Manufacturers are increasingly bringing production back to developed economies but this reshoring is merely “symbolic” and will not lead to a jobs boom, according to a survey of businesses.
“Our data and interviews with more than two dozen executives show that reshoring is symbolic. It does not represent the rebirth of American or European manufacturing,” said Kevin O’Marah, chief content officer of supply chain specialist SCM World, who co-authored a study of 330 business leaders’ future plans with Hau Lee of Stanford University.
Mr. O’Marah said a combination of increasing automation and growing demand in emerging markets relative to developed economies meant there would be little job growth as a consequence of reshoring.
The development of regional supply chains, with manufacturing done closer to the source of demand, is accelerating in a bid to respond more quickly to consumer trends and avoid disruption caused by natural disasters
About 57 per cent of the respondents expected to reshore at least some manufacturing to make products for their domestic markets in the next three years.
“There is a turning point,” Mr. O’Marah said. “The amount of manufacturing done outside the company’s headquarters country is higher than ever. The intention in the next three years is to decrease it. The number saying they would decrease it has tripled, from 5 per cent last year to 15 per cent this. People are pulling back.”
Mr. O’Marah said respondents favoured countries such as Mexico and Poland, with low wages but close to rich markets. The growth of demand in Asia would lead to more production for local consumption there too. Also, manufacturers were running out of options.
“There is no next China,” he said. “China was unique. Places such as Vietnam and Bangladesh have cheaper labour but do not have the population or infrastructure to do what China has done.”
Rather than move to cheaper locations, many industries were investing in automation, with 62 per cent expecting to increase capital spending in this area over the next three years. Some 14 per cent plan to expand capacity but not jobs in China. The survey showed that 73 per cent agreed that China still offers total cost advantages for manufacturing, compared with 33 per cent saying the same about the U.S. and 28 per cent about the EU.
Mr. O’Marah said: “There are winners and losers. Poland, Hungary and the Czech Republic are winners. France is a loser. Only 2 per cent are expecting to increase capacity in France. Domestic demand there is already more than being met. There is overcapacity.”
Proponents of U.S. reshoring say it has created 50,000 jobs since January, 2010, and offers cost advantages.
Mr. O’Marah said there was also some evidence that manufacturers from emerging economies are building factories to cater to Western demand.
Lenovo, the Chinese computer maker, is building a factory in North Carolina, while Tata, the Indian conglomerate, is investing heavily and creating thousands of jobs at Jaguar Land Rover, its U.K.-based car maker.Report Typo/Error