A.T. Kearney’s 2018 Reshoring Index: Has the Reshoring Trend Reversed?

Toyota supply chain Rainer Plendl/Adobe Stock

Harley-Davidson was in the news last month when it announced that it would be shifting some production overseas as a result of the E.U.’s planned retaliatory tariffs on the U.S.

The American motorcycle manufacturer is also closing its Kansas City factory and opening a plant in Thailand, decisions that were spurred by sluggish domestic sales and the U.S.’s withdrawal from the Trans-Pacific Partnership (TPP).

As it turns out, Harley-Davidson is hardly alone. Since 2013, A.T. Kearney has been tracking reshoring, and its 2018 Reshoring Index shows that the practice has not taken hold. In fact, U.S. “imports of manufactured goods [in 2017] from the 14 largest low-cost country trading partners in Asia rose by a staggering $55 billion.” This marks an 8% increase from 2016, as well as the biggest year-on-year increase since 2011.

Reshoring has been a hotly debated topic in recent years as a result of rising overseas manufacturing costs and demand among American workers to bring manufacturing jobs back home. The Reshoring Initiative was founded in 2010 by a group of manufacturers with precisely this purpose. And the 2016 U.S. presidential election cycle, with its focus on loss of manufacturing jobs, brought even more attention to reshoring.

However, A.T. Kearney’s report shows that U.S. manufacturing output has increased by only 1% since 2013, compared with the 19% growth in imports of manufactured goods from the aforementioned 14 countries: China, Taiwan, Malaysia, India, Vietnam, Thailand, Indonesia, Singapore, the Philippines, Bangladesh, Pakistan, Hong Kong, Sri Lanka and Cambodia.

A.T. Kearney assesses the reshoring trend by means of a manufacturing import ratio (MIR), or the gross import of manufactured goods from the 14 countries divided by the U.S. domestic gross output of manufactured goods. Last year, the MIR was 12.44%, the highest since A.T. Kearney published its first Reshoring Index in 2014.

The report puts forth a few potential explanations for why the reshoring trend seems to be reversing. One is simply cost. Overall, it is still more economical to produce goods overseas. Second, a shortage of skilled labor poses a major challenge to manufacturers’ reshoring efforts. And lastly, the report points out that the growth in imports has been driven more by manufacturing operations that are already overseas.

Another interesting trend is that companies are no longer publicizing their reshoring efforts to the extent that they were in 2013 and 2014, as the graph above shows. The report points to the current highly polarized political environment, suggesting that “attracting no attention is often perceived to be better than attracting the wrong kind of attention.”

Among the 14 countries, China remains the primary source of manufactured goods imports into the U.S., accounting for two-thirds in 2017 — a share that has hardly budged this decade. However, 2o18 may be the year that this trend reverses, as the U.S.-China trade war plays out.

A.T. Kearney’s 2018 Reshoring Index can be found here.

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First Voice

  1. Sandy Montalbano:

    A.T. Kearney’s Reshoring Index does not actually measure reshoring. It essentially uses the trend in imports to imply a trend in reshoring.
    According to the Reshoring Initiative, their report got some points right but other points clearly wrong.
    They are wrong about the decline of reshoring in 2017. It actually increased about 50% from a 2016 record high.
    Kearney’s Index is a direct measure of U.S. imports which are clearly too high, not a measure of reshoring which is one of many factors that influence the level of imports and has kept imports from growing more.
    The Reshoring Initiative measures reshoring directly and reported that a record 171,000 manufacturing jobs were announced in 2017 as reshored or FDI’d.
    Factors that cause Kearney’s Index to be wildly inaccurate include changes in prices and exchange rates in the various countries and the relative rate of growth in each country.
    Details from the Reshoring Initiative here:

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