Bringing manufacturing closer to home

Nearly 7 of 10 manufacturers in a recent survey plan to reshore or expand U.S. operations. The reason is mainly to shorten supply chains to hold less inventory without returning to a full just-in-time (JIT) inventory strategy. The 2023 BDO Manufacturing CFO Outlook Survey polled 125 manufacturing chief financial officers (CFOs) representing companies with revenues from $250 million to more than $3 billion.

The report’s authors note onshoring can also reduce transportation distances (and costs) while lowering an organization’s carbon footprint, which helps corporations achieve increasingly important environmental, social, and governance (ESG) goals. Adding regional support in the U.S. and neighboring countries also lets companies maintain service levels, as well as less overall exposure to natural disasters, fewer complex tax obligations, and greater insulation from transportation bottlenecks.

Where are companies moving or expanding? Gaining Altitude (p. 14) examines the top five states for aerospace attractiveness as compiled by PwC, but there’s more to picking the right site. Location consultants The Boyd Co. Inc. – whose clients include global aerospace manufacturers – compiled a site selection study comparing 30 U.S. high-tech corridors for the cost of operating an advanced manufacturing plant. Why corridors? Boyd analysts note many site-seeking companies begin their search along a prominent interstate highway or public transit corridor. Companies want to be near major infrastructure, transportation hubs, centers of talent in-migration, and affordable support services. These corridors are considered the most likely to give access to the greatest labor market and workforce assets possible.

Not surprisingly, five of these corridors are in California, two in Texas, and one each in Georgia, Ohio, and Indiana – mirroring PwC’s statewide findings.

Other corridors are found near Phoenix, Arizona; around New York-Long Island-Philadelphia; in Connecticut; Maryland and two sites in northern Virginia near Washington, D.C.; and south and central Florida.

Chicago’s I-90 Corridor is recognizable for tech markets Rosemont, Schaumberg, Elk Grove, Hoffman Estates, and others that are the U.S. home to many machine tool manufacturers and related businesses. The Boyd study notes the Southern Nevada I-515 Corridor connecting Las Vegas with suburban Henderson is home to Haas Automation’s $327 million plant set to open in late 2023.

The Boyd findings show total annual operating costs for a hypothetical 350,000ft2 production facility employing 500 workers range from a high of $53.6 million in the Bay Area Route 101 Corridor in Northern California to a low of $39.5 million in the Central Texas SH 130 Corridor.

BDO’s experts advise manufacturers that building a digital twin (digital replica) of their supply chain will help model the operational and financial implications of a proposed move. The more data a manufacturer can access, the more detail the model can give about the implications for risk and costs.

Companies relocating should negotiate incentive packages with state and local authorities and follow up as the move takes place to ensure all promised incentives are captured. – Eric