High-tech manufacturing jobs are going to be returning to the U.S. in what’s known as “onshoring,” and the Triangle could be a prime destination for employers due to much lower costs as well as a variety of other benefits – from environment to intellectual capital – says a new study.

“The Triangle shows very well,” says Donald Morgan, an analyst at site location consulting firm The Boyd Company.

“This onshoring is going to happen. The question is: Where will it happen?”

And operating costs are a crucial factor for companies in deciding where to locate plants, according to Boyd which has clients in the Triangle. Costs are a “white hot” issue in board rooms, the study notes.

Several other factors add to the Triangle’s appeal, Morgan adds. Those include:

  • “An outstanding environment”
  • “A tremendous collection of intellectual capital”
  • “A sophisticated work force”

North Carolina State University economist Dr. Michael Walden, who has studied the advanced manufacturing sector, agrees with Boyd about the triangle’s appeal.

“There is merit to the arguments put forth by Boyd,” Walden said. “North Carolina – in particular, NCSU and RTP – is developing a ‘critical mass’ in advanced manufacturing.”

Walden added that NCSU already is known as “the Southeast Manufacturing Innovation Hub.” And more is required to win company locations than just lower costs.

“This sector requires very highly talented scientists and workers that aren’t easily developed in a short period of time. So North Carolina has a head-start on developing this sector,” Walden explained.

“Costs are important – I have no reason to question Boyd’s rankings – but talent and existing programs are the most important factors in location of this kind of highly specialized economic sector.”

Why “onshore”?

Why are companies bringing jobs back to the U.S.” As costs increase elsewhere, such as for labor in China, multiple factors come in to play, according to a recent report from investment firm Baird Capital.

“[O]nshoring the manufacturing of finished goods presents significant cost savings opportunities,” Baird said.

“Bringing assembly factories closer to the end customer drives greater efficiencies than an Asia sourcing scenario, including working capital optimization, faster lead time to customers and the ability to tailor products to customer requirements. Another critical factor to consider is quality. Companies can better control quality processes in a factory they actively oversee and manage versus a facility they visit periodically.”

What kind of jobs?

Advanced manufacturing jobs as identified by Boyd include but aren’t limited to:

  • Precision metalworking
  • Engineered plastics
  • Composites
  • Energy
  • Aerospace
  • Med tech

John Boyd, the CEO of the firm which helped bring Stiefel Labs to the Triangle following its acquisition by GlaxoSmithKline, is briefing Triangle executives today about the findings of the report in which the company analyzed costs of operating an advanced manufacturing facility at 24 regions identified as “top locations” for companies looking into “expanding advanced manufacturing operations.”

The Triangle placed third lowest among 23 U.S. sites, fourth lowest when one Canadian region is included.

The Boyd Company calculated the costs of operating a 300,000 square foot plant employing 500 hourly workers.

Such a plant in RTP would cost a company just under $33 million. That’s nearly $10 million under what a similar plant would cost in Silicon Valley and $1.5 million a year less than Triangle rival Austin, Texas.

Only the Triad in North Carolina and Charleston, S.C. ranked lower among U.S. sites. The least expensive site among the 24 was the Eastern Ontario region of Canada.

Cautious optimism

Walden agrees that jobs are going to be “onshored” as opposed to “offshored,” but he cautions there might not be as many as some people expect.

“One caution: There has been much talk – including in the presidential campaign – of returning manufacturing jobs to the US,” he said.

“In my professional opinion, even if manufacturing production increases in the US (and North Carolina), jobs associated with this added production will be much smaller than in the past due to the shift away from labor and to machinery and technology in manufacturing firms.”