Why ‘Reshoring’ is the Coming Thing

April 08, 2014

Reshoring: to New York Times columnist Paul Krugman, it is an “ugly new term, but apparently the new thing.” To 1980s rock fans who fondly remember U2′s Rattle and Hum performance, it may not seem so new, as the manufacturing equivalent of Bono’s reclamation of “Helter Skelter” — “This is a song Charles Manson stole from the Beatles. We’re stealing it back.”

MassDevelopment sees signs of a small but growing trend: U.S. manufacturers stealing back jobs and production from overseas, a movement called reshoring.

The Reshoring Initiative, an industry-led effort to bring manufacturing jobs back to the United States, says about 160 companies have returned work to the United States from other countries in recent years. The organization also estimates that 100,000 U.S. manufacturing jobs have reshored by about 500 manufacturers and thousands of suppliers since the Initiative was founded in 2010.

Harry Moser, the Initiative’s founder, will speak more on this topic at the second annual Massachusetts Advanced Manufacturing Summit in Worcester on April 29.

Stories about reshoring have appeared in The Economist, the Financial Times, and The Atlantic, which outlined that the high cost of oil for transporting goods, the low cost of natural gas in the United States, rising wages in Asia, and advantages to having design and production in the same place are all contributing to companies bringing manufacturing jobs back to the United States.

The magazine studies the resurgence of General Electric’s Appliance Park manufacturing center and quotes CEO Jeffrey Immelt, who wrote in the Harvard Business Review that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.”

MassDevelopment, as the state’s finance and development authority, worked with the Advanced Manufacturing Collaborative to coordinate the state’s first Advanced Manufacturing Summit last year, which drew hundreds of businesses from around the commonwealth.

At the summit, David Askey, the chief business development officer at Energid Technologies, a Cambridge-based company that engineers products and services for robotics and training, detailed how his company moved operations to India and eventually decided it made financial sense to return to Massachusetts.

Askey said that once the company took all the costs of doing business into account — proximity to customers, inventory size, worker productivity and wages, tariffs, and shipping — Massachusetts was the winner.

The summit also featured financing options for manufacturers to build and grow their businesses, including several MassDevelopment programs. For example, AO Eyewear, the Southbridge manufacturer of Original Pilots, aviator sunglasses worn by members of the U.S. military, has set a goal to move production and jobs back from China and have its product made 100 percent in the United States.

In August, MassDevelopment issued a $1.5 million tax-exempt bond, purchased by Southbridge Savings Bank, on behalf of the company so AO Eyewear could buy equipment to manufacture the sunglasses and meet its reshoring goal here in the commonwealth.

MassDevelopment also worked with Clinton Savings Bank last year on a financing package for Dunn and Company, a commercial printer and book binder in Clinton. The company sought to buy and supply the unique paper stock for printed products at its sister company, Legacy Publishing Group. The paper stock previously came from a supplier in China. By reshoring this part of the business, Dunn and Company is creating nearly a dozen jobs, improving sales and profit margins, reducing operating costs, and providing better service to its customers.

Both AO Eyewear and Dunn and Company took advantage of MassDevelopment’s export loan guarantee program, thereby increasing the amount of bank financing available to them.

In Massachusetts, we know we can do better for our manufacturing sector. At the second summit in April, the program will once again allow businesses and organizations around the state to showcase their products, advanced manufacturing processes, best practices, and opportunities for good careers in the industry. We look forward to supporting those businesses as they make decisions about bringing jobs back to our state and country, making the future bright enough for everyone to need a pair of Original Pilots.

Marty Jones is the president and CEO of MassDevelopment.