The topic of America’s manufacturing resurgence is one many have been focusing on, including us. We’ve covered different aspects of it in recent blog posts. But beyond just focusing on the return itself, it’s just as important and interesting to look at the how and the why? To go beyond the numbers and look for the reasons that will keep it going.
How and why is manufacturing returning to our shores?
- The Cost of Overseas Labor Has Increased: It used to be that outsourcing was cheaper; Chinese labor simply cost less. But now, as U.S. labor costs have only risen 3% in the past few years, Chinese and Mexican labor costs have risen 20% and 5%, respectively. Furthermore, dealing with overseas labor is an increasingly political practice, as human rights issues are all too commonplace.
- Natural Gas Costs: In recent years, there has been a boom in America’s natural gas; our gas reserves have increased by 50% in the past five years. For manufacturers, this means replacing high foreign transportation costs with low domestic costs, and creates significant savings.
- Innovation and technology: Automation and the use of robots is no longer the wave of the future; it’s here and now, and it’s highly beneficial. The advancement of automation technology has surged recently, creating increased productivity, better products, and lower overall costs.
- Risky Global Supply Chains: These days, it’s simply too risky for many businesses to rely on a global supply chain. In addition to the aforementioned foreign labor risks, there are threats to security, threats of natural disasters, currency threats, long lead time threats, and intellectual property theft threats in a global supply chain. It’s simply safer to keep as much of it domestic as possible.