According to Manufacturing Trends and News; many corporate businesses have discovered new value in keeping manufacturing and production operations on American soil.
The USA has become enticing to out-of-country corporations as well due to the lowering energy costs from shale gas production. Recently our "Total Cost of Ownership" has come down dramatically. This is largely due to the high costs of:
- Quality Assurance
- Energy Consumption
- Monitoring of Labor
- Freight Packaging
- Carry-Over for Stock
When it comes to manufacturing and production - the focus on labor-cost has become overshadowed by the higher-costs of over-seas production.
Why Big Companies Are Now Home-Shoring
According to Forbes Magazine - Iconic American companies such as Apple or GE are now home-shoring production more-than-ever. Forbes explained in a recent article that the U.S. is now “more attractive than China, Korea, India, and other low-cost regions where global-manufacturers once rushed to move production.”
GE’s recent decision to shift a portion of production from China to Kentucky - resulted in discovering 20 percent lower sticker prices for final products. It also delivered higher quality while reducing lead-times from factory to warehouse.
Factors Enticing the Return of Manufacturing to the USA
The Forbes article identifies three major factors in this shift:
- The rising wages in China have increased 500 percent since 2000. They are expected to grow 18 percent annually.
- Higher energy, production, transportation and manufacturing costs
- Increased labor productivity in the U.S., largely because of plant enhancements and shifts to higher-level manufacturing
European companies are also tired of paying exorbitant energy costs. They, too, are finding it makes sense to shift production to the U.S.
The trend of companies relocating American medical device manufacturing and production jobs to low-wage China has begun a strong reverse. This is demonstrated by decisions at Apple Inc., DSM, General Motors, General Electric Co, Caterpillar and even Chinese electronics giant Lenovo to scale-up production operations here.
The Economic Drivers Behind This Trend
1) Cheap, abundant natural gas. Shale gas and High Plains oil delivered a virtual miracle into our U.S. economy. As America increased energy production - it created a significant edge for U.S. based manufacturing.
Our plentiful supplies offer about one-third of the $10-to-$11 levels in Europe and lower than one-fifth of Asia's $15 level. This reality has translated into affordable electricity for manufacturers. And because natural gas drives so much of our nation's power generation - natural gas is also used as a raw material.
It is used to produce ammonia, methanol, hydrogen and other feed-stocks. Because of this - U.S. producers of petrochemicals and polymers are ranking among the lowest-cost operations in the world.
DSM's oldest U.S. facility in Augusta, Ga. produces caprolactum and other raw materials for the nylon-6 and engineering plastics industries. Today the Augusta plant has seen it's lowest-cost of production of any DSM facility in the world - including those in China.
2) Innovation. The U.S. continues as the global-innovation leader. Research and development spends 31 percent of the total global outlay in the U.S. China's share is14 percent while Japan's is steady at 11 percent a share while 17 percent goes to the Eurozone.
Today, 16 of the world's top 20 universities are in the U.S. while 70 percent of all Nobel Prize winners work in the U.S.
3) The rule-of-law. Without means for protecting intellectual property, there is no exploitation for competitive advantages. In America, the enforceability of intellectual and property rights remains sacrosanct. This is the only country offering certainty and safety in this arena - whereas China struggles with these issues.
4) Human capital. The wage-discrepancy between America and China has been shrinking. In 2000, U.S. wages were nearly 22 times higher than comparable wages in China. In 2015 differences will be less than four times.
Due to the U.S.'s big gains in productivity with lower worker-turnover rates, by 2015 most pundits say labor cost comparisons won't be a factor for determining the placement of manufacturing operations.
Other reasons driving medical device manufacturing and production home include:
- Time zone and cultural differences
- Inadequate infrastructures
- Quality assurance
- Issues of business ethics
- Traceability concern
- Threats to brand equity
5) Public policy and abundance. Our federal government seems to be seizing opportunities to promote job growth at home.
As the U.S. dollar continues to weaken, the Chinese renminbi, or yuan, has appreciated at a four percent annual-clip. Many believe this will accelerate. Continued depreciation of the dollar promises to further bolster U.S. medical device manufacturing and exports.
Corporate balance sheets are healthy and interest rates remain historically low. Our world and the U.S. has changed. The pace of this change accelerates every year.
Now is the time to partner with those who remain at this cutting-edge of growth and quality - by contacting Crescent Industries as your custom injection molding solution today.