More GA Manufacturers Gain Business from In-Sourcing than Lose from Outsourcing

Gaining Business: The 2012 Georgia Manufacturing Survey shows a line has been crossed, with more firms benefiting from in-sourcing than losing from outsourcing.

The 2012 Georgia Manufacturing Survey provides some welcome good news for Georgia companies.

For the first time since researchers began tracking the statistic, more Georgia manufacturers have been benefiting from in-sourcing – production work coming to them from outside the state – than have been losing work to other states and countries.

Nearly 16 percent of the companies responding to the survey said work had been transferred to them from outside Georgia, compared to slightly more than 14 percent that lost work to out-of-state facilities.

The percentage of companies receiving work from facilities outside Georgia grew from just 11 percent the first year the question was asked in 2005, while the percentage of companies losing work fell from slightly more than 17 percent.

“We have finally seen a crossing of the lines so that more companies are benefiting from in-sourcing than are losing to outsourcing,” said Jan Youtie, director of policy research services in the Enterprise Innovation Institute at the Georgia Institute of Technology.  “It’s not a huge difference at this point, but it is a positive and consistent trend for the manufacturing community.”

The in-sourced work most commonly came from other facilities in the U.S., though a growing percentage of companies reported production transferred to them from outside the U.S.

The percentage of companies benefitting from this “on-shoring” trend grew to 4.3 percent from 2.6 percent in 2005.

“This may be about the total cost of manufacturing,” said Youtie, who also holds a faculty position in the Georgia Tech School of Public Policy. “Companies are taking a hard look at aspects of production they formerly assumed were cheaper overseas. There are costs involved in outsourcing that may not have been considered before, such as logistics and regulatory issues. Rising foreign labor costs may be another factor.”

Technology-driven companies and those that compete on the basis of innovation are more likely than other firms to benefit from in-sourcing.

Larger companies are somewhat more likely to receive work from outside the state than are smaller firms. In some cases, companies both gained work from outside Georgia and lost work to outside facilities.

“The growing need for new technology has also created an interesting convergence between different sectors in Georgia’s manufacturing industry,” said Adam Beckerman, partner-in-charge of the manufacturing and distribution group at Habif, Arogeti & Wynne, LLP (Atlanta, GA).

“For example, a piece of robotic equipment that is being used to attach car doors at an automotive production plant happens to be the same equipment that is being used to hold chickens at a nearby food production facility,” explains Beckerman. “In coming years, we will see more of these multi-purpose technologies and pieces of equipment having a positive impact on various sectors of the manufacturing industry.”

The Georgia Manufacturing Survey is conducted every two or three years to assess the use of modern manufacturing technology, practices and techniques by Georgia industry.

It was conducted by Georgia Tech researchers in collaboration with Kennesaw State University, the Georgia Department of Labor, and the Atlanta accounting firm Habif, Arogeti and Wynne, LLP, a Georgia-based tax, accounting and business advisory firm.

The 2012 survey was conducted from February to May of 2012, and received responses from 528 companies that had 10 or more employees.

The survey also asked about a broad range of competitiveness and productivity issues, and focused on current and planned technology use. More than half of the respondents reported using enterprise resource planning, computer-aided design and preventive-predictive maintenance technology.

Inventory-focused technologies such as bar-code readers and radio-frequency identification (RFID) systems led the list of future priorities, with 21 percent of companies planning to purchase readers and 18 percent planning RFID investments.