US manufacturers look to bring operations back onshore

22 March 2011

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22 March 2011 | Lindsay Clark

The majority of US manufacturing executives are considering switching the location of their suppliers and plants, reversing the trend of locating operations offshore.

Research by Accenture found 61 per cent of the manufacturing executives surveyed – of which 90 per cent are based in the US - are considering shifting their manufacturing operations to be closer to where demand for their goods and services is highest. Meanwhile, 59 percent said they are actively searching for new suppliers.

The consultancy said this was a reversal of the trend of the past 10 years that has seen companies relocating their manufacturing and distribution operations to lower-cost countries or regions.

When deciding where to locate production operations and supply facilities, labour costs remain the top priority, of 74 per cent of respondents. Proximity to customers or markets was second at 67 per cent, and access to skills of the workforce rounded out the top three with 61 per cent.

The study also reported that raw material and components prices have suffered the greatest increases of costs in the past three years, according to 73 per cent of companies, followed by logistics and transportation, cited by 57 per cent of firms.

“Manufacturers are beginning to recognise that many of the factors they previously based their offshoring manufacturing and supply decisions on most heavily, such as component price and transportation costs, have dramatically increased over the past few years - and those seemingly initial cost savings are no longer so big,” the report said. “They are, in fact, diminishing as transportation, commodity costs and in-country labour rates rise and exchange rates change.

These cost pressure issues are arising at a time when customer requirements for agility, speed and capability are becoming more challenging,” it said.

Accenture surveyed 287 executives for the report.

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