After 25 years of sending manufacturing jobs to Asia, the United States is seeing a return of manufacturing jobs. A 2013 Boston Consulting Group report said that more than half the major manufacturing companies surveyed were interested in bringing manufacturing back to North America. 20% are planning to do so in the near future and 16% have already begun.
60,000 manufacturing jobs were added in 2014, compared with only 12,000 in 2003. That 60,000 represents a net increase of 10,000 manufacturing jobs, the first net gain in the past two decades, according to data from the Reshoring Initiative.
Why?
- Offshoring was appealing when it meant an average savings of of 15% and higher, mostly because of low wages. As wages increase in traditionally low wage countries such as China, where the minimum wage automatically rises every two years, it’s less appealing.
- Increased automation in factories means that armies of low-cost workers can now be replaced by a handful of highly-trained operators.
- The costs of logistics are naturally higher when goods are made 3,000 miles away. Add a 28-day shipping time and the very real danger of having goods stuck at the docks when they arrive in the U.S., and it’s no surprise that U.S. manufacturers are seeing the value of making their products locally.
- JIT (just in time) practices, demands for increasing customization by consumers and retailers, and increasing pressure to reduce out-of-stock products on retailers’ shelves all make the relatively long time involved in offshore production impractical.
- Major retailer Walmart is pushing hard for “Made in America” products, to the extent of helping American manufacturers pay for the upgrades they need, giving grants to universities to help develop new technologies to make American-made goods less costly, and favoring U.S.-made goods. Walmart is the largest retailer in the world, and is therefore highly influential among consumer goods companies.
- Walmart has also added sustainability and ethical sourcing requirements that demand the lowest possible energy use and require suppliers to have a representative in the country where goods are sourced. Sending a rep to Bangladesh can undo the cost savings for small manufacturing companies.
- Consumers prefer goods made in the USA and believe that they are better. Walmart internal research shows that the “Made in the USA” label is a purchasing draw second only to price for their customers. This is one of the business realities fueling their $250,000,000 commitment to U.S. goods.
And yet the return to “Made in America” goods has not been smooth. Part of the problem is “the skills gap.” The average skilled manufacturing worker in the United States is 56 years old, and manufacturing companies have trouble finding qualified workers among young Americans who typically do not have the technical training, the background in math, or even a shop class to prepare them for work in manufacturing.
Puerto Rico has an advantage. An educated workforce with a higher percentage of technically skilled graduates than most States and a stronger recent history of active manufacturing than most, Puerto Rico is in a good position to draw reshoring projects. As a territory of the United States, Puerto Rico can label goods made on the island “American Made.” This means that Puerto Rico can participate in “Made in America” initiatives.
With 14,735 associates and 41,676 supported supplier jobs, according to Dun & Bradstreet, Walmart is the largest private employer in Puerto Rico. Next month they will hold an “Open Call” for products made in the United States, a special annual opportunity that includes not only unusual chances to talk to buyers, but also pitches from states and municipalities that can help consumer product goods companies source production in the U.S.
Puerto Rico was present at last year’s Open Call. Participation in the 2015 Open Call has not yet confirmed.
