- Did you know that China is expected to see more cost inflation in the future than the U.S. or Mexico?
- Did you hear that Ford announced it will build some auto parts in the U.S. that have traditionally been sourced in China?
- Did you read that Otis Elevator is moving production from its factory in Mexico to a new plant in South Carolina? Or that a furniture maker is opening a new factory in North Carolina instead of continued sourcing from China?
Each of these stories was reported recently in the Wall Street Journal. Over the past month or so we’ve blogged a few times about bringing jobs back to the USA. Jobs may be starting to trickle back home from China, but why? Isn’t manufacturing in China the be-all, end-all? Not necessarily.
The WSJ reported that wages in China are on the rise – up 15% or more a year in some provinces. Shipping costs have doubled over the past few years. Since 2005, Beijing has allowed its currency to rise about 30% against the dollar. A stronger juan makes China’s exports more expensive in foreign markets which is bad for U.S. manufacturers who serve their global customers from factories in China. But for those who want to see production move back to our own shores? This is good news.
The story in the WSJ included a manufacturer of high-end earphones who said that “quality control proved a headache.” Sleek Audio is moving their production to Florida and their chief executive said that although costs will rise by 20% they will have “better quality control and less lost inventory” to “offset those increases. Profits will go up.” For Otis Elevator, their new plant in the North Carolina will be closer to a majority of their customers which will lower their freight and logistics costs by over 17%.
Remke has always manufactured our product in Chicago. Logistics issues have plagued others in the electrical industry who sent their production to China and elsewhere overseas. It would seem that manufacturers in other market segments are beginning to see that the grass isn’t necessarily greener in China. For the sake of the U.S. economy, may that attitude grow so that more & more jobs come back home.
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