Answer to Question about Reshoring?
January 6, 2015
Thomas N. asks…
Q. I’m hearing a lot about reshoring. Hasn’t this been going on for a long time?
A. Oh I suppose off-shoring, or having goods made off our shores, and reshoring, the process of bringing the manufacturing of goods from off-shore back to the States has been going on a long time to a small extent. Companies have been experimenting with goods made overseas for decades and then, disillusioned by the results, bringing the work back. But in the late 1990s, China became the darling of U.S. companies because their growing culture change of farmers moving to cities to find work provided a glut of cheap labor which our American culture and wages couldn’t compete with. Companies were sending work overseas as fast as they could print purchase orders. After all, they said, the cost of a widget and overseas freight was far less than a widget made here.
But now several factors have altered the decision making. Overseas wages went up, China eliminated certain subsidies to manufacturers (like free materials), the cost of shipping went up, and a growing environmental movement over there forced companies to properly deal with the disposal, and cost, of toxic wastes. Couple those issues with quality and delivery failures and American firms found that the cost of the overseas widget was not as low as they once were. With that realization the movement of off-shoring from 1998-2012 became a flood of reshoring from 2013 to ????.