President Obama, corporations and organized labor alike have heralded the trend of manufacturers bringing back jobs to the Americas as transportation and Asian labor costs rise.
Near-sourcing will create up to 3 million jobs over the next several years, according to the Boston Consulting Group.
But will the job gains offset the loss of U.S. factory positions to countries with lower labor costs, improving skill sets and better supplier connections? It will be a virtual wash, according to a recent study by The Hackett Group, a global consulting firm. Near-sourcing will barely offset the amount of jobs lost, as the gap in total landing costs between the U.S. and China shrinks to 16 percent next year.
“Our findings debunk a myth about the future of manufacturing that has been much discussed in the press recently: that manufacturing capacity is returning in a big way to Western countries as a result of rising costs in China,” the study authors wrote.
Instead of going to China, more of the lower-skill jobs will shift from the U.S. to other emerging markets with lower labor costs, including India, Thailand and Vietnam. Researchers studied nearly 30 companies, mainly U.S.-based Global 1,000 corporations. Thirty-five percent of the companies studied were moving production from high-cost countries to low-cost countries, while more than 20 percent were shifting production the opposite direction.
“In fact, there is no dominant movement of capacity in any single direction. Rather, companies are continuously optimizing their manufacturing footprint in response to changing conditions,” the report concluded.
In other words, the winds of change in supply chains regularly change and blow differently for each shipper.
Contact Mark Szakonyi at firstname.lastname@example.org.