Survey spots trend to bring operations to North America

U.S. companies are moving overseas operations closer to home, according to an IPC survey. On-shoring isn't a huge trend, but it accounts for significant revenues and many jobs.

The trend of offshoring has been going on for several years, expanding to areas beyond manufacturing. Over the last few years, there have been signs of a reversal as some companies have moved operations back to North America. 

IPC decided to determine whether anecdotal evidence of on-shoring, in which overseas operations are moved back to North America, went beyond random instances. A survey taken earlier this year has shown that on-shoring is definitely a trend in the electronics industry, though there's no chance it's going to reverse many years of moves outside the U.S.  

"About 11 percent of electronics manufacturers in North America have brought operations back since 2009, while nearly 20 percent created new operations in North America instead of establishing them elsewhere," said Sharon Starr, director of market research for IPC. "The 11 percent represents $9 billion in operations and nearly 3,000 new jobs, and that's just from the companies that participated in the study."

The idea for the study came out of conversations between manufacturers about the hidden costs and issues with offshore production. They were countered by benefits of operating in North America, prompting many companies to review the cost/benefit ratios of their operations, leading in some cases to a return of investment from off shore to North America.

The survey, limited to companies operating in North America, surveyed firms throughout the supply chain served by IPC. The 229 respondents represent more than $935 billion in revenues. The report examines new operations that could be located anywhere as well as operations that returned to North America. Two leading rationales drove these changes.

"The main driver of decisions to return overseas operations to North America was quality control," Starr said. "For decisions to locate new operations here, the primary driver was the need to be close to customers."

When North American companies bring operations back from Asia or low-cost countries in Europe, they usually bring them fairly close to home. That was something of a surprise.

"We thought we might hear about Brazil and other South American countries, but everything was occurring in the U.S., Mexico and Canada," Starr said.

The survey also asked about sourcing. Many companies are changing their buying patterns, picking components and materials that are made on this continent.

"Nearly half the respondents had changed some of their sourcing from overseas suppliers to domestic sources. Of companies that switched, more than half cited bare circuit boards among the products they are now sourcing domestically," Starr said. "We also learned that over half the respondents have formal policies that encourage domestic sourcing."

Starr noted that IPC compared its results to other industries in order to verify the responses. In fields like appliances, the trends were similar, reinforcing the validity of the trend.  She also noted that questions about manufacturers' future plans suggest the trend will continue.

"Looking to the future, about seven percent of respondents who had knowledge of their companies' plans expect the company to move more operations back.  About half of them are EMS companies and most of the operations will come from China and end up in Mexico," Starr said.

For more information or to purchase the report, visit www.ipc.org/on-shoring-2012.