As the global economy continues to grow and change, some American companies have been bringing their manufacturing operations back to the United States.
“Reshoring” is the term used to describe this migration of manufacturing from offshore (usually Asia) back to America. This is good news for the American worker, but will New York be ready to compete with other states for these returning jobs?
Reshoring is not wishful thinking, it is a fact. While not for every product, companies like GE, Master Lock, Caterpillar, NCR and others have returned the manufacture of some product lines to America. U.S. factories are being selected to manufacture some new products as well. Just last month, Google announced that the state-of-the-art Nexus Q will be manufactured in the U.S.
This reverse migration is a logical consequence of steadily increasing labor costs in China, soaring transportation costs and, in some cases, the risk of quality problems, supply disruptions, and the theft of intellectual property.
That America can compete with offshore manufacturing shouldn’t be a surprise. Honda, a Japanese company, has assembled its vehicles in the U.S. for more than 20 years. The company didn’t choose to manufacture the Honda Accord in America out of a sense of patriotism or philanthropy. They made that choice because it was good for business.
Another example is KitchenAid, whose stand mixers were never manufactured offshore; they have always been made at a factory in Greenville, Ohio. As these examples show, manufacturing in the U.S. can be competitive and makes good business sense for many global companies.
Starting in the 1980s, some U.S. companies climbed aboard the offshoring bandwagon without critically and objectively evaluating the total tangible and intangible costs that came with offshore production.
Instead, they focused exclusively on the low quoted price while ignoring or playing down the disadvantages. These included increased time-to-market, higher logistical costs, high landed costs (the total cost of a product once it has arrived at the buyer’s door), and tying up capital in containerized inventory being shipped on a slow boat from the other side of the world.
In a swing of the global pendulum, Made in America is once again in demand by customers who have grown tired of the poor quality that so often accompanies lower-priced imported products.
Just as an athlete must prepare for a competition, New York must prepare to compete for these returning jobs. To passively wait and hope that companies will locate their operations in the state is both naive and a recipe for failure.
Are we ready for reshoring? In the recent past, it seems our political leaders have focused above all else on the expansion of gambling as the way to create jobs and revenue for New York. In this perpetual race to the bottom against Connecticut, Massachusetts, New Jersey and Pennsylvania, New York seems to have been enticed, like gamblers themselves, by the lure of easy money that casinos promise but rarely deliver.
Unlike gambling, manufacturing provides value-added jobs, which form the backbone of a strong middle class. And unlike grandpa’s factory, where laborers worked in hot, dirty and dangerous conditions, next-generation smart factories are clean, brightly lighted, and safe.
These modern factories require exceptionally skilled workers, who have the ability to read engineering drawings, program modern machine tools, and possess math skills that include algebra, basic trigonometry, and basic statistics. To meet this challenge, New York has some of the best technical schools in the country. This provides the state with a distinct competitive advantage.
Have we forgotten our manufacturing heritage — why Schenectady was once known as the city that lights and hauls the world? As the recent examples of GlobalFoundries and the new General Electric battery plant have shown, New York can compete for jobs, but we must plan and prepare. The time to start is now.
Reshoring brings with it the opportunity to return manufacturing jobs to New York. This is good news for our state and for the American worker. Reshoring isn’t for every product, but for many it makes good business sense. New York must prepare now to compete for these jobs as businesses assess the pros and cons of locating reshored production in New York.
Dean Poeth lives in Glenville and is an adjunct professor at Union Graduate College.