Nearshoring and Reshoring: Businesses see Greater Opportunities Keeping Manufacturing Closer to Home

When General Electric (GE) announced plans to move production of a line of energy-efficient hot water heaters from China to Kentucky, Chief Executive Officer Jeffrey Immelt had his eye firmly affixed to one key goal: cutting costs and improving efficiency.

Exactly the reasons the company opted to set up production in China in the first place. “Outsourcing,” Immelt said at the time, “is quickly becoming outdated as a business model for GE Appliances.”

As global economic conditions have changed, and U.S. supply chain operations have become more efficient, a growing number of U.S. and Canadian businesses are realizing that Asia is no longer the low-cost option it once was and that keeping manufacturing closer to home makes good business sense.

General Electric is in good company as other leading companies including, Apple, Walmart, General Motors, Ford, Microsoft, and Caterpillar, are among the growing number of businesses returning at least some of their manufacturing to North America. The concept of relocating manufacturing to a nearby country is known as “nearshoring,” while moving operations back to its country of origin is referred to as “reshoring.”

The movement away from Asia has become so prevalent that a 2013 survey by the Boston Consulting Group found that 54 percent of executives at U.S. companies with sales in excess of $1 billion are planning to return production to the U.S. That figure is a sharp increase from the 37 percent of executives who said they were considering reshoring in a 2012 survey.