The overall re-shoring of U.S. manufacturing may have taken a step back in 2014, according to a study released Monday by global strategy and management consulting firm A.T. Kearney, but the apparel industry bucked the trend.
According to A.T. Kearney’s 2014 Reshoring Index, a study of the rate and pace of the return of manufacturing operations to the U.S., the top three re-shoring industries were electrical equipment, appliance and component manufacturing, with 15 percent of the more than 700 cases in the study database; transportation equipment manufacturing, also with 15 percent, and apparel manufacturing, which has been in the nascent stages of an unexpected revival the past few years, with 12 percent.
The study said improvement in delivery time led the reasons executives gave in favor of re-shoring, with quality improvement a close second followed by brand/image.
In this inaugural index, manufactured goods flows were tracked over a 10-year period to show the change in ratio between U.S. manufacturing imports and gross output during that time period. The index showed a year-over-year decline, lower by 20 basis points from 2013, as off-shoring to foreign manufacturing markets outpaced re-shoring.
“While the so-called re-shoring trend has helped improve the mood of U.S. manufacturing since the recession, the reality is that the import value of manufactured goods into the U.S. from 14 low-cost Asian countries has grown at an average of 8 percent per year in the last five years,” said Pramod Gupta, A.T. Kearney principal and study coauthor. “The 2014 Reshoring Index is not only an indicator of U.S. manufacturing capital flows, but also how the U.S. stacks up in terms of attractiveness as a source of manufactured products versus countries like China, Bangladesh and Cambodia.”
The index revealed that while there has been an overall lift in U.S. manufacturing for five straight years since 2009, imports of off-shored manufactured goods into the U.S. have increased at a faster rate than any return of manufacturing operations to the U.S., and for the 14 top off-shoring locations combined, all in Asia, amounted to $630 billion in 2013.
The index measures the change in ratio between U.S. manufacturing imports and gross output over time. It uses the aggregation of a decade of watching shifts in re-shoring and understanding the reasons behind it, using primary data from a proprietary survey administered to senior executives of global corporations, as well as re-shoring information reported in the media. Respondents include c-level executives and regional and business heads. The 700-plus cases tracked span all industry sectors.
The index depicts flows of capital, not shifts in physical assets or employment levels. It represents the choice that U.S. executives make between domestic production and offshore production to meet domestic and U.S. demand.