Lower costs to manufacture in the United States, fueled by lower corporate taxes and a reduction of government regulations, are driving the reshoring of manufacturing work, according to a study by consulting group Plante Moran and the Reshoring Initiative.
Those changes have already happened, but the study said the skilled worker shortage remains a major long-term challenge to bringing work back to the United States. Investments in Industry 4.0 technology will help factories become more competitive in an increasingly tight labor market, according to the study.
Plante Moran and the Reshoring Initiative wanted to explore why U.S. companies source production offshore and what would motivate them to shift work back to domestic sources. The groups surveyed manufacturers between July 2017 and February 2018. Tim Erdmann, principal of Plante Moran's manufacturing consulting group, said most of the responses came in during the fall of 2017, well before the tariff news and even before specifics of President Donald Trump's tax cuts were spelled out.
"Our point is, we've already started in the right direction," Erdmann said. Erdmann and Harry Moser, president of the Reshoring Initiative, co-authored the report, called "The U.S. Manufacturing Reshoring Study."
The survey covered a broad range of manufacturing. Erdmann said plastics processors face the same dynamics covered in the report, but there could be a lag time on reshoring for them, since most processors supply parts to larger companies.
"They're not making an end product; they're typically making a component for the end product. The decisions on where to produce those components is they tend to be collocated with the assembly of the finished product. So, the pressures for work to be reshored to the United States would first be felt by their customers, which would prompt them to bring their suppliers back to support them," Erdmann said.
Not surprisingly, the survey shows that lower prices are by far the biggest motivator for U.S. manufacturers to offshore — a category in the survey that includes companies setting up their own manufacturing, for example, in China, or buying components made offshore for domestic production.