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August, 2014
Onshoring: A Complex But Critical Decision Process
By Rick Short, Director, Marketing Communications, Indium Corporation
fessionals based mostly in the United States (US) believed that their com- pany would deploy its next manufac- turing operation in the US. In fact, 39 percent in the poll selected the US as the next likely manufacturing loca- tion compared to 16 percent who cited China as the next likely manufactur- ing location (http:// du press. com/ artic - les/manu facturing-beyond-china/) according to
JPMorgan.com (https:// - www. jpmor
gan.com/tss/ Gener - al/How_Real_Is_Reshoring /1394948 - 805703). A resurgence in manufacturing
M
capabilities has been apparent with- in the United States in recent years, although it has not occurred at the expense of healthy economies in other countries and regions. Those who conduct operations in multiple countries certainly hold deep respect for the people, cultures, and econ - omies of each country, and deep appreciation for the strengths of each. However, given the myriad changes in technologies, energy costs and availability, and the ever-short- ening cycles of product development and delivery required to remain com- petitive, from a US perspective, the concept of onshoring/reshoring/near - shoring has become increasingly attractive. Worldwide economies are typi-
cally heavily interconnected. Bolstering a local economy in a comprehensive and long-term man-
any manufacturing execu- tives and managers in a recent Deloitte poll of 900 pro-
condition, governments seem to gam- ble on business owners’ reluctance to relocate, and then appear surprised when the ignored business moves to what is hoped is a better location. Some states and regions may even incentivize distant businesses to relocate to bolster the local economy,
wages can be driven up due to compe- tition for labor, further negatively impacting the existing businesses.
Incubating New Businesses Incubating new and fledgling
businesses is a critical activity for any community. What better way to
certainly affects the localities invol - ved. There can be a net benefit to the US when businesses are relocated to more cash-efficient locations and profits are used more efficiently and capital is put to more effective use. One way to increase the effi-
ciency of a particular locale is to cre- ate business clusters. According to a newspaper article in the Dallas News (
www.dallasnews.com/business/colu mnists/mitchell-schnurman/201 - 30909-schnurman-while-u.s.-lags- behind-reshoring-is-real-in-fort-
worth.ece), “Manufacturing is covet- ed, in part, because it often attracts a cluster of suppliers. While that’s good for the economy, it’s even better for manufacturers because proximity usually means fewer disruptions to the supply chain. Products can be made faster and upgraded more often, and less capital has to be tied up in inventory.” The National Federation of
There are still numerous contract manufacturing operations in the U.S., and OEMs are moving many operations back to North America from the Far East.
while ignoring the businesses already established in that area. These distant businesses may be incentivized with low-interest loans, PILOT agreements, and even periods of time with reduced or no taxes. The obvious reaction from existing busi-
Bolstering a local economy in a comprehensive and long-term manner requires simultaneously
addressing onshoring along with relocating businesses, incubating new businesses, and retaining existing businesses.
ner requires simultaneously address- ing onshoring along with relocating businesses, incubating new business- es, and retaining existing businesses. Many communities, for example, ignore or neglect the very businesses that helped anchor their economies. While business owners bemoan this
nesses is a feeling of disrespect and lack of appreciation. While states often avoid attracting direct (prod- uct) competitors, newly located busi- nesses nonetheless compete with existing businesses for resources, especially labor. In addition, when new businesses move into an area,
ensure a diverse and healthy local economy than to encourage local business risk-takers! Conversely, the opposite results can be expected from discouraging the most curious, most creative, and most entrepreneurial risk takers. Bolstering an economy through the encouragement and facilitation of homegrown new busi- ness is known to be one of the best techniques. Both the cost and risk associated with cultivating and nur- turing startup businesses is low, making this activity truly worth- while for any community. In fact, many different regions or communi- ties have developed successful busi- ness incubators to help fledgling business get started. Relocating businesses from one
region to another within the US, of course, is a seemingly zero-sum game for the national economy, but
Independent Business (
www.nfib. - com/ article/5-reasons-to-relocate- your-business-51336/) lists items such as cost of real estate, access to clus- ters of talent, lifestyle, access to mar- kets, and opportunities for growth as some reasons businesses relocate. So, there can be obvious and not-
so-obvious benefits to relocating busi- nesses within the US. Localities and regions that offer enhanced efficien- cies would be well served to share such information with any businesses they hope to attract. Such conditions offer a win-win scenario for business- es, local economies, and the national US economy.
Onshore/Reshore While a great deal of electronics
manufacturing may have moved to distant locations, away from the US in recent decades, this trend may be changing. The website for a book authored by individuals from The Boston Consulting Group and the Wharton School of Pennsylvania University, titled “Made In America, Again” states (http://kw.wharton. -
upenn.edu/made-in-america-again/) “…the tide is turning. Rising wages
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