Here's some good news for U.S. manufacturers — a new report from Boston Consulting Group titled “Made in America, Again: Why Manufacturing will Return to the U.S." According to the report, which was released Aug. 25, the return of manufacturing to the U.S. will accelerate
as companies take into account the full costs of outsourcing to China and strategic advantages of making products closer to consumers in North America.
The report cites factors including 15-20 percent annual increases in Chinese wages and a strengthening yuan, which will nearly erase China's manufacturing cost advantage vs. low-cost U.S. states for goods imported into North America.
Even as Chinese factories become more productive, thanks to automation and improved technology, rising factory wages will make it tough to compete with higher U.S. labor productivity.
“Greater automation would undercut the primary advantage of outsourcing to China, which is access to cheap labor,” said Harold Sirkin, a BCG senior partner and lead author of the study. “Once companies carefully look at all the costs, many will find they'll be better off making their products closer to customers in the U.S.”
The report cites examples like this one: Coleman Co. is moving production of its 16-quart wheeled plastic coolers from China to Wichita, Kan., due to rising Chinese manufacturing and shipping costs.
Won't other low-wage nations like Vietnam and Mexico pick up the work? Yes, says the report, but they will not be able to absorb all the higher-end manufacturing because they lack adequate infrastructure, skilled workers, scale and domestic-supply networks.
China will remain a major manufacturing power. But it won't be the force it is today, the report says. In terms of supplying North America, China will no longer be the default option for many OEMs.
Loepp is editor of Plastics News and author of “The Plastics Blog.”