Research indicates US manufacturers looking to repatriate 20% of capacity

It was apparently only a matter of time before US manufacturers, pressured by their customers to seek lower cost alternatives than the United States, returned production to the United States.  New research by The Hackett Group which was highlighted in an article by American Shipper for their June publication shows that a narrowing of the gap of costs between the US and China (the primary destination for much of the offshoring) is one of the key reasons to bring it home.

The ability to produce has never been at issue; the United States’ reputation as a global manufacturer has long since been established.  Hackett instead highlights higher transportation costs (directly attributable to the price of fuel), higher wages, Customs duties, raw materials all are contributing towards a narrowing of that gap.

Key takeaway numbers from the Hackett Report, as well as one from the Boston Consulting Group:

  • 75% of firms surveyed by Hackett have their own plants or contract with manufacturers in China representing between 15-20 million jobs.
  • The cost gap has shrunk by 50%.
  • As Chinese wages rise, manufacturers are looking to other countries such as India, Thailand, Vietnam and Brazil.  Each of these countries has their own positives and negatives which must be taken into account.

However, cost isn’t the only element to this equation.  Skilled labor is something that will be required, whether to operate computer controlled machinery or just having the experience that come from years working in a craftsmanship-intensive industry.  People have asked why one of the most well-known importers, Apple Inc., doesn’t manufacture in the United States.  The New York Times reported in January that Apple discovered when it came time to produce and launch their iPhone, it required 8,700 engineers and 200,000 factory workers.  To find that kind of labor pool would’ve taken nine months in the United States, they estimated.  In China?  Fifteen days.

Ultimately if the United States is to bring back quality, skilled manufacturing jobs, it requires a commitment from the government to create a climate where companies can be rewarded for making things here (and contributing to the National Export Initiative along the way) and find enough labor to make it happen in existing or new technology such as renewable energy.  An inexorable march to the inevitable, however, will require logistical support from lots of people and groups along the way.

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