The Reshoring Initiative's Recommendations for the Federal Government

Reshoring Recommendations for the Federal Government, especially Department of Commerce

Executive Summary

The economic bleeding due to increasing offshoring has stopped.  The rate of new reshoring is now equal to the rate of new offshoring.  The challenge is now to reshore the 3 to 4 million manufacturing jobs that are still offshored. Recent reshoring announcements and successes by Apple, Caterpillar and GE and analysis of the economics of reshoring suggest that we could raise the net reshoring rate from the current zero jobs/year to 50,000.  For the U.S. to achieve its full reshoring potential requires a continuation of offshore cost trends, improvement in U.S. competitiveness and changes in companies’ sourcing decision metrics.  The U.S. government can influence all of these factors with minimal expenditure to achieve the 2016 scenario shown below.

	Manufacturing Jobs / Year
	2003	2013	% Change	Feasible 2016
New offshoring *	~150,000*	30-50,000*	- 70%	20,000
New reshoring	2,000*	30-40,000**	+ 1,500 %	70,000
Net reshoring	-148,000	~0	-100%	+50,000

        *Estimated / ** Calculated

Reshoring and TCO Analysis Find Support in Graduate Thesis by Ferran Cabratosa

The Reshoring Initiative is pleased to publish Illinois Institute of Technology graduate student Ferran Cabratosa's thesis, titled: “Reshoring.”

Mr. Cabratosa's paper offers a concise and thorough understanding of the precursors, causes, and consequences of both offshoring and reshoring, and ultimately makes the case for reshoring.

Included in the topics are the macroeconomic trends that led from pre-Industrial Revolution to twentieth century offshoring to twenty-first century reshoring. Using an enormity of data, Mr. Cabratosa demonstrates that reshoring production is often the most cost-effective supply chain decision a manufacturer can make.

The Reshoring Initiative's Harry Moser assisted Mr. Cabratosa in his research, and is pleased to publish his paper on our website, here.

Using The Reshoring Initiative's TCO Estimator: A How-To Guide

                                                      

Getting a Company Started with TCO

A.    Which parts to analyze

1.    By sourcing structure

Follow these priorities:

          1^st Keep existing domestic sources: No new offshoring w/o TCO analysis.

               2^nd Shift outsourcing back

3^rd Repurpose offshore own-facility to serve the offshore market. Incrementally invest domestically to serve domestic market

4^th Shut offshore own facility. Build new domestic facility.

The Reshoring Initiative's Economic Development Program

Economic Development Program

The Reshoring Initiative’s high impact-minimal cost economic development program outlined below is being implemented in Pennsylvania, Mississippi and central New York. We are seeking other regions interested in developing this opportunity.

Trade Deficit: Imports or Exports: Where Should We Focus?

Should We Focus More on Reducing Imports or Increasing Exports?

We often hear of the need to increase U.S. exports, thus increasing GDP, employment and tax revenues and reducing foreign debt. Actually, the country needs to reduce its net export deficit. Due to the approximately 30% cost advantage of competing domestically instead of overseas, the relative volumes of our annual imports and exports, and a range of exogenous impacts on the U.S. economy, it is almost surely in the country’s interest to place more emphasis on substituting domestic production for imports (reshoring) than on increasing exports. Despite the clear advantage of reshoring, the U.S. government spends about 60X more on promoting exports than on encouraging reshoring.

Local and Federal Governments Support Reshoring

The Commerce Department Launches Assess Costs Everywhere (ACE)

On April 9, the Commerce Department introduced ACE - a useful and informative tool for comparing costs and risks of offshoring to those of domestic sourcing. As part of this endeavor, The Commerce Department accumulated data on a wide variety of risks, travel and shipping costs and other factors helpful for calculating Total Cost of Ownership. The Reshoring Initiative played a role in the development of the site’s concept, and is present on the site’s Toolbox. It is estimated that companies would reshore 25% of offshored work if they calculated their total cost. Rising offshore wages, plus other “hidden” costs are increasingly diminishing any savings from price and labor. Total cost tools make it possible for companies to recognize when local sourcing is the more profitable option.

Ohio House Passes Legislation to Designate March "Reshoring Month"

Ohio State Senator Bill Beagle led the effort to make March 2013 Reshoring Month in Ohio. This reshoring proclamation is the first by any state. Congratulations, Ohio!

The Bring Jobs Home Act

West Virginia Senator Jay Rockefeller cosponsored a bill to encourage American businesses to stop moving jobs overseas, and incentivize them to bring those jobs back home and hire American workers. While all efforts to support reshoring are appreciated, in general the preferred solution is to eliminate all special exemptions and deductions to keep tax codes simple and reduce corporate tax rates across the board so that all manufacturing is motivated to produce in the U.S.

Many State governments continue to offer tax, credit and grant incentives to companies that create jobs in their areas. According to a recent Reshoring Report by the MIT Forum for Supply Chain Innovation, “the number one government action that can make a difference is corporate tax reductions, with both providing tax credits and incentives coming in second.”

To find out more about existing government incentives, contact your local Manufacturing Extension Partnership or Economic Development Organization.

Tell us how government incentives helped you reshore on the Case Studies feature on our website.

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