Business Trends

U.S. Companies Mull Near-Sourcing, by AlixPartners

File Type: Free Content, Article
Release Date: March 2014
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The U.S. is becoming increasingly attractive as a place to source manufacturing, putting it ahead of Mexico as the preferred near-sourcing location. The latest AlixPartners Reshoring/Nearshoring Executive Survey and Outlook found, for the first time in its four-year history, that the U.S. “has surpassed Mexico as the preferred location for either the reshoring or nearshoring of previously-offshored manufacturing for U.S. consumption.” In this year’s survey, 42 percent of manufacturing executives said they would choose the U.S., up from 37 percent in last year’s survey, while those who said they would choose Mexico dropped to 28 percent, down from 37 percent last year and 49 percent in 2012.

According to a March 4, 2014, article in The Journal of Commerce (JOC), “US Companies Mull Near-Sourcing But China Remains Dominant Source,” by Peter Leach, Foster Finley, AlixPartners’ managing director and co-head of its global supply chain practice, told attendees at a JOC conference on March 3 that the main reasons more companies are attracted to near-shoring to the U.S. are “lower freight costs, faster speed to market, improved customer service and fewer supply-chain disruptions.” While Finley claimed that the U.S. appears to be on track to achieve cost parity with China by 2015, other panelists said they don’t expect a wholesale shift of production away from China anytime soon, even though production of some goods is growing faster in other countries, such as Vietnam, Indonesia, India and Pakistan.

Because “the predominant factors affecting sourcing decisions remain wage rates, the availability of raw materials, and low manufacturing overhead, such as taxes” — and because of its world class ports — China likely will maintain its position as the largest source of production for many industries. "China is still the gold standard,’ said Julia Hughes, president of the U.S. Fashion Industry Association.”