Reshoring (onshoring): affirming the economic viability of localised flexible manufacturing — Dr Michael Johnson (Texas A&M University
As Peter Davies, chairman of Professional Polishing said on a sister site in 2013, “ it is great to see that there is a new buzz word around – onshoring!”
The reshoring trend, successes and possible pinch points, systematically explored and publicised by Aston’s Professor David Bailey since 2013, is the subject of new research from EY. Readers new to the subject could also turn to Bryan Luoma for his concise overview of out-sourcing problems.
Following a link received recently, we read the cautious comments of Cathy Taylor, EY’s senior partner, who notes that: ‘the economics underpinning the off-shoring trend appear to be reversing’.
Examples of this trend in the WM region have been reported on a sister site, including Coventry’s RDM Automotive and Birmingham’s Brandauer – both reshoring and multi-skilling. As Cathy Taylor writes, reshored firms find that a ‘cluster’ in the appropriate sector will offer close proximity to key suppliers, infrastructure and a workforce with the relevant skills and we add that these are to be found in areas like Coventry and Aston/Hockley/Newtown.
Cathy Taylor reports estimates that re-shoring could add £15.3bn of GDP to the UK economy and equate to more than 315,000 jobs across the UK. The West Midlands is one of five regions that offer the greatest re-shoring potential; others named are the East Midlands, North West, South East, Yorkshire and the Humber.
She notes that while increasing wages in developing countries are eroding their labour cost advantage, other factors are leading business to choose British suppliers. These include the desire to guarantee quality, the imperative to reduce time to market and highly skilled workforces. We also note references on our sister site to a flexible approach, enabling modifications or new products ordered to be designed and processed in good time.
Ms Taylor ends by calling on government to provide the correct infrastructure framework, and to reduce the headline rate of corporation tax to the joint lowest in the G20, providing competitive relief for innovative and high tech industries.
Will this government backing materialise, or can manufacturing prosper on its own merits?
Encouraging last words from Professor Michael D. Johnson, Department of Engineering Technology and Industrial Distribution, Texas A&M University, briefly in the FT:
“My colleagues and I have found that importing goods from China to developed countries (for example, the US) entails numerous increased costs: transportation, inventory carrying, and production and logistics oversight. The combination of these increased costs, just-in-time manufacturing needs, and increased developing country labour rates contribute to the economic viability of localised flexible manufacturing facilities serving developed country markets”.