BCG report sparks debate in ‘reshoring’ or ‘backsourcing’

Posted on the yorkiementor blog 1st May 2012

Since the Boston Consulting Group [BCG] published a report in August 2011, ‘Made in America, Again: Why Manufacturing Will Return to the USA,’ there has been an increasing volume of debate on whether or not it was starting to make business sense to bring certain, previously ‘off-shored’ businesses or activities back to the UK.

Have things really changed? The BCG study makes a case for the USA, but the logic and conclusions should not be discounted purely on the basis that we are not the USA and developments in the UK and Europe are so different.

The, ‘At a glance’,  conclusions are, and I quote:
China’s overwhelming manufacturing cost advantage over the USA is shrinking fast.  Within five years, a BCG analysis concludes, rising Chinese wages, higher USA productivity, weaker dollar, and other factors will virtually close the cost gap between the USA and China for many good consumed in North America.

LOOK AT TOTAL COSTS

Companies should undertake a rigorous, product-by-product analysis of their global supply networks that fully accounts for the total costs, rather than just factory wages.  For many products sold in North America, the USA will become a more attractive manufacturing option.

REASSESS YOUR CHINA STRATEGY

For many products that have a high labour content and are destined for Asian markets, manufacturing in China will remain the best choice because of technological leadership or economies of scale.  But China should no longer be treated as the default option.

Certainly something for the UK to think about, particularly as Europe  continues to devalue on the world stage.

The decision to ‘reshore’ and bring operations back to the UK depends on many factors and needs careful consideration but do not rule it out.

Here are some additional thoughts and insight:

• Reshoring Initiative (USA);
• Buzzworthy Benefits of ‘Reshoring’ Companies [Forbes];
• Reshoring: Five reasons why China will remain the world’s factory [The Financial Times];
• ReshoringMFG;
• Re-shoring [New York Times, Opinion Pages];
• China Cups to Clitheroe – UK Manufacturing Grows [Levantar blog];
• A New Chinese Export – Jobs [TIME Business];
• Re-shoring firms head for home [China Daily];
• Jobs lost to Asia reappear in UK [This is Money].

Filed under: Export, Manufacture, Procurement, Risk & Continuity Management Tagged: #simplifyingbusiness, backsourcing, BCG, Boston Consulting Group, business, employment, international, jobs, lean, outsourcing, reshore, reshoring, risk, sustainability, UK