'Insourcing' becoming more popularAfter years of sending jobs overseas, companies are beginning to bring them back to the U.S. as part of their cost savings strategies. Many businesses that previously had their manufacturing hubs in Asia have found that the rapidly rising costs make it less effective to produce their goods there than in the U.S.

Businesses that have manufacturing centers in Asia are becoming increasingly concerned about rising shipping costs. It is becoming expensive for companies to have their goods made on one continent, then shipped across the world to be sold. While energy prices at home have dropped, it makes sense for businesses to bring production back to the States and enjoy the much lower cost of delivering goods.

Manufacturing costs in Asia are also on the rise. While many companies previously shifted their manufacturing overseas to reduce money spent on employee labor, it is no longer cost effective for some businesses to keep spending money on foreign workforces. As worker wages in Asia continue to increase, many countries are no longer the low-cost production havens they once were.

Shipping costs and labor wages are not the only reasons American companies are bringing production back home. The Wall Street Journal reported that a survey by Massachusetts Institute of Technology professor David Simchi-Levi revealed companies have more motivation for insourcing their manufacturing.

The survey showed that one reason companies are eager to bring production back to the U.S. is to be able to get goods to the market more quickly. Rather than waiting on shipments from across the globe, their products will be closer to where they eventually need to be. Businesses also cited intellectual property protection as one of their reasons behind the insourcing trend. Many businesses also named customer service issues, such as faster response to orders and higher quality products, as reasons they would like to produce more goods in the States.

Several large companies have made recent announcements about their insourcing efforts. Google announced that its Nexus Q would be manufactured in the U.S., something not commonly seen in the electronics industry. Coffee giant Starbucks recently built a manufacturing center in Georgia and sourced a line of mugs from an Ohio ceramic manufacturer. Caterpillar, General Electric and Ford have also jumped on the insourcing bandwagon and publicly committed to bring jobs back to America.

As more American companies consider the perks of taking production back to the U.S., foreign businesses are also considering the cost of doing business in the country. Japan's Yaskawa Electric recently made the decision to built a new plant in Illinois rather than China. More businesses are finding that insourcing can be a way to step up cost reduction efforts, as the global manufacturing market continues to change.
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  1. I heard 'insourcing' was becoming less popular. What say you?

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