Reshoring, in-shoring, and on-shoring are three different terms for the same thing: bringing manufacturing jobs back to the U.S. from other parts of the world. It's the opposite of offshoring which has sent millions of American jobs overseas. In many cases, the cheap labor that manufacturers found in foreign markets hasn't always proven to be cost-effective, and that has brought back some jobs. But is it a growing trend or a temporary resurgence? And how is the Chicago area faring?

Molten aluminum flows 24 hours a day at the Aallied Die Casting Company in west suburban Franklin Park. It goes into molds that turn out transmission components for such things as cars, lawn mowers, and snow blowers. And 24 hours a day, employees at the plant trim and inspect the finished product. Aallied boasts that it makes high-quality components, but quality alone hasn't always translated into sales.

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“The automakers, our lawn and garden customers, our industrial customers, used to go to China and buy 100 percent of their goods that we would typically manufacture; they would buy them there,” said Mike Higgins of RCM Industries, Aallied Die Casting of Illinois.

Aallied Die Casting has an impressive client list: GM, Ford, Chrysler, Toyota and John Deere. But while some of those companies may have been lured to foreign markets with the promise of getting a cheaper product, it didn't always work out that way.

“They finally felt it in the pocketbook, in the logistics, in the administration required, the offshore quality personnel are required to be over there,” said Higgins. “All of these unanticipated costs they now started feeling, and it got to a point with them that they had to at least start market testing here to companies like us.”

In the late 1970s, the Chicago area had an estimated 7,000 manufacturing plants, most of them small. But, by the late ‘90s, about 4,000 of them had disappeared. The reasons ranged from automation to deindustrialization. But by the turn of the 21st century, so-called offshoring took away more companies. One of the most famous in Chicago was the Brach's factory on North Cicero Avenue.

“Brach Candy Company, which was a major candy company on the west side, wanted to move to Mexico, but couldn't find an adequately skilled workforce in the late ‘80s,” said Dan Swinney, Executive Director of the Chicago Manufacturing Renaissance Council. “But, by 2000, they could. So what you had, I think, in the mid to late ‘90s, beginning of 2000, you began to have companies offshoring, going offshore. But it wasn't sending all of the manufacturing jobs offshore. In the first place, what they did was they sent jobs that were low-skill jobs, that required simple assembly, very simple processes, and those were the jobs that went offshore.”

Increasingly foreign markets, especially China, began providing a better trained work force with more sophisticated capabilities and labor costs that were a fraction of what U.S. workers earned. For some companies, it was ideal. But for others, things turned sour.

“So, one of the things that really happened over the last 10 or 15 years, companies that sent work offshore realized that the quality, first of all, wasn't what they expected,” said Swinney. “And as they moved to making more complex products that required high precision, the work that was being done offshore around the world had a lot of faults, had a lot of mistakes, had to be redone, which added a whole new cost to production.” 

While China was once a lure because of cheap labor, wages in that country are now rising by 15 to 20 percent per year. For the Arrow Gear Company, however, Chinese competition is still a threat. The Downers Grove company manufactures gears for jets and helicopters. Pratt & Whitney, Rolls Royce and Boeing are among their customers. Joseph Arvin is the president of Arrow Gear, and he's visited some of his counterparts in China.

“One of them, in 2006, were making the same identical gears that we're making here in Downers Grove,” said Arvin. “And, at that point in time, 70 percent of their equipment was new CNC numerical control equipment. At that point in time, Arrow Gear was about 70 percent. I was there last year; they're 100 percent all new equipment, I'm still 70 percent. They had to put $40 million in new equipment into that plant. And I said, well, where did you get the money? They said, from the Chinese government, we're owned by the Chinese. Well, I don't want to say, why doesn't my government help me? I'm not asking for a handout. I just want some tax breaks. I want to have R&D money.”

In the absence of federal subsidies, Harry Moser is trying to help manufacturers understand what he says are the real costs of offshoring. Coming from a family of manufacturers, three years ago Moser launched the Reshoring Initiative.

“Many companies historically have decided based on labor rate, where should I put the factory? Where is the labor rate lowest?” said Moser. “But we get them to also look at the carrying cost of the inventory, the travel cost to check on the supplier, the intellectual property risk, the opportunity cost when they can't deliver because they can't get product fast enough, the impact on their sales because they have a "made in China" label instead of a "made in U.S." label.

“For example, GE did that at an appliance park in Louisville, and by just working hard with that team together, in one language, in one place, they were able to cut the cost enough so that they are selling a U.S. made product for 20 percent less than what the product was when it was made in China.”

Moser says the actual number of manufacturing jobs that have been reshored to the U.S. in recent years remains miniscule at only about 50,000. Most of those are in plants in the southern U.S. Only about 10 to 15 companies in Illinois have actually reshored. But while some companies may be reshoring their more complex products, another U.S. manufacturing challenge is already underway. 

“Our state of the manufacturing economy at this point is troubled. I mean, it's growing and vibrant in certain ways, but right now there are 600,000 positions in manufacturing, that are jobs going unfilled,” said Swinney. “These are jobs that pay, on average, $75,000 a year because companies can't find young people or anybody with the talent, the skills, the education necessary to do the work. So this issue of, if we're going to reshore, we have to have companies that really can find the talent and have the talent they need to do the work, and that's a challenge.”

Experts warn that China, and especially India, are beginning to meet the more complex skills that American manufacturers are in need of, and that could potentially generate a new wave of offshoring.

Aallied Die Casting is trying to prevent that from impacting their company again.

“Where we're combating that is we've been very strong at going down to the college and trade school level and reaching out to these facilities, creating internships, apprenticeships, co-ops -- bringing them in and growing our own,” said Higgins.

But the global competition is not letting up any time soon, and reshoring may be only a temporary phenomenon.

Right now, there are about 400,000 manufacturing jobs in the Chicago area. More than half of those are in Cook County.

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