For many people, the words “Made in the USA” have become a rallying cry. In fact, a survey done in 2012 found that 83% of US citizens disapprove of companies that manufacture their goods overseas and they are interested in initiatives that strengthen the US manufacturing base*. Their wishes are finally being granted.
The Reshoring Trend
Reshoring is the return of manufacturing jobs to the US from countries such as China, Southeast Asia, and Eastern Europe. The move has been fueled by rising labor costs in these regions, long distance shipping rates, and problems within the supply line. Add in the increasing numbers of US citizens who are actively seeking out products manufactured within our borders and it’s easy to see how the trend is being fueled.
When product manufacturing is especially technical, companies have found that they risk intellectual property theft and that they are unable to control quality levels. Within the computer industry, the reshoring of printed circuit board manufacturing is happening for all of these reasons.
What Makes Reshoring a Good Economic Idea Now?
Wages are increasing in formerly attractive off shoring destinations. US manufacturing headed off to China in droves between 2001 and 2009. Initially, the cost of labor was very low and this lower cost made off shoring a lucrative alternative. But, that is changing. While the average wage in China was a mere 72 cents an hour in 2001, Chinese workers have successfully demanded more money and their wages are expected to rise to $6.31 per hour by 2015. Since labor costs only contribute 7% to the total cost of manufacturing, reshoring is becoming more attractive.**
American productivity is second to none and the rates of that increase in productivity have been accelerating as well. With advanced technologies in place on the manufacturing floor, US workers produce more each hour than any other nation in the world.
The cost of shipping is increasing and is affecting the return on investment. Average ocean ship rates have increased by 135% since manufacturing moved into its current global scheme. *** Additionally, long shipping times make logistics more difficult. In constantly changing industries, it’s important to be able to deliver the goods when demand is high. This has driven the reshoring of printed circuit board manufacturing.
This news makes us feel optimistic about the future of manufacturing here in America and in the Silicon Valley specifically. It is part of the reason we have invested in new facilities and equipment to improve our productivity and quality to meet the demands of the marketplace.
It is increasingly making better sense for corporations to return to a “Made in America” mode.
* Alliance for American Manufacturing (AAM) http://americanmanufacturing.org/
** Boston Consulting Group (BCG) https://www.bcgperspectives.com
*** Archstone Consulting http://www.acrhstoneconsulting.com