In the July 9th post on his blog Software Advice, Derek Singleton wrote an excellent article entitled “What Can be ‘Made in the USA?”. Mr. Singleton writes about a topic we’ve discussed several times in this blog – reshoring – and shares some interesting data that we had not seen before.
COMING BACK TO THE USA
In 2012 manufacturing is expected to outpace growth of the overall economy and reshoring – bringing production back home – is part of the equation. As most of us know, low labor costs is what lured many manufacturers to move production to China. But did you know that Chinese labor costs are expected to increase 13 percent per year through 2015? Add to that the cost of shipping products around the world which is increasing and you’ve got some big reasons to bring jobs back to the USA. But there are intangible factors/indirect costs that also promote the advantages to reshoring including:
- Distance & cultural boundaries that make collaborating on design and engineering a challenge
- Lengthy lead times which can complicate supply chain management
- Protecting intellectual property (particularly in China) which can be a nightmare
- City & state governments more willing to provide tax breaks & other incentives to open domestic manufacturing facilities as a result of the continued economic downturn
- A renewed sense of pride in the “Made in the USA” label which generates goodwill for manufacturers
SEVEN INDUSTRIES NEAR A ‘TIPPING POINT’
According to the Boston Consulting Group, seven industries (see chart) are approaching a tipping point at which it will be economically viable to produce their products in the USA instead of China. Although this tipping point might be up to 5 years away, the products produced in these industries are good candidates for reshoring because they require a low labor content to produce (making cheap labor less important) and they are relatively heavy which means they are increasingly expensive to ship. These 7 industries represent $200 billion worth of goods that may be reshored.
THE RESHORING INITIATIVE
Last year, this blog introduced you to Harry Moser, the founder of the Reshoring Initiative. Mr. Moser echoes the sentiment of the Boston Consulting Group saying that “proponents of reshoring need to target industries with a low labor content relative to their product price so cheap labor isn’t as important.”
Do you have these type of companies on your prospect list? Are there any companies from the 7 industries that you can start building a relationship with now? Believe me, Remke will be looking at this very closely and we hope there are opportunities for us all.
Do you find this post helpful? What do you think of the opportunities in your market? Please let us know your thoughts and LIKE or SHARE this blog with others who would be interested. And as always thanks for subscribing to EVERYTHING’S CONNECTED.
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