What Timken Bearing Has to Do With Reshoring Manufacturing to US

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Timken's CEO James Griffith

Source: McKinsey & Company

Much has been made of recent reshoring trends, the most visible of which was Apple’s announcement that they’ll throw US manufacturers a bone and have American workers, rather than their Chinese counterparts, make a few Macs.

Check out MetalMiner’s follow-up on the effects of reshoring on the US aluminum industry.

But looking just a bit deeper at the reshoring issue, through the lens of supply chain risk management, is it really helping the overall economic recovery in the United States?

And if it isn’t helping now, will it even make a dent in the long term? Or is the reshoring trend much less substantial than it’s made out to be?

In a recent interview with the McKinsey Global Institute, James Griffith, CEO of the US-based bearings manufacturer Timken, spoke about manufacturing trends as his company sees them.

“When we look for a place to manufacture, we look for three things,” Griffith said. (Timken has operations all over the world, including China.)

He continued, “We need to be in a place that’s got a significant market for our product. We need to have access to raw material. And we need a high-skilled workforce, because even the people who run the machines are dealing with CNC controls, computerized process controls, and fairly complex math.”

The ‘highly skilled workforce’ component is a major reason why many midsize to large manufacturers are deciding to bring major portions of their operations to the US — especially as wages in China rise for the middle class.

Imports and Exports on a Net/Net Basis

However, when talking about the benefits of reshoring, much still comes down to simple net import/export equations.

Although Timken CEO James Griffith spoke highly of exports (“in 2011, we exported $660 million worth of product out of the United States to [Asian] markets”), he said, “Virtually 100 percent of [Timken’s] new plant capacity has gone to Asia.”

Are exports figures such as those — when aligned with continued offshoring — a drop in a bucket?

In a rebuttal to a couple pro-reshoring articles in the Atlantic, Alan Tonelson, research fellow at the US Business and Industry Council (USBIC), speaks to these points.

“New government data analyzed by [USBIC] show that more than 100 advanced domestic manufacturing industries collectively lost American customers to imports worldwide last year,” Tonelson wrote.

He continued:

“In 2011, foreign-based producers supplied a record total of 37.57 percent of total American purchases in industries ranging from semiconductors to pharmaceuticals to ball bearings to machine tools and dozens of other capital-and technology-intensive sectors. In 2010, when the industrial renaissance supposedly was stirring, the import penetration rate was 37.07 percent and in 1997 – the earliest data year – only 24.49 percent.”

And what about government subsidies for reshoring?

Continued in Part Two.

Check out MetalMiner’s follow-up on the effects of reshoring on the US aluminum industry.

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