It’s a sight for sore eyes for many and has been a long time coming – jobs are starting to come back to the United States by virtue of reshoring – the return of jobs and manufacturing operations that were previously offshored to other countries like China. After World War II, the United States accounted for nearly 40% of the worlds manufactured goods. The decades that followed saw a sharp decline up until the past few years where the pendulum seems to be swinging back.
There are many reasons why reshoring is taking place and we’ve decided to highlight 6 that we think are key to the movement.
1. Narrowing Gap in Pay
Cheap labor was a driving factor in the offshoring process. This pay gap, however, has been shrinking quickly and consistently. A study of the The International Labor Organization found a 7%-8% global raise in real wages every year between 2000 and 2008.
The Boston Consulting group came out with a report that highlights some significant findings, such as wage and benefit increases of 15-20% per year at the average Chinese factory.
While pay is increasing in Asia, wages in the US remain quite stagnant, accelerating the rate in which the wage gap is narrowing.
2. Intellectual Property
A chronic issue in offshoring production is the threat of intellectual property concerns, in terms of both design and production methods. The simple truth is that non-disclosure agreements or proprietary information agreements are often forgotten or ignored by international companies, and they offer inconsistent protection in foreign legal systems.
Reshoring these manufacturing efforts in the US restores control and allows companies to better protect their IP interests
3. Higher Freight and Operating Costs
Regardless of what is being produced and where, it has to be freighted back to the US for sale, distribution or assembly.
Increased regulations create a heavy burden on companies. The increased man hours, and therefore money, that must go into cutting through the red tape and moving freight is taking its toll.
Raising energy costs are also helping to tip the scales back in favor or domestic manufacturing. This doesn’t only include transportation costs, such as fuel, but production energy as well. In China, energy costs continue to rise (by 15% since 2010.)
Real estate is also a growing concern as major cities can no longer offer low cost factory space, requiring a move further inland and therefore further away from ports.
4. Skilled Workforce
The United State’s talent pool has highly skilled workers, many of whom have experience and are eager to advance in technical/engineering fields. Trade schools have record enrollment as people look for technical training rather than facing the skyrocketing costs of higher education. And, they genuinely want to work and advance their careers.
(Learn more about how we are helping to train the next generations of skilled professionals here.)
5. Shorter Lead Times
While order sizes for U.S. manufacturing companies have decreased and those for companies overseas have increased, lead times have become longer and more unpredictable. Supply chains can become complicated depending on the method of shipment, such as by cargo ship.
By relocating manufacturing to the US, production can be far faster than offshoring. Products can be ready for distribution that much sooner. It can also lead to more collaboration between engineering and development teams, helping to improve products and the speed in which they can be sold.
It may sound cliché but it’s true. People love this country and there is something about the “Made in America” seal that speaks to both a company and their customers. It shows a commitment to the American dream and the people who strive to experience it. There are few places on Earth that offer the kind of talent, working conditions and pride than the folks working in this great nation.
Uncle Sam is here to help on this one too. There are many state and federal programs and incentives that are set up to aid in the reshoring of jobs, and, companies are reacting with great success.
Neu Dynamics has over 40 years of experience in the semiconductor, pharmaceutical and commercial industries in the design and production of precision molds and dies. We work with highly skilled and experienced engineers to create deliverables for our clients and keep up-to-date with the latest advancements to help fulfill even your most complex needs.
NDC is a valued and trusted resource in providing full in-house services and expertise along with impeccable customer service.
To get started on a project or to learn more about how affordable working with a US company can be, contact us today.