Daily Management Review

Insourcing in America Moved from Words to Deeds


12/10/2015


A few years ago, analysts noticed that the trend of transferring jobs from China to developed countries, including the United States, finally became one of the main strategies for the production development in the US companies. Now, most companies are going to shift or are already moving production from China to the United States. Two or three years ago, these companies were in minority.



Today, the international consulting firm The Boston Consulting Group (BCG) published results of an annual survey of US industrial enterprises managers. 17% of respondents reported that they are actively involved in the return of production in the US, which is 2.5 times greater than number of respondents who were actively engaged in the return production from abroad in 2012.

There is a growing number of companies passing from words to deeds. 31% of CEOs would place a new facility designed to serve the US market in the US. In comparison, 20% of managers would choose China. BCG has recorded a significant change compared to the situation observed two years ago, when China was chosen by 30% of respondents, and the US - 26%. The first signs of this process were noted as early as late 2011-early 2012. Then, some of the big industrial companies (GM, Ford, Chrysler) began to introduce extra shifts at its US plants, and companies such as Caterpillar and DuPont have begun to invest tens of millions of dollars to expand production in the US.

Now, according to BCG’s study, this process took a mass character. The study took into account 263 response from companies that conduct their proceedings in the United States and abroad, and produce goods for consumption in the United States and abroad. The survey was conducted among the employees who are responsible for making decisions and work for companies with annual revenues of at least $ 1 billion. The share of executives who say their companies are actively involved in the return of US production escalated by 9% compared to the 2014 year and about 250% compared to 2012. This indicates that those, who previously considered possibility of the return in the US, are now taking appropriate measures. This year, the study confirmed that the decision on return was strongly influenced by factors such as logistics, cost of inventories, smooth conduct of business and risks associated with the management of long supply chain. 76% of respondents said that the return of production of goods sold in the US from abroad was caused by desire to shorten the supply chain. At the same time, 70% of respondents mentioned decrease in transportation costs and 64% of respondents expressed desire "to be closer to consumers."

50% of respondents said they expect that number of jobs at its manufacturing plants in the United States will grow by at least 5% in the next five years; 27% of respondents expect that this increase will number at least 10%. "These results underscore the extent to which US industrial production has changed in just a few years", - said Harold L. Sirkin, senior partner at BCG and co-author of a series of reports “Made in America, Again”, observing changes in the global industrial production economy, being published from 2011.  

 






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