The State of American Manufacturing

What Reshoring Initiatives Are Driving Manufacturing to America?

It’s now in vogue to describe American manufacturing with terms like “renaissance” and “reshoring”—a new bit of jargon describing the increasingly common practice of bringing production back home. However, business owners still need to consider their own circumstances—and often, that of each product they offer—before making a decision to expand operations domestically or abroad. 

This serious business consideration is a relatively recent trend. In 2013, China was the most likely location for new manufacturing capacity serving the U.S. market, according to The Boston Consulting Group’s annual survey of senior manufacturing executives at large companies ($1 billion or more in annual revenues). But in BCG’s most recent survey, conducted in late 2015, the U.S. had outpaced China among likely locations for manufacturing expansion. Executives saying that their companies had actually taken the reshoring plunge have increased by nearly 250% since 2012, the survey said.

“These findings underscore how significantly U.S. attitudes towards manufacturing in America seem to have swung in just a few years,” BCG senior partner Harold L. Sirkin said at the release of the 2015 survey. “We are seeing more evidence of an American manufacturing renaissance.”

Advanced Manufacturing is Contributing to Reshoring

The broad reasons for this shift are often repeated: rising labor costs in China and other low-wage countries and increased transportation expenses, combined with productivity gains due to investments in advanced manufacturing domestically, have tilted the calculus of manufacturing costs. 

Yet the move towards reshoring has been far from universal—and it has yet to dramatically tip the global balance sheet.

The move towards reshoring has been far from universal - and it has yet to dramatically tip the global balance sheet.
Mark Toner, Journalist

For example, Walmart in 2013 pledged to purchase $250 billion in American-made products over the next decade, followed by the creation of a $10 million grant program to support innovation in domestic manufacturing. Yet the retailing giant remains the nation’s top importer of goods, according to a 2015 report from the Economic Policy Institute. And other large companies are shifting production in many directions—for example, reshoring production of some products while at the same time offshoring manufacturing for others intended to serve global markets.


But most U.S. manufacturing concerns are much smaller than these global giants: Three-quarters of manufacturing firms have fewer than 20 employees, according to the National Association of Manufacturers. For small businesses facing competitive pressures, deciding whether to rely on domestic manufacturing is even more challenging.

Location Factors for Domestic Manufacturing

The product itself. Is manufacturing a particular product labor-intensive or capital-intensive? Does the infrastructure and expertise required to produce it exist locally?

Supply chain. How important is it to be nimble and responsive to local changes in demand? To what extent do shipping expenses impact the total cost of production?

Smart manufacturing. While 71% of BCG survey respondents believe that advanced manufacturing technologies will make domestic production more cost-effective, can a particular product or company take advantage of advanced manufacturing?

Workforce analysis. Does a particular product and the infrastructure required to produce it rely on a high-skill or low-skill workforce? Large manufacturers seeking more skilled labor are nearly three times more likely to cite workforce as a reason to move production to the U.S. than to move it away, according to the BCG study.

How to Determine Manufacturing Cost

However, it’s important to ensure that skilled labor exists in your market—55% of manufacturers responding to a 2016 Accenture survey reported a skills gap among workers, up from 38% in 2013. Similar gaps also are growing in the maintenance of the increasingly sophisticated equipment found in advanced manufacturing facilities. 

Marketing considerations. Companies that choose to manufacture in the United States can market their products by saying they’re American made. A 2013 New York Times survey found that two-thirds of Americans check the country of origin when shopping; roughly half said they would be willing to pay more for similar items made in the United States.

Product positioning. While total costs of domestic manufacturing are growing more competitive, the numbers still may only work with high-end or luxury products which can emphasize craftsmanship—and command premium prices. One clothing manufacturer said in 2015 that labor costs were still 40% higher than in China, resulting in a 20% increase in retail prices; another focused on U.S. production ultimately decided to offshore production of lower-cost lines of clothing targeted at mass market retailers.

Total costs. It’s important to not just focus on shipping and labor costs—taxes and duties, currency rates, and other factors must be factored into the total cost of production in order to make the best decision for a business or a particular product. 

So while it’s too early to say that manufacturing is returning to the U.S. in a broad wave, nimble companies can take advantage of these changing factors to identify opportunities that make sense for their products in both this country and abroad. And for small businesses, that may arguably become as much of a renaissance as the one around the manufacturing sector as a whole.