Bring Manufacturing Back

Once considered the “workshop of the world,” China now seems to be losing its cache as an unstoppable manufacturing powerhouse. Rising costs in China are forcing manufacturers to relocate operations to lower-cost labor countries such as Vietnam and Indonesia. For companies like Apple and GE, production is moving back to its roots: the United States.

But the decision to reshore isn’t as simple as you might think. It’s not a binary yes-no decision. It involves multiple dimensions and complex considerations.

I have been assisting clients with sourcing and manufacturing in China for many years, but now companies are reconsidering their global manufacturing strategies. To help clients with this important decision, we recently launched a new consulting service to help companies determine if they can and should bring some manufacturing back to the US. Here are some of the points to consider:

1) Cost Increases – Not only has the wage gap in China significantly eroded, but several other categories of costs such as local energy, materials and transportation are on the increase. Have you considered total landed cost vs. manufacturing domestically? Determining your tipping point when alternate manufacturing locations become cost effective is the first and probably the most important part of the analysis.

2) Innovation – The pace of innovation in new materials, increasingly sophisticated digital electronics and manufacturing technology such as 3D printing, is changing rapidly. How can these new technologies be used to further automate and optimize your US production?

3) Market Access – China will become the largest target market for consumer goods within the next 10 years. To maintain access to this burgeoning market, you must consider manufacturing there and localizing your products for Asian tastes as part of your global manufacturing strategy.

4) Skills – As US manufacturing was outsourced, the skills and knowledge of manufacturing processes offshored too. Are the skills necessary to innovate and manufacture in the US still available or will workers have to be reeducated? Can you sustain design to manufacture to support capabilities with the current workforce?

5) Supply Base – As US manufacturing was outsourced, the suppliers of goods and services also left to be in proximity of their customers. Bringing manufacturing back to the US means that companies will also have to rebuild their domestic supply base.

6) Public Sentiment – The tide of public sentiment towards outsourcing has shifted as a result of the economic downturn and lingering unemployment. How will domestic manufacturing change the perception of your company in the markets you serve? 

7) Political Environment - Do you know how your company can take advantage of federal and local incentives for taxes, building, etc.?
To rebuild a strong America, we need to bring back our manufacturing underpinnings. To do so, companies must consider all aspects of the decision and think strategically about the future of global manufacturing.

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