“A range of underlying changes are taking place in the US economy that will give a boost to manufacturing, even if some of this has yet to show up in the [production] data.”
~Hal Sirkin, a manufacturing expert at BCG
I realize most people are cynical about a possible manufacturing revival in America after all – how can we compete with low wage countries like China, Vietnam, Guatemala etc. Let me remind you that the U.S. has been the #1 country to move manufacturing jobs to for the past two years (source). But let me also remind you that Germany pays its workers 30% more than the U.S. does and it has a burgeoning manufacturing industry. Germany has figured out how to pay its workers more and still grow its manufacturing industry and it looks like we may be on the precipice of a new manufacturing era. And some experts say the foundation has been built for a new era of manufacturing jobs coming back home.
The Financial Times calls it an “industrial revival” and explains a report by the Boston Consulting Group HERE:
As a result the US has the potential to increase goods exports by up to $130bn by 2020, in the process adding 5m jobs to the US economy.
The consultants estimate that because of the underlying shifts, the US will by 2015 have a cost advantage over manufactured goods exports of 5 to 25 per cent compared with countries such as Germany, Japan and the UK. In particular, the cost disadvantage the US suffers compared with China is starting to decrease.
While in 2010, the cost of turning out a dollar’s worth of goods in a Chinese factory was on average 12 per cent less than the equivalent cost in the US; by 2015 the cost gap will be reduced to 7 per cent, the consultants say.
Forbes adds HERE:
PwC’s recent report A Homecoming for U.S. Manufacturing? evaluates the key factors that may lead to the U.S. becoming a more attractive manufacturing location. Many manufacturers are increasingly reevaluating their U.S. strategies, such as their separation of R&D and production, and their production abroad and importation back to U.S. buyers. Depending on the industry, they may find considerable benefits in establishing regionalized supply chains and R&D facilities in the U.S., including reducing costs, shortening lead times, protecting intellectual property, and avoiding many of the risk factors of developing markets.
Localizing production can help reduce supply chain disruptions that cost American industrial manufacturers $2.2 billion last year, according to the PwC report. Bringing manufacturing production back to the U.S. generally holds greater advantage for some industries than others. Taking into account labor, materials, transportation, and energy costs, the chemicals, primary metals, and heavy equipment manufacturing industries stand to benefit most from maintaining or expanding facilities in the U.S. Companies in wood, plastic, and rubber products could also benefit significantly, but their lower net imports might limit their benefits from on-shoring.
A new report by Breakthrough Institute and think tank Third Way says the #1 issue preventing America from growing manufacturing jobs is a strong American policy on manufacturing HERE; key highlights:
In June of 2012 – America exported more goods than at any time in our history. I’ve shared that HERE:
The Wall Street Journal writes HERE:
U.S. exports bucked a world-wide trade slowdown in June, but face serious headwinds from the recession throughout much of Europe and softening growth in Asia. The U.S. trade deficit with other countries narrowed to $42.9 billion in June from $48 billion a month earlier, the Commerce Department said Thursday, as imports fell and exports grew. Exports, which have been a pivotal contributor to the economic recovery, were strong almost everywhere except to Europe, where a recession and a protracted sovereign-debt crisis have sapped demand.
In June, the U.S. notched increases in exports of a variety of goods including pharmaceuticals, cars and industrial engines. Exports increased $1.7 billion to $185 billion, the highest monthly tally ever. Imports declined $3.5 billion to $227.9 billion, driven largely by a drop in oil prices that reduced the value of petroleum imports. Total U.S. exports are up 6% in the first six months of 2012 from the same period a year ago.
As we have shared HERE - America has gained 489,000 manufacturing jobs from January of 2010 to April 2012.
In the 2010 Global Manufacturing Competitiveness report (written by companies keep in mind) – points out that this affects other jobs like R&D when manufacturing leaves HERE; and they ranked America 5th in competitiveness in the world.
Competing in U.S. manufacturing has changed dramatically. Globalization and technological progress, especially in advanced communications, have put American workers in an unprecedented level of direct competition with its lower-wage counterparts as well as with rising leading-edge talent pools available worldwide. Much of this projected decline has been attributed to the hollowing out of manufacturing by the outsourcing of not only millions of U.S. manufacturing jobs, but also, increasingly, the export of research and development and customer support to foreign partners and subsidiaries.
Many manufacturing skills—such as welding, software development for numerically controlled machines, and quality management—have a high degree of accumulated tacit knowledge, and, if lost, is difficult, if not impossible, to recover.27 Moreover, the added complexity costs of long supply chains are not well understood. The projected decline can also be seen as driven in part by a perception that a services sector can sustain prosperity without the vital support of a strong manufacturing sector and from a lack of a cohesive national policy on manufacturing competitiveness.
An explanation of what’s going on in the global manufacturing industry and how to compete.
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