Made In America: Why Reshoring Still MattersMay 10, 2016
Looking to put American made products on your shelves?
The resurgence of American-made products in this day and age has made it a priority for all small business owners to rethink their supply chain partners and marketing strategies. Check out our blog, “How Important is the ‘Made in the U.S.A. Brand?” There is quite a lot of momentum behind this Made-in-America movement, and there are a number of things business owners should be doing to ensure that they are appealing to their customer bases, and also making sure profits are not suffering as a result.
The Importance of Manufacturing
In terms of total output and employment, manufacturing remains the most important sector of the U.S. domestic economy. As a result, manufacturing impacts the demand for goods and services from other sectors including construction, software, energy, temporary help firms, accounting, and engineering.
The Current State of Manufacturing
U.S. manufacturing over the last couple of decades has seen the loss of millions of jobs due to:
- Companies outsourcing to nations with lower wages and fewer regulations, like China and Mexico
- Recovering from the recession (2007-2009)
- Reduced spending on infrastructure by state and federal governments
- Inadequate public policies on taxes, education and energy
Jumping on the Reshoring Bandwagon…Good or bad idea?
As we’ve covered in a past whitepaper, there are obvious advantages to reshoring operations back to the U.S., but there are also some drawbacks. So, many are wondering if the risks outweigh the positives with this business tactic—here are a few facts that will help you gain clarity:
- Upwards of 249,000 jobs have been reshored over the last 5 years;
- 2015 was the second consecutive year that the number of jobs returning to the U.S. was higher than the number of jobs leaving;
- There are still an estimated 3-4 million jobs in the manufacturing sector still located offshore;
- Many U.S. consumers are willing to spend more on products manufactured in the U.S.;
- The Made-In-America label can create goodwill and improve your company’s brand image.
The Reshoring Initiative released a data report for 2015, which mentions several other benefits to the reshoring movement, including:
- Increased control over supplies
- Access to a more experienced, diverse labor pool
- Proximity to customers, leading to lower shipping costs and fewer shipping delays
- Fewer communication difficulties with local suppliers
- Reduced risk of intellectual property theft
- Higher product quality
- Fewer product liability concerns and recalls
- Closer IRS scrutiny of foreign sources of income
Though your company can stand to benefit greatly from reshored operations, you have to review relevant Federal Trade Commission (FTC) standards with your advisors before you adopt a Made-in-America slogan, campaign or label for your company.
More about FTC standards:
- You cannot legally claim that a product is “Made in the U.S.A.” unless final assembly takes place in America.
- You also cannot claim a product is American made unless the majority of total manufacturing costs are spent on domestic parts and processing.
- The FTC permits qualified claims when a product is made in several different countries—for example, you can say something like your bicycles are “assembled in the U.S.A. from imported parts”
Does Offshoring Still Make Sense for Some Companies?
Yes, in some instances offshore manufacturing still makes sense financially or strategically for certain companies. Companies that rely mainly on less-skilled workers, sell primarily overseas, or sell low-tech commodities benefit from offshored operations.
If you’re looking for more information on how restoring manufacturing operations to the U.S. can benefit your company, and are not sure where to begin, contact us for help today.