By Bart Taylor | Jun 08, 2017
The notion that U.S. manufacturing is "coming back" has always been a misnomer. Most of the goods that feed America's consumer-driven economy are still made here.
As Harold L. Sirkin of the Boston Consulting Group pointed out in 2012, "The U.S. manufactures $3.4 trillion worth of goods annually, nearly three-quarters of what it consumes." It's a staggering number.
But the story of modern manufacturing is also very much about the half-trillion-plus dollars of products U.S. companies make offshore, products often fabricated with less expensive labor sourced in overseas economies eager to accommodate cost-minded companies. In some cases, entire industries -- like apparel -- left the U.S.
What goes around comes around, and five years ago Sirkin identified seven industries at tipping points, industries poised to reshore manufacturing jobs as the economics of making overseas, especially in China, were becoming less attractive and brands were reawakening to the the benefits of domestic production. In 2010, these industries accounted for $200 billion in imports from China alone, or two-thirds of all Chinese exports to the U.S.
Sirkin's forecast in 2012 of a new emerging price equilibrium that would have U.S. companies "reassessing their global manufacturing footprint" has generally materialized and, in some industries, accelerated. For example, Harry Moser's excellent research at the Reshoring Initiative finds that U.S. companies are now reshoring as many jobs as they offshore.
The rising cost of labor in China and elsewhere is the main driver, but brand imperatives are also accelerating the fresh look at U.S. production. In emerging powerhouse sectors like the outdoor industry, companies view domestic production as key to brand authenticity and value. Today it's counterculture for many companies to sell Millennial buyers products made with dollars-a-day labor. And that's not to mention the tangible benefits of shortening supply chains to bring production closer to where products are designed, prototyped, and sold.
The trillion-dollar question: Where, or who, will land the jobs and business spend as industries and companies reimagine domestic manufacturing? Not only for the $200 billion-plus of product imported from China today, but for thousands of new companies that value "Made in the USA."
Not Pittsburgh, Pennsylvania, according to some economic voices in the Steel City who were quick to run away from President Trump's alliteration and from manufacturing. It was probably a knee-jerk reaction. The city's R&D ecosystem is leading-edge and already instrumental in helping transform manufacturing to the high-tech, opportunistic sector reinventing itself across the U.S. Pittsburgh's industrial future actually looks bright. How ironic.
So too are the prospects of Anytown, USA that values a new wave of brands that define success by quality, innovation, and responsiveness. Cities and communities who see a future in hosting brands that build great products, increasingly with robotics and automation, and, in so doing, are creating new middle-class wealth. Cities and communities around Denver, Salt Lake, Los Angeles, and San Francisco?
Time, and a trillion dollars, will tell.
Bart Taylor is publisher of CompanyWeek. Contact him at firstname.lastname@example.org.