By Hal Weitzman in Chicago Two-thirds of big US manufacturers have moved factories in the past two years, with the most popular destination being the US, according to a survey being released on Monday by Accenture, the consultants.
The report provides some of the first industry-wide empirical evidence of “reshoring,” the trend of jobs once outsourced to low-cost emerging economies being brought back to the US.
Although the subject has received much attention, with General Electric the most high-profile example, most of the evidence so far has been isolated and anecdotal.
President Barack Obama has proposed tax incentives for companies that move their overseas operations back to the US and tax penalties for those that do not.
“If you’re a business that wants to outsource jobs, you shouldn’t get a tax deduction for doing it,” Mr Obama said in this year’s State of the Union address. “No American company should be able to avoid paying its fair share of taxes by moving jobs and profits overseas.”
Some 65 per cent of the senior executives questioned by Accenture said they had moved their manufacturing operations in the past 24 months, with two-fifths saying the facilities had been relocated to the US. China was the second destination for relocated factories, with 28 per cent, followed by Mexico with 21 per cent.
Rich Bergmann, managing director of Accenture’s manufacturing practice, said the respondents cited freight and the speed of fulfilling orders as their main motivators for moving factories. The survey demonstrated that manufacturers are increasingly moving production closer to end-markets, he said.
“There is evidence here of reshoring because of transportation costs and lead times,” Mr Bergmann said. “The global supply chain allows you to chase lower cost of labour, but the total costs are reflected in the decision on where you produce for a given geography.”
In many cases – such as GE and Caterpillar – the relocation takes the form of expansion at existing US facilities. However, China remains the top destination for new factories among companies that are opening facilities, followed by the US, India, Brazil and Mexico.
“Internal domestic demand in China and other markets in south-east Asia is behind the new facilities there – not so much for importing back to the US,” said Mr Bergmann.
The survey also reveals that US manufacturers expect China to overtake Europe as their second biggest market within three years.
Some 58 per cent of companies anticipate that Chinese demand will be one of their highest revenue generators within three years, up from 38 per cent currently, while 53 per cent predict that western Europe will be a leading source of revenue, down from 63 per cent today.
