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IEDC Examines Reshoring—Finding Plenty of Reasons to Support Bringing Industry Back to the U.S.
The International Economic Development Council examines manufacturing reshoring and finds plenty of reasons to support bringing industry and good, well-paying manufacturing jobs back to the U.S. —for the last year IEDC has been working on an EDA Grant to spur the growth of reshoring.
The IEDC is a non-profit membership organization serving economic developers with more than 4,700 members. Their mission as economic developers is to “promote economic well-being and quality of life for their communities, by creating, retaining and expanding jobs that facilitate growth, enhance wealth and provide a stable tax base.”
Last year, the IEDC received a grant from the U.S. Economic Development Administration to “examine current reshoring practices and create materials to spread awareness of reshoring trends, tools and resources that are available to ease the process.”
For the past 16 months, IEDC has conducted research on why companies are choosing to reshore and what resources are available to assist American companies that are considering reshoring. The research will more accurately assess companies total cost of offshoring.
In the past year, IEDC has provided training sessions for economic developers with reshoring experts, such as Harry Moser of the Reshoring Initiative.
IEDC also created the Reshoring American Jobs webpage, a project funded by the U.S. Economic Development Administation (EDA). It is the go-to place to learn about and find resources to support activities encouraging reshoring in communities. Economic developers will find the latest news, case studies, and in-depth research on reshoring activity to help them stay in-the-know on reshoring trends.
This microsite is divided into three sections:
• Understanding Reshoring discusses the critical role reshoring plays in strengthening the economy, identifies challenges to reshoring, and highlights lessons learned from communities that have worked with reshored companies.
• Tools for Reshoring provides resources and best practices in reshoring American jobs to aid economic developers in assisting reshoring companies.
• Reshoring in the Media tracks the latest discussions on trends covered by popular and trade media. The content will help demystify the reshoring movement and serves as a practical reference for economic development professionals.
IEDC’s also published 30-page white paper March 2015, “Defining the Reshoring Discussion,” which defines the history of offshoring and highlights the reasons behind reshoring. Now, however the supply chain dynamics have changed and the report states,
“…the cost savings that American firms had enjoyed began to erode around the year 2010. Changing macro-economic factors, such as labor and transportation costs increased, absorbing much of the savings from which manufacturers had previously benefitted. Also, after experiencing offshoring firsthand, many companies found that hidden costs often outweighed the cost befits of manufacturing overseas. Some off these hidden costs that were not always considered include factors such as increased costs of monitoring and quality control, uncertain protection of intellectual property, and lengthy supply chains.”
Boston Consulting Group (BCG) studied 25 national economics from 2004 and 2014 finding that the following factors also significantly impacted manufacturing location/reshoring decisions: 1) China’s wages rose 15 to 20% per year at the average Chinese factory; 2) compared against the U.S. Dollar, the Chinese yuan increased in value by 35%; 3) reduction of energy costs from 2004 to 2014, especially in energy-dependent industries such as iron and steel and chemicals industries.”
In an article by MIchele Nash-Hoff in IndustryWeek May 19, 2016 she provides a list of tools for companies considering the costs of reshoring vs offshoring:
1. The Total Cost of Ownership Estimator (TCO) is a free online tool created by the Reshoring Initiative that helps companies account for all relevant factors—overhead, balance sheet, risks, corporate strategy and other external and internal business considerations—to determine the three total cost of ownership. Using this info, companies can better evaluate sourcing, identify alternatives and even make a case when selling against offshore competitors.
2. Assess Costs Everywhere (ACE) Tool: This U.S. Department of Commerce tool was developed within the Economics and Statistics Administration, in partnership with the NIST-MEP, and with support from various agencies within the U.S. Department of Commerce, the U.S. Patent and Trademark Office, and SelectUSA. "The tool provides a framework for manufacturers to assess total costs by identifying and discussing 10 cost and risk factors. These include: labor wage fluctuations; travel and oversight; shipping time; product quality; inputs such as energy costs; intellectual property protection; regulatory compliance; political and security risks; and trade financing costs." ACE also provides case studies and links to public and private resources.
3. National Excess Manufacturing Capacity Catalog (NEXCAP): This resource was developed by the University of Michigan and "provides a catalog of vacant manufacturing facilities as well as critical data on skilled workforce supply, community assets and other information pertinent to location decision making." It was funded by the Economic Development Administration.
4. U.S. Cluster Mapping Project: This is another project funded by the EDA and led by Harvard Business School's Institute for Strategy and Competitiveness by "conducting research and publishing data records on industry clusters and regional business environments in the United States…[allowing] users to share and discuss best practices in economic development, policy and innovation."
Going forward, what could be done in the future to encourage reshoring— the need for increased workforce development:
Mark Muro, Senior Fellow and Director of the Metropolitan Policy Program at the Brookings Institution, argues that offering incentives focused solely on manufacturing reshoring is not enough, “the focus should be on building the vibrancy of the critical advanced manufacturing industry sector. Muro argues that the U.S. must strengthen the depth of the nation’s regional advanced industry ecosystems…he calls for governments, companies, and individuals to work collectively to rebuild the nation’s local skills pools (workforce development), industrial innovation capacity and supply chains."