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.
Foxconn is about to purchase enormous amounts of robots, so there may not be much of a union left after that: http://www.reuters.com/article/2011/08/01/us-foxconn-robots-idUSTRE77016B20110801
Nancy, I'm more likely to research online and then buy locally, when possible, for the reasons you mention. Paying a bit more is not a problem in my mind. And it's not always more, anyhow, when you include the cost of shipping for online purchases. Then there's customer service. If I can get it locally, that's usually a better option, in my experience.
I agree Ann, especially when it comes to exchanges. While buying online is often tempting, the product often arrives damaged or is subpar for some other reason - then you have the additional hassle and expense of shipping returns. However, some items are just hard to find locally and in that event, it is a blessing to have the online option...
Bringing work back home may never happen. The USA fought hard for human/worker rights. People died over it. Now, those same corporations who fought against those rights, ship jobs off to places were abuse is fine. At home, consumers expect a low price of good, that only labor abuse can bring.
Foxconn, or whoever, can unionize, they will just find another place where the work is cheap. Other parts of Asia, then India, back to Mexico. When everyone fights back, they will industrialize places like the Congo.
Interesting article, Ann. I found the quote regarding Chinese manufacturing "Of course some companies will consider moving their manufacturing overseas, but it's easier said than done when the supply chain is here" highly ironic...what a shift from the past - and Mexico?!
How tragic about the suicides that have been occurring. But is it really Foxconn's desire to move asssembly line workers into R&D and other innovative positions which is what the article mentions is their goal with the advent of robots? Not every worker aspires to get off the line and what any employee wants is a safe work place and a fair wage. Another question also comes to mind - will there even enough positions for the soon to be displaced workers?
It always matters, Cabe. It's just how willing are we to recognize that human rights apply to all people in all places and to do something about it regardless of the hit to our pocketbooks. But then, Jesus was betrayed for thirty pieces of silver so what can we expect when millions are at stake - it seems the thirst for money will always be the downfall of man.
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.
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.
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.
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!
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