It’s no secret that fashion goes in cycles. Witness the return of the circa-1970s denim jackets and three-quarter sleeve concert T-shirts at your local Gap. (I’m just waiting for my Members’ Only jacket and Risky Business-style Ray-Bans to come back in vogue.) Business trends and approaches often follow similar cycles. The recent energy crunch was reminiscent of the Jimmy Carter era — without the odd/even days at the pump.

A new Industry Week article provides further evidence that a near-shoring may be back. The article profiles uniform designer, manufacturer, and distributor, TLM Industries. After trying its hand at offshoring to low-cost regions in th 1990s, TLM ran into quality problems with sizes and colors and found it difficult and costly to correct these issues from the other side of the globe. In the article TLM CEO Tim Mossberg said: “Our prices started increasing rather than decreasing as it should for an imported product.”

TLM has since shifted its manufacturing to Fort Walton Beach, Florida. Once a production center for large garment makers, the area had largely been abandoned as these companies moved their manufacturing overseas. The result: TLM was able to secure a stable and skilled textile workforce at competitive wages. According to the article, the near-shoring strategy has added more flexibility and control over the end-product, transportation and handlign costs, and enables TLM to quickly respond to style changes and spikes in demand.

There is a strong argument that TLM’s offshoring experiment could have generated greated results and savings if the company employed effective strategic sourcing, supply management, and landed cost management approaches. But the eventual decision to shift manufacturing to the U.S. – especially the Southeastern U.S. — is indicative of a resurgence in near-shore sourcing. Locations like Kentucky and Tennesee have emerged as manufacturing hotbeds.

Ironically, the biggest moves to source from U.S. suppliers and increase manufacturing in the states seems to be coming from foreign-based companies. The highest profiles are Japanese automakers, like Toyota and Honda, which produced 3.7 million vehicles in North America last year. As noted in previous posts, Honda and Toyota each have more than a dozen manufacturing plants in North America. And both are building more U.S.-based capacity. Similar to the TLM approach, the Japanese transplants are now setting up shop in the Midwest, where there is an ample supply of skilled laborers due to bankruptcies and low-cost-country sourcing strategies of U.S. automakers and suppliers.

The Japanese automakers are also increasing the local “U.S. content” within their vehicles. A recent Detroit Free Press article reported that Toyota now spends $20 billion annually with North American parts suppliers, up 400% from a decade ago. Heck, the Toyota Camry can now officially be identified as a “domestic” vehicle because it meets U.S. government targets of having 75% or more of its content made in the U.S. or Canada.

It nows seems that some U.S. manufacturers are following suit. Black & Deck, Delta Faucet, Procter & Gamble, and Whirlpool all have set up manufacturing in Jackson, Tenn.

These rising manufacturing regions offer a skilled and stable workforce at competitive wages compared to the rest of the U.S. Keeping manufacturing and supply onshore can also help mitigate risks, narrow leadtimes, and shrink total landed costs.

However, there are still several hurdles to a full-scale comeback U.S. manufacturing and supply resurgence. The benefits of keeping production onshore are outweighed by the cost advantages of well-managed low-cost-country supply strategies. In fact, a study released today by the National Association of Manufacturers (NAM) found that U.S. manufacturers operate at 31.7% structural cost disadvantage to their foreign competitors. The study said U.S. costs were higher due to corporate tax rates, employee benefits, legal costs, natural gas prices, and pollution abatement.

Offsetting this disadvantage will require a mix of sustainable supply strategies and policy changes:

• Socially responsible supply strategies, such as investing in developing supplier capabilities and manufacturing capacity in recessed U.S. regions. Take a page out of the Japanese automakers’ book and target recently fallen manufacturing centers where a skilled workforce, facilities, and tax advantages still remain.
• Policy changes to increase tax breaks for commercial investment in infrastructure, training, and other activities to revive recessed manufacturing regions.
• Increased investment in alternative energy and environmentally responsible materials and production methods. This can help cut off costly taxes and fines for emissions. Hey, with global temperatures rising, even staunch, pro-business Republicans are thinking there’s something to this global warming thing. Evidence Gov. Schwarzenegger signing a tough new law yesterday to curb greenhosue gas emissions in California. (More on this later.)

These changes will occur. It’s just a matter of when and how well your company will be positioned to take advantages of these changes.