2012 Manufacturing Re-shoring and Near-shoring Survey
By Adina Moloman
Source: AlixPartners
AlixPartners, a global firm of senior business and consulting professionals specialized in improving corporate financial and operational performance, conducted a study over the present phenomenon or the necessity of Manufacturing Re-shoring and Near-shoring.
Briefly Nearshore Outsourcing is the practice of outsourcing work to neighboring countries with geographical proximity and cultural similarities and re-shoring is the practice of bringing manufacturing back to the country of origins , known as homeshoring or repatriating, due to higher transportation and fuel costs, higher wage rates and higher reject rates in developing countries.
The Survey was conducted during a month and a half in March and April this year, and included responses from 116 C-level and other senior executives in manufacturing-oriented companies that sell into the U.S. market. The participants are executives from large multinational corporations or medium companies, from industries like aerospace, automotive, consumer products, electronics, etc.
The cost gap between the U.S. and China has shrunk, making re-shoring a much more viable option or re-shoring manufacturing, considering Mexico, as the No. 1 choice for the re-location of their operations according to the 50% of the survey contestants, while 35% percent of the contestants view manufacturing inside the U.S. as the most attractive choice.
This situation basically is given as manufacturing costs have increased in China and elsewhere in Asia and the cost and time factors involved in shipping goods across big distances is also growing. With the re-shore or the near shore operation to Mexico, 26% percent of the contestants considers that lower inventory costs is the biggest expected advantage. Shipping and inventory carrying costs are two variables that every more is taking into consideration.
The only negative detailed about relocating manufacturing in Mexico is the security and safety situation, where 43% of the contestants believes that it is to expect modest improvement in the security and safety situation, 13% percent considers the opposite ( a worse situation) and 4% of them had such a negative perception, mentioning a situation out of control.
Many US large companies have made public plans to re-shore portions of their manufacturing to the U.S. from countries like China.
Other interesting phenomenon is a growing domestic demand in Asian developing countries like China with a huge market witch accelerates their local consumption, resulting interesting according to 35% of the contestants the near-shoring and “re-shoring” on West in the future.
