More Manufacturers Looking To Re-Shore Back To U.S.

Master Lock LLC, Caterpillar Inc., General Electric Co. and Whirlpool Corp. have all re-shored products back to the U.S., but more manufacturers are starting to lay the groundwork to come back home, according to a presentation by Deloitte Development LLC.

The reason — U.S. manufacturing labor costs have remained flat over the past 12 years and are substantially lower than in China, Canada and Germany; the cost of energy and plastics has dropped; and Chinese-made goods are more expensive for U.S. consumers to buy.So are suppliers to larger firms starting to think about coming back home?

Brad DeNoyer, manufacturing and distribution leader for accounting and advisory firm Baker Tilly Virchow Krause LLP, said a lot of middle market manufacturers supplying larger companies are starting to come back to the U.S.

“There’s just not necessarily a drive to go there anymore and there is talk about coming back,” DeNoyer said. “Five to 10 years ago, the work was leaving and going overseas, even the smallest of companies was going to China. Now the faucet has stopped and there is talk about whether to come back.”

But some manufacturers are just starting to have conversations with Milwaukee-based suppliers about re-shoring.

Frank Krejci, president and chief executive officer of Strattec Security Corp., also heads up a contract die-casting division called Strattec Component Solutions. Companies that used to get castings from China are now looking to bring back the work to the U.S., but this push to come back home isn’t going to happen overnight, Krejci said.

“This is not an impulse buy at a grocery store,” Krejci said. “The choice is…do you move inventory or tools? What manufacturers are more likely to do is create a separate set of tools, then ramp up in America and shut down in China. But they are still getting the parts from China.

“But next year they are coming out with a new and improved version of their product. And instead of having the new tools coming from China, now they are making it in America.”

Krejci also said more companies are auditing his firm to determine if they might need his company’s services six months or two years down the line for their next product generation.

What does that mean on the jobs front?

Jeff Sachse, regional economist for the Wisconsin Department of Workforce Development, said that he’s seeing manufacturing companies in the four-county metro region have been hiring at a stable rate. The re-shoring effort has been segmented, but companies have also been reinvesting in some production facilities and cutting costs.

“There is a lot of interest in re-shoring from China…Some of that was driven by labor costs because they dropped during the recession and a lot of companies got rid of the high-wage earners because a lot of that was driven by seniority, but there was definite cost cutting going on,” Sachse said. “So we’re seeing relatively lower wage rates in assembly here than there used to be and we are seeing more competitive costs compared to other countries like China.”

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