The study found that “in industries with a high labor-cost component in total landed cost, the financial advantages of offshore manufacturing continue to be extremely compelling and sustainable. But in many others, companies must constantly reevaluate manufacturing sourcing decisions based on changes in regional market conditions.”
China will retain an edge in sheer numbers of available laborers, said Michael Janssen, Chief Research Officer at The Hackett Group. “If you said you need 10,000, 100,000 or a million workers, China can do it. We can’t do it here. They could go to full employment in a couple of weeks.”
The service industry is another likely to remain offshore, for a time. Hackett’s data gathered from 4,700 U.S. and European-based companies with annual revenue over $1 billion, indicated that by 2016, a total of 2.3 million jobs in finance, IT, procurement and HR will have moved offshore, 40 percent to India. However, offshoring levels in business services, currently at around 150,000 new jobs each year, will be leveling off or declining after 2014. “By the end of the next 8 to 10 years, the traditional model of lifting and shifting work out of Western economies into low-cost geographies will cease to be a major factor driving business services job losses in the U.S. and Europe,” the report showed.
Hackett indicates that China’s best bet is to meet the rising demand for goods in its own domestic market. It excels in low-skill manufacturing work, making products developed elsewhere and shipped out for Western consumption. To stay competitive and maintain growth in the face of its eroding cost competitiveness, China must modernize and spur innovation in its manufacturing industries.
Reshoring is an efficient way to reduce imports, increase exports and regain manufacturing jobs in the U.S., according to Harry Moser, Founder and President of the Reshoring Initiative, and perhaps the No. 1 evangelist for the nearshoring movement. He confirmed that it's also the fastest and most efficient way to strengthen the U.S. economy.
“For the nation, reshoring brings back desirable jobs that have been lost to decades of offshoring. Reshoring also helps manufacturers recover from offshoring's poor quality, trade secret thefts, supply chain disruptions and lengthy delivery times—all while staying cost competitive.”