Increasing efficiency can have a big impact on how businesses work on a global or local scale. Re-shoring in North America is the result of some interesting global trends, and increased efficiency through technology. Here’s what you need to know about offshoring and re-shoring in the United States and Canada:
What is offshoring?
In North America, we understand offshoring as an on-going business practice that sends manufacturing jobs to far-away countries. However, as wages increase overseas and technology increases logistical efficiency at home, some of these jobs could return to the United States and Canada.
Historically, business operations have been relocated in order to take advantage of the reduced labor rates and lower taxes in countries such as China and India. The activities that are commonly offshored include manufacturing, accounting and information technology services. The industries most associated with offshoring include electronics, textiles, toys and shoes. As a result, manufacturing in the United States dropped from employing 32% of the workforce at its peak to only 9% at present.
What is re-shoring?
Re-shoring is the hypothesis that developed nations – particularly the United States – could be recapturing a significant piece of the manufacturing production that fled to Asia over previous decades, which would result in more manufacturing and technology jobs in North America.
The trend of bringing these processes and jobs to North America can be attributed to a number of factors including increasing wages overseas, the decreased value of the American dollar, and increased logistical efficiency. One example of this trend is at Catepillar Inc., which found its manufacturing to be more cost-effective using robots and skilled American workers, when compared to low-wage Chinese workers.
What impact will it have?
Additional factors that encourage re-shoring in the United States include an increase in wages overseas, improvements in domestic energy production, government incentives and the trend towards locating production closer to consumers.
Though the long-term impact of these economic changes is not fully known, it is estimated that two million manufacturing jobs could return as a result of re-shoring in the United States. OfficeBooks and many other businesses across North America are excited to see re-shoring catching on. While market forces should ultimately determine where businesses operate, buying, sourcing, and hiring locally is good for local economies.
Do you work for a company that is actively re-shoring operations? Have you seen the impact off offshoring or re-shoring in your region? Leave us a comment and let us know if re-shoring is changing how your company does business on an international or regional scale.
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