Ten years ago, even the most reputed business professionals would laugh at the prospect of the United States becoming one of the largest low-cost manufacturing countries in the world. Now, some experts are speculating that foreign merchandisers will refocus their strategic sourcing to the U.S. in search for cheaper finished products. If this trend toward a production economy persists, it's likely that domestic enterprises will reorganize their shipping routes to include onshore factories.
The end of "Made in China"?
A study conducted from the end of 2013 to Q1 of 2014 by Entrada Group titled "Where in the World?" concluded that a burgeoning U.S. production economy is no longer an outlandish proposition: The numbers would suggest that the country is set to become a major low-cost manufacturing nation - possibly the largest. Survey participants consisted of C-suite executives working at enterprises in the U.S. (73 percent), Canada (14 percent) and Europe (8 percent).
After asking business professionals which country seemed the most attractive for low-cost manufacturing, 33 percent favored the U.S. and 24 percent believed Mexico offered the best prospects. Surprisingly enough, China came in third, with only 14 percent of companies preferring the nation.
As for the reasons why such executives favored on-shore manufacturing, 30 percent cited low operating costs as a critical factor, while 27 percent claimed that satisfying customer needs factored into their inclinations.
Cheaper goods, faster
Essentially, businesses - especially those in North America - are looking to capitalize on a cheaper procurement process. The prospect of not having to ship massive amounts of goods across the Pacific is quite appealing to those looking to reduce distribution expenses. As many materials acquisition specialists are aware, there are numerous hidden costs associated with trans-oceanic transportation, including those related to fuel, docking, labor and maintenance.
If U.S. businesses do choose to invest in manufacturing endeavors domestically, that means some serious reconstruction is going to occur. Frank Russo, Fabricating.com CEO and IndustryWeek contributor, noted that part of the appeal of re-shoring factory jobs is the ability to eliminate complication.
A more simple distribution process can translate to less disruption. For example, a ship may have to remain in a Southeast Asian port due to a tropical storm, delaying the shipment of goods. However, if the factory is located in California, than such an obstruction isn't factored into the equation.
In addition, Russo's marketing analysis would suggest that companies have the opportunity to eradicate intellectual property risks and have a better handle on production quality.