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Why Local Manufacturing is Better: The U.S. Comeback

During the 1960s, the United States held a clear lead in the manufacturing industry. Job levels peaked toward the end of the 1970s, but have declined ever since with most of the “offshoring” going to China. The main reason for this migration was the low cost of outsourcing. This cost advantage is wearing thin, however, and over 200 manufacturing firms have brought jobs back to the U.S. this year alone. Most of these jobs came from China. Since 2005, exports from manufacturing have grown seven times faster than U.S. GDP, making it is one of the fastest growing industries today.

This week, we came across a report from the Boston Consulting Group titled “The U.S. as One of the Developed World’s Lowest-Cost Manufacturers.” We found many encouraging statistics and projections in this report, and we would like to share some of the highlights. We originally found this report through the ARISPlex blog, where they wrote a commentary similar to this one. We highly recommend reading this post, which can be found here. ARISPlex is a portal that discusses robotics and intelligent systems, providing industry related research, insights and analysis.

Returning to World Manufacturing Leadership

U.S. manufacturing dominance is symbolized when we decrease imports and raise exports. We become the producer rather than the consumer. The U.S. is on track to decreasing the number of manufacturing imports while increasing exports, according to BCG’s report. They estimate that the U.S. manufacturing sector could capture an additional $70-115 billion in exports from foreign countries, mainly Europe and Japan.

This would create an additional 2.5-5 million jobs, pushing the unemployment rate down by 2 percentage points. Manufacturing jobs are generally high paying with quality benefits; the industry has a relatively low turnover, as jobs become careers. This is just what our economy needs: all of this would result in a $3-9 billion boost in production.

Gaining a Cost Advantage

Local manufacturing is becoming more cost effective every year. By 2015, it will be cheaper to produce in the U.S. than in Germany, Japan, France, Italy, and the U.K. Prices are also becoming more competitive with China, as well. According to BCG, the cost advantage is largely due to three factors: labor, natural gas, and electricity costs. Possibly the most important of these is the labor cost advantage. BCG’s report states that “by 2015, average labor costs will be around 16 percent lower in the U.S. than in the U.K., 18 percent lower than in Japan, 34 percent lower than in Germany, and 35 percent lower than in France and Italy.” Ultimately, it comes down to one simple fact: the U.S. has the most productive workforce in the world.

Capturing Key Markets

Manufacturing is coming to our fastest growing markets like computer, automobile, and aerospace industries. Companies like Lenovo, Toshiba, Airbus, Ford and Toyota have all increased domestic production, sometimes moving entire factories or product lines back to the U.S. Of all these industries, transportation will have the top spot for growth. This includes automotive, aerospace, railway, etc. The second-largest source of growth from U.S. reshoring is coming from petroleum and coal products, with chemical manufacturing and computer equipment taking the third and fourth top spots.

The U.S. is heading toward world leadership in manufacturing once again. As jobs are brought back to the U.S. and the economy grows, we are sure to see huge technological breakthroughs and advances. We want to be there when all this happens, which is why we are dedicated to supporting local innovators and staying at the technological forefront of the industry.

To learn more about our services, visit our services page: http://celmfg.com/cel-services

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