In 1960, nearly 1 in 4 Americans worked in a factory. Today, according to the Bureau of Labor Statistics, that number is less than 1 in 10. Since 2000, the United States has lost 5 million manufacturing jobs, reflecting an exodus dating back to the 1990s, when U.S. producers began setting up shop in foreign countries, most notably Mexico and China, where the cost of labor was significantly lower. Still, manufacturing remains a mainstay of the overall U.S. economy. The sector employs more than 12.3 million factory workers — or 9 percent of the total workforce — who earn an average wage of about $26 an hour. Ongoing rhetoric touts an American manufacturing renaissance, with companies “reshoring” production facilities from overseas and bringing back millions of jobs. There is some truth to this. But reality fails to fully match popular perceptions, according to new research.
Manufacturing remains a mainstay of the overall U.S. economy. The sector employs more than 12.3 million factory workers — or 9 percent of the total workforce — who earn an average wage of about $26 an hour. Published in March, “Off-, On-, or Reshoring: Benchmarking of Current Manufacturing Location Decisions” delves into the multifaceted supply chains that drive factory production around the world, focusing on companies’ practices and strategies in today’s volatile global marketplace. The multiyear research project was conducted by a nine-member team of supply-chain experts from seven international business schools, including Georgetown University McDonough School of Business’ Ricardo Ernst, professor of operations and global logistics and director of McDonough’s Global Business Initiative, and Shiliang Cui, assistant professor of operations and information management. The two Georgetown McDonough researchers collaborated with Morris Cohen of the Wharton School at the University of Pennsylvania; Arnd Huchzermeier and Marc Steuber of the WHU–Otto Beisheim School of Management in Germany; Panos Kouvelis of the Olin Business School at Washington University in St. Louis; Hau Lee of the 28 •
Fall 2016
Graduate School of Business at Stanford University; Hirofumi Matsuo of the Graduate School of Business Administration at Kobe University in Japan; and Andy Tsay of the Leavey School of Business at Santa Clara University. The group surveyed executive decision-makers at 85 top manufacturing companies, predominantly from North America, Europe, and Japan. “This is the first time research of this scope and detail has been conducted at the business-unit and product level, where people are making decisions, not at the aggregate level,” Ernst says. “This is what managers are thinking and doing, more than what the company is saying.” The study began with the premise that manufacturers are no longer relocating production facilities based primarily on lower costs, he says. The goal was to learn firsthand and benchmark what other key drivers have led to a reorganization of global supply chains.
msb.georgetown.edu