Reshoring Shovel Ready Industries

BCG’s Tipping Point Industries

The Boston Consulting Group’s U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much? report highlights seven manufacturing subsectors that are poised to take advantage of the multiple factors driving the reshoring trend. The seven ‘tipping point’ subsectors are:

  • Plastics & Rubber (NAICS 326)
  • Fabricated Metals (NAICS 332)
  • Machinery (NAICS 333)
  • Computers & Electronics (NAICS 334)
  • Appliances & Electrical Equipment (NAICS 335)
  • Transportation Goods (NAICS 336)
  • Furniture (NAICS 337)

The forecasted direct and indirect impacts from the increased manufacturing activities are noteworthy, and described by the BCG as being conservative. In total, the seven subsectors represent $200 billion in imports, and of which 10-30 percent will be reshored by the end of the decade resulting in an annual addition of $20-$55 billion to the gross domestic product. Combining the direct and indirect impacts from the reshored activity, as well as increases in other manufacturing exports due to increased US competitiveness versus other developed nations, the United States would realize the creation of 2-3 million jobs, a drop in the unemployment rate between 1.5 and 2 percent, and a total rise in exports of $65 billion annually.

The BCG’s 7 tipping point industries are listed along with the value of the goods consumed, imports from China, location quotient for the MAFC region as a whole, the subsector’s location quotient ranking amongst manufacturing subsectors within the MAFC, and the highest location quotient amongst the states of the MAFC.

Table 1: Tipping Point Industries in MAFC States

TD Economics’ ROMI, EOMI, and NSOMI

TD Economics’ reshoring analysis, Offshoring, Onshoring, and the Rebirth of American Manufacturing is similar to that of the BCG’s in that it too highlighted subsectors that are most likely to be reshored. TD Economics however, added a temporal aspect driven by the level of capital or labor intensity involved in the particular subsector’s manufacturing process. The TD report breaks the manufacturing subsectors into three groups: the Recently Offshored Manufacturing Industries (ROMI), the Early Offshored Manufacturing Industries (EOMI), and the Not-Substantially Offshored Manufacturing Industries (NSOMI).

The ROMI subsectors are those subsectors that involve relatively capital intensive processes thereby reducing the impact of cheap labor in location decision making process. These subsectors began to substantially offshore production in 2001, and are also the subsectors that TD highlights as being strong candidates for reshoring. These activities will require a competitive and flexible labor market, affordable industrial land, and quality transportation infrastructure. The ROMI subsectors are:

  • Plastics & Rubber (NAICS 326)
  • Fabricated Metals (NAICS 332)
  • Machinery (NAICS 333)
  • Computers & Electronics (NAICS 334)
  • Appliances & Electrical Equipment (NAICS 335)

The EOMI subsectors are those with manufacturing processes that are relatively labor intensive, and not likely to be reshored. TD states that these subsectors will either stay in China or seek cheaper labor rates outside of China. The EOMI subsectors are:

  • Apparel (NAICS 315)
  • Textile Mills and Textile Product Mills (NAICS 313, 314)
  • Furniture (NAICS 337)

TD notes that while the furniture subsector is not necessarily capital intensive, it is one of the EOMI subsectors that is poised to take part in the reshoring trend.

The last group highlighted by TD was the NSOMI group. While offshoring did not significantly reduce production levels for this group of manufacturers, they could very well supply the US economy with increased production going forward. This is especially true for the subsectors that are closely related to the energy boom in the United States and require large amounts of petroleum or natural gas either as inputs or to power the manufacturing process (marked with an asterisk). The NSOMI subsectors are:

  • Food and Beverage (NAICS 311)
  • Wood (NAICS 321)
  • Paper (NAICS 322)
  • Printing & Related (NAICS 323)
  • Petroleum & Coal (NAICS 324)*
  • Chemicals (NAICS 325)*
  • Non-Metalic Minerals (NAICS 327)*
  • Primary Metals (NAICS 331)*
  • Transportation Equipment (336)*
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