US Manufacturing Reshoring, Investing but Still Faces Challenges

North American factory activity has increased for the 30th consecutive month and 65% are investing in new technology.

"These are both very positive signs for expanding growth in the manufacturing sector," explains Mitch Free, CEO of, the world's largest online marketplace for the industry, often called the "eBay of manufacturing".

Re-shoring: bringing it back home

22% of companies have or are the process of reshoring back to North America, a 3% uptick, 33% of manufacturers researching reshoring, an increase of 7%, There are several factors that are contributing to moving sourcing from a low-cost country, such as China.

Supply Chain Disruption

Buy-side product manufacturers have taken measures to mitigate their supply chain risk, ramping up several suppliers and diversifying geographically. There are a few reasons.  Over the last few years, many small manufacturers that supply bigger companies got wiped out during recession: a major supply chain disruption for those larger manufacturers. These larger companies have had to find a new suppliers, which is a long-term task: they must send drawings, produce parts and components, and often manage a lengthy quality control process in order to get quality right. Disasters such the earthquake and tsunami took out a lot of suppliers, leaving large supply chain gaps that resulted in lengthy product delays. This practice is a change from LEAN manufacturing, where the goal is to reduce vendors and complexity in the supply chain. As Mr. Free said, "We're a society that likes to customize --different colors, patterns and so forth. The days of orders of 1 million that are exactly the same is over. It isn't a strategy that resonates, because consumers like new versions."


  • Business and operational risks are driving some companies to seek the safety of U.S. shores.
    The total landed cost of products. For example, the price of production in Vietnam may not defray the costs of shipping, delivering through customs, and the travel and manpower needed to manage development and quality control, The current high price of fuel, and the expectation of higher prices to come, are a big concern.

  • The U.S. dollar is currently cheap, which can add in incremental benefit.
    Companies are looking to be nimble and place smaller orders. An oversees supplier may need a million part order, and that order will take a long time to be delivered. If consumer demands falls, than the manufacturer may be stuck with a large inventory of unsalable units. In order to be in closer lock step with consumer demand, industrial buyers would like to place smaller orders and receive delivery in a more timely manner. There are intellectual property protection that threaten sourcing strategies. This is a big barrier when owners -- or employees -- of foreign companies can easily start new ventures based on a U.S. intellectual property.

New Investment

In spite of some of these challenges, 63% of sellers, and 65% of buy-side product manufacturers are aggressively investing in new technology, hiring, or investing in new technologies and hiring. This is a positive sign for growth. Buy side companies that design and produce products generally don't manufacture themselves. Apparel and other consumer product companies own the brand, but not their own factories. They are investing in technologies that allow them to customize faster: new colors for electronics, new materials that are customizable on the fly, and more durable.

What's Holding It Back? Troubling Trends

  • Capital
    There is a sustained increase in concern over access to capital. As increased pressure mounts on "right-sizing", cash strapped companies can't get access to capital for expansion projects in order to get back to pre-recession levels. Many went through a lot of their cash reserves so are afraid to use what is left, because the banks are just not lending. While they are staying busy and see a lot of opportunity, they are not able to invest.

  • Skilled Workforce
    A low hiring rate is partly indicative of a workforce skills gap. Unlike IT, manufacturing is a long term skill. To become a machinist is not a 6 months process, but generally a 2 year program with a 3 year apprenticeship. For modern manufacturers, the skill set not commonly understood, since so much is automated and computer controlled. But programming skills must be matched with an understanding of materials properties, along with the math and geometry skills to program a machine to move in geometric patterns. In order to build the workforce needed, many companies are setting up their own training programs. Mr. Free believes that some are reaching out to local high schools to find students who are good at math, and bringing them along in two and three year programs.

What Does This Mean for the Future?

  • Intentions to add capacity in Q1 2012 is a historic high at 45% - up from 39% in Q3 (for Q4 projections).
  • 52% of respondents are NOT considering exporting at this time. "We Americans don't have a culture of exporting. You could run a really great business just looking at the U.S. Now, if you think your future is tied to the US economy, that's really not a good strategy."
  • More education  needed on the benefits of exporting for small business.
  • Operating costs will continue to be a major concern in 2012

Mitch Free adds, "Our reshoring statistics tend to indicate that economic conditions have started to produce sound business reasons for bringing work back to North America and product manufacturers continue to see value in exploring this option for their business."


Founded in 2000, is the largest global online marketplace for manufacturers looking to source custom parts, standard components, assemblies and textiles. has revolutionized the way parts get sourced, bringing tremendous efficiencies to its users. Since 2000, $117,982,615,784 has been sourced through MFGWatch is a quarterly, recurring survey conducted by of North American Supply-Side Job Shop and Contract Manufactures as well as Buy-Side OEMs and Product Manufacturing companies. The survey is conducted via e-mail from a sampling of member companies (over 100,000), and is intended to reflect projected (intent) and reported (actual) behaviors of companies in the North American manufacturing sector. Industries represented include aerospace/aeronautics, automotive, medical, defense, textiles and consumer products manufacturers. This article is based on the MFG quarterly survey, and an interview with Mr. Free.  Errors are the responsibility of THE GREEN ECONOMY.

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