September 12, 2014

Top 10 Reasons Why Manufacturing is Returning to America

1.  Flexibility to respond to local demand: improvement on customer responsiveness, delivery time, inventory.

2. Linkages between research, design and manufacturing: harder to innovate in manufacturing if you aren’t close to the research and design team, so cutting costs by moving manufacturing team abroad can negatively impact ability to innovate.

3.  Skilled labor that can make higher-end products — means for every dollar invested in U.S. workers, you get more value out of them — higher productivity than in China.

4.  Rising labor costs abroad and high costs of production in other developed countries are eroding cost advantages of locating production outside of U.S.

5.  Extended, global supply chains can fall apart when there’s an exogenous shock such as a natural disaster, hurting production globally — e.g. Toyota couldn’t produce cars anywhere near where demand was in 2010-11 due to tsunami.

6.  Strong rule of law and IP protection — chances of your innovative idea being stolen in developing countries like China is very high b/c no patent protection.

7.  Abundance of low-cost energy in U.S., especially natural gas.

8.  Shipping costs due to price of oil, volatility of energy costs generally.

9.   Emphasis on total cost of production, rather than just factory wages.

10.  Nascent, but growing “buy local” movement.

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