Industry-led initiative rebuts report questioning reshoring

January 24, 2016 - 06:00pm

Harry Moser, the founder and president of the Reshoring Initiative, an industry-led group out to prove offshoring is not always the best economical decision for companies, takes issue with the recently released 2015 A.T. Kearney U.S. Reshoring Index, which suggested that the reshoring trend was an aberration.

A.T. Kearney, a global management consulting firm headquartered in Chicago, reported in December that its reshoring index dropped to -115 in 2015. A negative value is said to indicate net offshoring, according to the consulting firm.

Read more about the A.T. Kearney Reshoring Index.

"A.T. Kearney got some things right, others clearly wrong," Moser said in a written response issued Jan. 22. "Some A.T. Kearney statements were completely misleading, chosen to get attention," Moser suggested. "They succeeded to the disadvantage of U.S. manufacturing.

"Recognition of the strength of the reshoring trend is a major factor driving companies to reevaluate offshoring and many individuals to choose manufacturing technology training, [which is] helping to fill the skilled workforce gap," Moser continued. "It is clear that about 25 percent of what is now offshored would be economically reshored today if companies used TCO (Total Cost of Ownership) instead of wage arbitrage or PPV (Purchase Price Variance) to make sourcing and siting decisions."

While Moser said A.T. Kearney correctly reported that Foreign Direct Investment (FDI) in 2015 was stronger than reshoring, the Reshoring Initiative considers FDI and reshoring to be part of the same phenomenon. "In both cases," he explained, "the company decides it is more profitable to serve the U.S. market from a U.S. based factory instead of from a foreign factory."

On several other points, Moser contradicts A.T. Kearney's findings:

  • that the number of reshoring cases per year is projected to drop 70 percent from 2013 to 2015. "Our database shows a smaller 40 percent reduction," Moser said, "but reshoring [is] still at about twice the 2011 level."
  • that jobs leaving China are going to Mexico more than the U.S. "Certainly some jobs are," Moser acknowedged, but added that a recent survey by Alix Partners, a New York-based global business advisory firm, showed that the U.S. is favored over Mexico by 55 percent to 31 percent.
  • that the reshoring trend seems to be over. "Repeated surveys by Boston Consulting Group, Plastics News/Nexant, Alix Partners and Medical Design Technology show that the trend is increasing, or at least that commitment to reshore is increasing," Moser said. After speaking at gear and bearing manufacturing association gatherings in May 2015, a poll of attendees found that 54 percent had reshored or one of their customers had done so.

What's more, Moser suggested that A.T. Kearney’s Reshoring Index does not actually measure reshoring. "It essentially uses the trend in imports to imply a trend in reshoring," he explained. "The Reshoring Initiative measures reshoring directly. Since the U.S. has one of the world’s fastest growing economies now, it tends to import more."

Click here to read the full rebuttal from the Reshoring Initiative.


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