BCG: Made in USA eating share from Made in China

13 November 2014

US manufacturing is increasing its reshoring of production capacity from China back to home soil, reduced shipping costs, access to skilled labour and a drive to automation, cited as reasons for the move.

Interest to reshoring production to the U.S. remains strong, eating into Chinese market share, finds a recent survey from The Boston Consulting Group (BCG). The research, titled ‘Made in America, Again’, elicited 252 responses, limited to one per company. Respondents are decision makers in companies with more than $ 1 billion in annual revenues, across a wide range of industries. 

The strategy consulting firm found that 54% were considering bringing ‘Made in China’ production back to the U.S., validating last year’s result (also 54%). Around 16% are actively bringing back production – a 20% increase since 2013 (13%). As a result the respondents expect a 7% increase in the future manufacturing capacity in the US, leaving only 11% of their capacity in China, a 21% decrease from last year. The production in Mexico, Western Europe, and the rest of Asia is also forecasted to drop.

Anticipated Mix of Total Manufacturing Capacity

“These findings show that not only does interest in repatriating production to the U.S. and creating American jobs remain strong but also that companies are acting on those intentions,” says Harold Sirkin, Senior Partner at BCG.

Reason to move
Firstly, the price of labour has been steadily increasing in the historically cheap regions for labour. In 2001 the cost per hour of labour in China’s Yangtze River Delta was $0.82, today it is $5. The cost of moving (raw) materials and goods to and from manufacturing plants has also increased considerably on the back of the oil price, in 2001 it was $20 a barrel, settling at $85 today. The overseas overheads are therefore relative higher than a decade ago.

A second main reason for the trend is the access to skilled workers. 74% of the executives “strongly or somewhat agree” to the statement that a strong workforce is a key reason for reshoring offshore manufacturing capacity. For goods that would be sold in the United States, around 80% cited logistical reasons such as shorter supply chains as primary reasons for moving operations to the U.S. from other countries.

Companies that have reshored cite increased regionalization


Another cited reason for the reshoring of capacity is a trend toward the automation of the process. The survey found that automation removes one of China’s competitive advantages since installing the equipment in the US reduces the length and overheads associated with their supply chain. 56% of respondents believe that decreased costs in automation have increased their competitiveness, with 71% of respondents indicating that improvements in automated production will increase the economics of localised production.

Executives plan to invest in automation

“We have long advised companies to look at the total cost of manufacturing in the U.S. and to consider the entire supply chain—not just the obvious factors such as wages. When companies take a holistic view, the U.S. increasingly comes out ahead, particularly if those products are to be consumed in the U.S,” concludes Michael Zinser, who leads the firm’s manufacturing practice in the Americas.