while he was manufacturing in China, his customers began telling him that they’d only do business with American suppliers. By reshoring in 2011, he positioned the company to acquire business that was directed toward suppliers that manufactured locally. “I was at the consumer electronics show,” Ginsburg told industry blog PlasticsNews.com. “I met with six potential customers and without exception, they said [they] were looking for U.S. suppliers.”
Companies like Buck Knives in Idaho are recognizing the true marketing potential of a stamp that reads “Made in U.S.A.” The company, which had outsourced about 30% of its knife production to Chinese manufacturers, recently returned production to North Falls, Idaho, where the company was founded in 1902. “Hunters are rednecks, and they don’t like anything with that C word on it,” Chuck Buck, the company’s chairman, told The Idaho Statesman.
Often, there isn’t just one reason a company decides to reshore. Sleek Audio, which manufactures headphones, cited a list of factors—from poor quality to the difficulty of traveling overseas—as the main reasons they moved production back to St. Petersburg, Florida. "It became very difficult and taxing," Jason Krywko, one of the company’s founders, told Fortune. Now we control the quality of the product. No more waiting for production has been a wonderful thing."
Cutting steps out of the supply chain makes for a cheaper production process. That’s what cookware maker All–Clad Metalcrafters of Canonsville, Pennyslvania, realized when it performed a cost-benefit analysis of overseas vs. domestic manufacturing. “If you can reduce the length of the supply chain, you can reduce the cost of capital," Trevor Dunthorne, the vice president of operations, told Product Design & Development. "This frees up cash flow that can be used in the company on other projects.”
Clothing manufacturing in particular is starting to see an uptick in domestic production. Quality is not the only concern: Since fashions can change on a whim, nimble companies are better able to capitalize on a trend. And with more sophisticated manufacturing techniques, production is no longer prohibitively expensive. Karen Kane, for instance, a fashion line based in California, recently reshored most of its production locally. "We looked at the cost of doing manufacturing here domestically, and the cost is not that different,” Michael Kane, director of marketing, told Reuters.