The Impact of Bringing Jobs Back: Transportation ...NAICS Industry In-Region Out of Region 3344 Semiconductor and Other Electronic Component 24.8% 75.2% 3345 Navigational, and Control

Center for Logistics, Trade and Transportation

http://www.usm.edu/cltt

Chad Miller, Ph.D.Associate Professor

The University of Southern Mississippi

The Impact of Bringing Jobs Back: Transportation & Economic Development Implications

The Future of American Manufacturing SummitMarch 22, 2017

Franklin Furniture InstituteMississippi State University

Reshoring and Its Impacts on Transportation Infrastructure and the US Economy



Presentation Outline

1. Reshoring and the Reshoring Initiative Databases

2. Industries likely to reshore and where they might go

3. Impact on freight flows

4. Economic impact

5. Implications for transportation and economic development



Reshoring and Its Impacts on Transportation Infrastructure and the US Economy

Center for Freight Infrastructure Research & Education

• University of Southern Mississippi– MD Sarder, Tulio Sulbaran, and Chad Miller

• University of Memphis– Mike Golias, Sabya Mishra

• University of Alabama –Huntsville– Mike Anderson

• University of Wisconsin-Madison– Ben Zietlow

Advisors: Bill Martin, MSU; Harry Moser Reshoring Initiative; Bruce Lambert ITTS



Definition of Reshoring

Source: http://reshorenow.org/blog/definitions-of-reshoring/

The practice of bringing manufacturing and services back to the U.S. from overseas.



Reshoring Initiative DatabaseIndustry Reshoring Initiative

Companies BCG

331 Primary metal 52 Yes332 Fabricated metals 45 Yes326 Plastics and rubber 38 Yes336 Transportation goods 36 Yes335 Appliances/electrical equipment 34 Yes315 Apparel 32334 Computers and electronics 31 Yes333 Machinery 25 Yes339 Misc. Mfg. 23337 Furniture 20 Yes311 Food Mfg. 8314 Textiles 7316 Leather 6327 Mineral Mfg. 6321 Wood 3322 Paper 3334 Electronics 2

Sirkin, H. L., Zinser, M., & Rose, J. (2014). The Shifting Economics of Global Manufacturing: How Cost Competitiveness Is Changing Worldwide. Boston, MA: The Boston Consulting Group.

Reshoring Initiative. (2016). Reshoring Initiative Data Report: Reshoring and FDI Boost US Manufacturing in 2015, from http://reshorenow.org/blog/reshoring-initiative-data-report-reshoring-and-fdi-boost-us-manufacturing-in-2015/

37,004 reshoredjobs

13,528 jobs kept from off-shoring

72,045 FD jobs



Where are the reshored jobs?

Sources: Reshoring Initiative Library, August 31, 2014



Review of the Literature

• Is reshoring a significant trend?

• Wages & productivity significant factors– Currency, supply chains, IP– Reshoring Initiative (Total Cost of Ownership)

• Findings skilled workers greatest challenge– Retirement of aging workers exasperating issue

• US should reform taxes and other costs (e.g., tariffs, duties, healthcare) and minimize regulatory burden

Destination-based cash-flow tax?



Destination-based cash-flow tax?Value-added tax (VAT) plus the average tariff in each country

US 9% EU 25%

China 27% India 31% Source: NYT



Challenges to Reshoring



Anticipated Advantages

Advantage 2013 2014

Improved speed to market 71% 67%

Lower freight costs 75% 59%

Customer Service 42% 42%

Fewer supply chain disruptions 35% 30%

Import duty & tax benefits 27% 27%

Better quality 21% 19%

Easier Mgmt Coordination 31% 81%

Lower input costs 17% 13%

IP Issues 14% 12%

Shrinking wage gap 22% 7%

Data adopted from Finley et al 2014



Reshorability Index (Sarder 2015)

• Identified 44 socio-economic factors that influence the reshoring decision.

• Applied these factors to 4 & 6 digit NAICS

• Sensitivity analysis for various countries

Sarder, M. D. (2015, January). Reshoring-A Driving Force to US Manufacturing. In IIE Annual Conference. Proceedings (p. 3091). Institute of Industrial and Systems Engineers (IISE).

• High potential reshoring/near shoring• Motor vehicle parts• Iron and steel • Computer and electrical eqpt.• Appliance mfg industries • Ceramics/plumbing



Computer and Electronic Product Manufacturing



Pottery, Ceramics, and Plumbing Fixture Manufacturing (327110)

Overall concentration of 0.90, below average workforce availability.

Overall job growth of 16.5% from 2011-2016, indicating that the regional talent pool is increasing.

