Manufacturing in the US is making a comeback. It has to be true -- it said so in my local newspaper. Actually, a similar story has been reported in lots of places, including a recent study released by the McKinsey Global Institute. That study is titled, “The next era of global growth and innovation.”
Propelling this comeback is an increased need to reduce the duration between the time that a product is designed and the time that it appears on the shelves. While much of the design has always occurred in the US, there was generally a lag before the product hit manufacture, which often occurred in a faraway place like China or India.
While we like to think we live and work in an ever-shrinking world (and we do), there’s still some amount of time to transfer information. And depending on the size of the run, it may or may not make fiscal sense, especially as manufacturing in the US is gaining momentum.
Part of this shift to the US has to do with the fact that labor costs in places like China are on the rise. There are also uncertain and potentially rising tariffs, fluctuating currency exchange rates, and fuel costs that have turned sharply upward in the past 24 months. Mix all those facts together, and when you ask why manufacturing is making a comeback domestically, the question becomes, “Why not?”
Wal-Mart recently announced that it would be buying an additional $50 billion worth of US-made products over the next decade. That sounds like a pretty good indicator to me. The company plans to increase orders for items like paper and sporting goods, which it already buys domestically, and bring back production of some textiles, furniture, and higher-end appliances. The latter item surprises me the most, as the US seems to have lost the appliance battle, but time will tell.
A defining statement in the McKinsey report sums it up: “As long as companies and countries understand the evolving nature of manufacturing and act on the powerful trends shaping the global competitive environment, they can thrive in this promising future.”
It’s generally acknowledged that manufacturing tends to rise as an economy grows, with emphasized growth coming out of the recession like the one of a few years back. Sustaining that growth, and by how much, is dependent on a bunch of factors. They include the availability of low-cost and/or highly skilled labor; having and/or building the proper infrastructure, meaning efficient transportation of resources/materials and of goods produced; and access to the technology that’s required to manufacture goods in this new world. There’s also a difference between manufacturing complex products as opposed to more simple goods.
A nice benefit of the increase in manufacturing is the service industries that get pulled along in tow. Depending on your definition, this could include the research and development activities, sales and marketing jobs, and certainly customer support.
The final piece of this puzzle lies with investment. Will the proper level of investment be made to fully secure the manufacturing growth in the US? If the promises made by both parties in the recent election hold true, the investment will be there. Where it comes from specifically is still to be determined, but it likely (hopefully?) will materialize.
I agree with both of you. Although most of my online purchases seem to be fine, many of the consumer goods I buy from big-box stores are not. To the point where I've stopped patronizing them. There aren't that many our here in the boonies anyway, so I end up buying stuff either online or from small local mom & pop stores run by my friends and neighbors.
Nancy, I find it tough to believe that a company that treated workers like Foxconn did is likely to do anything they've said publicly about helping the displaced workers. The history of labor disputes in other places--like the US and Europe--makes me pretty cynical. And standards and attitudes about workers and their rights are very different in China from what we're used to in the West. As I posted on another discussion board, the problem with a lot of job displacement discussions is that they don't take into account the kind of new jobs created and the kind of old jobs that become no longer available to lesser-skilled people. The relationship between the skill level of the labor force and the kind of jobs available to it is not as balanced as many such studies would make one think.
I am a bit weary to order from those companies. They are not held to making perfect parts in the end. I may send thousands of dollars out of the country, it could be just like I threw it all out of the window.
To be fair, considering an overseas supplier is a rational thing to do from a business economics perspective. However, all cost factors should be considered including risk, and for small orders of custom parts the risk of not getting what you need is pretty high and should be weighed against the cost of something going wrong. Don't forget to factor in your customer's reaction in that case as well, if troubles with a chinese supplier cause you not meet commitments.
BTW - I saw your later post, and a 10 fold delta certainly makes a difference in that calculation. Sometimes you have to chose what is best your own business.
I do know of buyers that have been successful getting custom parts made in Asia, but I believe mainly because they could bury the cost of developing an Asian supplier in with the other business they were doing there.
Honestly, I never had anything made in China. But, the low price includes 5 day shipping. I imagine if the parts are wrong, I can get them re-worked. Though, I could be wrong. I have always gone with USA based manufacturers. But... I am considering a move.
Your experience with higher machine shop pricing could also be due to basic supply and demand. In the past year or so I have seen in my buiness that many shops are at or near capacity so they don't need to quote a low price to get your business.
And, although my personal experience was a few years back, the $5-$13 price ratio from China to the US seems to be narrower than when my company was buying machined parts from Asian suppiers.
Are you making the mistake of not considering the total cost of buying from Asia? Did that $5 include the cost of shipping? What will you do if Chinese parts come in wrong? In our case of a custom one-off machine we could make minor modifications to the design and rework parts to accomodate the errors but that negated the savings. Will you have the time for them to start over and redo the order, or rework the parts youself?
Even in our local stores we are seeing this problem, Bob. We bought some incandescent light bulbs from Home Depot the other day and when we plugged them in, some went "pop" and the filament opened - just out of the box!
Nancy--I agree completely with you one this one. I don't know if I have just had a run of bad luck lately but just about every consumer product I have purchased, especially the electro-mechanical products, have been "off-quality". Two were DOA right out of the box. The merchandisers give my money back or substitute for another but even then it's a real pain. In dealing with off-shore suppliers, we noticed their first piece products were excellent but then, after production was initiated, the quality dropped significantly. I'm talking about PC boards, ribbon cables, Mylar overlays, etc etc. Products that should represent a high degree of quality are really junk when they come over. It get old fast. I do quality control work for a Southeastern client and it is not unusual to have 30 percent dropout on Mylar products coming from China. The biggest problem is you can't talk to these vendors and get your point across. We have problems and need relief.
Cabe, I think you are right on the mark with your observation about "entitlement" attitudes in the U.S. - we have really lost our work ethic in this present generation. If people think they are entitled to be provided for, they certainly won't care about how other people are being treated.
My working career began with a paper route, progressed to fast food service, grocery store checker, faculty assistant to help pay for college, retail clerk on weekends while engineering tech during the week, to engineer, to engineering manager. Today, everyone kid thinks they should start at engineering manager...
I agree, sometimes the service industry is very enticing.
If prices jumped up to USA worker made standards, the country would have a fit.
What I am thinking is that we all suffer from a sense of entitlement. A friend of mine, who has been out of work for some time, refuses to take a job where they will get dirty for low wages. Illegals, another abuse group of workers, are willing to take those jobs.
I think we are all dooms to work in the service industry. I, for one, enjoyed being a waiter in my youth – so I will be ok with it.
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