South Carolina Shines as U.S. Reshoring Hot Spot
South Carolina is the fastest-growing manufacturing economy in the Southeast, according to a recent report released by the U.S. Department of Commerce's Bureau of Economic Analysis, and a recent reshoring wave has pushed it to the forefront of fast-growing, economically thriving states.
The state is a leader in the manufacturing revival, and while a small state in size, it has traditionally had a strong manufacturing presence and continues to gain momentum, said South Carolina Commerce Secretary Robert "Bobby" Hitt at a hearing in March before the U.S. House of Representatives Small Business Committee Subcommittee on Economic Growth, Tax, and Capital Access. The hearing, titled "Made in the U.S.A.: Small Businesses and a New Domestic Manufacturing Renaissance," was held by the subcommittee to examine the reshoring trend, the factors that are influencing it, and what a growth in American manufacturing could mean for small businesses.
South Carolina also tied North Carolina as the fastest growing state on the East Coast, according to the report, which ranked South Carolina's economy as the 12th fastest growing in the nation.
"We are known as a heavyweight in the aerospace and automotive sectors, with the highest per capita employment by foreign-owned companies," said Hitt during the testimony. "For these reasons, the national trade press has given us the moniker 'Beast of the Southeast,' which we wear with great pride."
In his remarks before the subcommittee, Hitt said that in 2012, South Carolina's manufacturing GDP was $28.7 billion—approximately 16.3 percent of the state's overall economy and a larger share than on the national level, where manufacturing accounts for 12 percent of the U.S. economy. "Between the end of the recession (July 2009) and December of 2013, South Carolina added 15,600 manufacturing jobs, an increase of 7.4 percent—more than double the rate of growth on the national scale over the same time frame," he stated.
Recent announcements indicate that reshoring is occurring in South Carolina, according to Hitt, who cited the successful recruitment of the aerospace industry—including Boeing's 787 assembly operation—as an example. "In 2013 alone, nearly $981 million in capital investment and 1,200 new jobs were announced by manufacturers bringing their operations to South Carolina from overseas," he remarked. "The companies range in size and scope."
Hitt said that three Walmart suppliers announced new facilities in South Carolina last year as part of Walmart's U.S. manufacturing initiative. Altogether, the three companies represent 800 new jobs and more than $14 million in investment. They include Kent International, a bicycle company; Element Electronics, a maker of televisions; and Louis Hornick and Company, which provides window coverings and home textiles.
Another example is Silcotech, a Bolton, Ontario, Canada-based manufacturer of silicone injection molded components for the medical industry. Last August, the company announced plans to locate its new facility in York County, South Carolina. Silcotech's $3.5 million investment is expected to generate about 50 new jobs.
South Carolina has also been the location of choice for companies looking to reshore contract manufacturing work to manufacturing operations with fewer than 100 employees. Examples include Sargent Metal, which contracts with Otis Elevator; and ADEX Machining, which provides value-added work for the aerospace sector.
"In these cases, being Made in the U.S.A. offers a highly skilled workforce, lean manufacturing processes, as well as cutting-edge technological advances and world-class infrastructure," Hitt said in his testimony.
Hitt also said that the South Carolina Department of Commerce is working to connect the dots between small business and large industry. Supplier outreach events and a "Buy South Carolina" program are aimed at bringing together industry's needs with businesses in the state that can fulfill them, he said.
"One recent success is Continental Tire, which is investing a total of $500 million and creating 1,600 jobs in Sumter, South Carolina," said Hitt. "The tire maker announced in January that it awarded some $100 million in contracts to South Carolina companies to date, an example of the ripple effect that occurs when a company of its scale locates in the state."
Automotive is strong in South Carolina and it has three of the top four global tire makers. Today, more than 45,000 South Carolinians are employed by the automotive industry in the state, Hitt said.
According to the subcommittee's press release on its reshoring hearing, a number of changes have occurred in the United States and overseas that appear to be reversing the offshore manufacturing trend. Recent increases in the cost of transporting goods, as well as currency appreciation, quality control issues, and a general rise in productivity-adjusted wages have driven up the cost of manufacturing overseas. These changing factors, combined with shorter supply chains that allow domestic manufacturers to respond to customer demand in days or weeks, instead of months, are providing domestic manufacturers a distinct advantage over their foreign competitors, according to the release.
"In order to improve America's global competitiveness, we must reinvigorate our nation's manufacturing capacity," said Chairman Tom Rice (R-SC) in the release. "We must also not forget the importance of this industry to the small business economy. When larger businesses decide to reshore their manufacturing to the United States, they not only create jobs in their own plants, but additional jobs in factories and plants of their component suppliers, many of which are small businesses."
Small businesses in South Carolina typically reap benefits from manufacturing by providing value-added services—such as machining or repair—in support of the manufacturing operations, or by providing other services, such as subcontracting or construction projects, Hitt added.
"Many companies are finding that reshoring their manufacturing domestically allows them to enjoy benefits that are not often readily apparent or are difficult to quantify on a financial spreadsheet," Rice continued. "This is good for small businesses and good for America's global competitiveness. Washington must provide certainty and embrace policies that promote manufacturing growth in the United States to ensure that this reshoring trend continues."
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