Labor cost in MS $25.2kNational labor cost $52.5k

Only 27% of supply chain in-region



Regions likely to benefit from reshoring (UM-W)

• Matched regions with specific manufacturing concentrations with industries that have started to reshored

• Based on this approach target industries for Mississippi

– NAICS 337 Furniture & Related Products– NAICS 336 Transportation Equipment– NAICS 3391 Medical Equipment &

Supplies (Memphis region)



Reshoring “Hotspots” by Industry



Freight Flow Analysis (UA-H)

• Scenario's of FAF O/D data for reshoring industries with 5-20% freight import reallocation to US production

Decrease to some East Coast (e.g., Savanah, Baltimore, NY) and Gulf Coast (e.g., New Orleans) ports

No significant change to other ports (e.g., Mobile, Norfolk)

West Coast ports less impacted

Import Freight Flows Impacted



Economic Impact on CFIRE Region

Industry Summary for Manufacturing

6,473,426 (2001) -30.4%

4,504,516 (2010) % Change (2001-2010)

Loss of 1.9m mfg jobs Nation: -29.7%

Large manufacturing job losses in the region 2000-2010



Economic Impact on CFIRE Region

2010 to 2015 13,043 direct manufacturing jobs

Additional 17,343 supply chain jobs

1.91% of mfg jobs in those industries

$3.6b impact on earnings



CFIRE Regional Mfg Economy

NAICS LQ 5 yrChange

ReshoringTotal

Due to Reshoring

31-33 1.44 455,718 30,386 7%?

Industry Summary for Manufacturing

4,960,234 10.3% $74,322Jobs (2016) % Change (2010-2015) Avg. Earnings Per Job

39% above National average Nation: 6.8% Nation: $79,200



Mississippi Reshoring Impact 2015

• 986 mfg jobs

• 206 supply chain jobs

• 431 induced

• $76m in annual earnings

• Annual tax impact $6.9m



Suppliers to the Industries Reshored

74.5%

25.5%

Total Regional Demand Percentage

In-Region Out of Region



Regional demand for industries ranked by total amount

NAICS Industry Amount In-Region Out of Region

3363 Motor Vehicle Parts Manufacturing $22,772,853,899 93.6% 6.4%

3252 Resin and Filaments Manufacturing $8,000,117,824 71.3% 28.7%

3261 Plastics Product Manufacturing $6,455,069,916 72.4% 27.6%

3311 Iron and Steel Mills and Ferroalloy $3,996,234,178 81.9% 18.1%

3327 Machine Shops $3,687,854,666 81.5% 18.5%

3336 Engine, Turbine, and Power Transmission $3,398,630,316 83.5% 16.5%

4251 Wholesale Electronic $3,241,757,294 72.5% 27.5%

3315 Foundries $3,046,691,816 81.9% 18.1%



Major Out-of-Region Suppliers

NAICS Industry In-Region Out of Region

3344 Semiconductor and Other Electronic Component 24.8% 75.2%

3345 Navigational, and Control Instruments 47.3% 52.7%

3359 Other Electrical Equipment and Component 51.0% 49.0%

4236 Electrical and Electronic Goods 51.5% 48.5%

4234 Professional and Commercial Equipment and Supplies 53.0% 47.0%

3314 Nonferrous Metal (except Aluminum) 57.8% 42.2%



Ports of Entry for Out-of-Region Inputs



Motor Vehicle Parts Import Ports

$0

$5

$10

$15

$20

$25

$30

$35

Billi

ons

Motor Vehicle Parts Values by Port of Entry



Conclusions

• Certain industries are expected to continue to reshore

• Regions should target industries

• Reshored industries are likely to locate where they can find a strong proximate supplier network

• Efficient regional transportation is important with links to key strategic ports



Need Investment to Have Efficient Transportation

• 25% or 20,000 miles of highways are in “very poor condition”

• 1,054 of the state’s 5,724 bridges are either posted (as in being dangerous) or are closed

• MEC recommends investing $375 million annually to address Mississippi’s deteriorating roads and bridges.

Sources: http://www.horizonautoshipping.com/export-faqs Source: http://www.tgal.us/enclosed-container-20ft-40ft-45ft-high-cube

Mississippi Defense Diversification InitiativeOpportunities for Defense Contractors to

Diversify

Economic diversification in Mississippi to reduce the state’s dependence on federal defense spending by identifying new revenue streams for Mississippi companies and opportunities for its entrepreneurs and researchers/scientists

Large Defense Contractors• Spinouts driven by innovation• Development of Tier 2

suppliers program

Growth Entrepreneurs• Defense Researchers at

federal labs/universities• Micro companies• LDC spin-outs• Defense IP commercializers

$5.2 Billion of Annual DoDspending in Mississippi

5.1% of the state GDP

SME Defense Contractors• Opportunity & Growth

Program• Market expansion• Geographic expansion

900,000,000

400,000,000>100,000,000

Over 3,000 Defense Contractors

Federal Defense Labs• US Army Engineering

Research & Development Center (Vicksburg)

• Naval Research Lab (StennisSpace Center)

Build capacityTrain-the-trainer

Develop networksSupport BRE programs

Connect to national platforms

Contact:Haimes A. Kilgore LTC(R), MBA, Program Director,Cell: 954-494-6650Office: 601-266-5275Email: [email protected]



Chad R. Miller, Ph.D.Associate Professor

Graduate Coordinator of the Masters of Science in Economic Development Program

Assistant Director of the Center for Logistics, Trade, and TransportationThe University of Southern Mississippi

Economic Development & TourismCollege of Business

118 College Drive, #5022 Hattiesburg, MS 39406Tel: 601-266-6666 Fax: 601-266-6071

Email: [email protected]

Documents

The Impact of Bringing Jobs Back: Transportation ...NAICS Industry In-Region Out of Region 3344 Semiconductor and Other Electronic Component 24.8% 75.2% 3345 Navigational, and Control