Made in America – Jobs Trickle Back to U.S. Plants

U.S. manufacturing employment was reduced by about six million jobs, or one-third, between 1997 and 2010 but the new trend that has been growing over the past two years is the re-shoring of some manufacturing work that was “off-shored” to low-cost producers like China in the past few decades. Producing in Asia is not as big of a no-brainer as it was 10 years ago.

U.S. manufacturing has become attractive for some companies as Asian wages have surged over recent years and the wage gap between the U.S. and China has narrowed. The drop in the dollar over the past decade has also made U.S. produced goods more competitive. And higher oil prices have increased the cost of shipping goods across oceans, making domestic manufacturing more appealing.

The U.S. also suffers from a shortage of trained workers in some areas vital for manufacturing, such as engineering and operation of computerized machinery. U.S. corporate taxes are higher than those in most other industrial nations.

Products more likely to be re-shored include heavy or bulky items for which the shipping costs are high in relation to the price, such as heavy machinery. Other candidates for re-shoring include expensive items subject to frequent changes in consumer demand for certain colors or styles, such as high-end clothing, home furnishings or appliances. Makers of products for which safety is a paramount concern—such as food or baby products—might choose to make them at home so they can closely monitor all of the suppliers of parts or ingredients.

In terms of labor costs, China still had a big edge, despite rapid wage increases there. Assembly workers at plants in the U.S. typically earn about $12.40 to $16.50 per hour, plus benefits. By contrast, manufacturing wages in eastern China’s big manufacturing hubs are as much as $3.40 to $3.50 per hour. While those Chinese wages are only about a quarter of the level in straight comparison, the effective difference is narrower with estimates that U.S. manufacturing workers on average produce about three times as much per hour as their Chinese counterparts because of greater use of automation and more efficient manufacturing processes.

Call centers in India were having typical turnover of 100% or more each year, while typical turnover in U.S. call centers that handled more serious problems was in the single digits which allows U.S. call centers to provide much better service and customer satisfaction. Also currency fluctuations and rising wages in emerging markets are making the United States a lot more attractive in the long run.

Chinese labor costs are rising about 15% to 20% a year, which makes producing goods in China not nearly as cheap as it used to be. For many manufacturers, that narrowing is enough to tip the balance back to U.S. plants.

One factor that is helping the U.S. manufacturers is that many companies were forced to cut back and are reaping the benefits of restructuring. GM is a prime example of how the most drastic form of reorganization — bankruptcy — can work.

The news are great but U.S. still has to re-shore a considerable amount of manufacturing jobs in order to improve unemployment and every American can help by choosing “Made in America” products over products made elsewhere.

6 thoughts on “Made in America – Jobs Trickle Back to U.S. Plants

  1. I agree with the “Made in America” statement and do think that their are reasons that we will see companies re-shore production back to the United States, even beyond those mentioned above.

    I wonder how the recent U.S. port strikes will affect the re-shoring efforts mentioned in this blog. I assume that if U.S. companies continue to use lean production and JIT they will need to think of re-shoring as a valuable alternative to the possible costs of shutdown and delay from delays in the supply chain. As companies continue to be very tight on inventory in an effort to limit costs of carry, shipment schedules play an even more integral role in the everyday life of a company.

    There is always a cost to anything and by companies making these changes in inventory or supply chain management they are at the hands of their suppliers.

  2. Two thoughts: (1) What about the concern that some of this will just shift to other “up and coming” Asian countries like Thailand or Taiwan? Is it another short-term opportunity that companies are chasing?

    (2) If this trend continues, it will likely (hopefully) have a significant impact on the US economy – not just by creating jobs, but by creating jobs that support the middle class. When the middle class does well, the entire US economy does well, so adding jobs that present an opportunity for financial stability and the American dream with the “white picket fence” will have a multiplier affect on the economy.

  3. It would be wonderful if we could bring back some of the outsourced manufacturing to the U.S. I am intrigued by this article because it really points out the positive attributes the United States has to offer that foreign countries do not, such as efficiency and quality. Yes, budget and cost are important elements in manufacturing goods, but what good does it do if the quality is not up to par or the product can not be delivered in a timely manner?
    In reference to the comment above me, I do think that companies will continue to search for cheaper countries to outsource to; however, that will eventually come to a halt and the manufacturing will come back to U.S. More recently, Apple closed one of its outsourced branches and now manufactures on U.S soil. Slowly but surely, we are seeing companies return home. This article forces me to question whether or not this will have a big enough effect on the economy to dig us out of this hole.

  4. I agree with the comment above me, and I found this post really interesting and relevant. I recently read an article similar to this for a class on Consumer Culture, and I think this will have effects on management as well. Deciding whether to keep outsourcing or switch back to the United States has a lot of implications for Managers and will change the entire production process. This post addressed some really good benefits, and I especially liked what they briefly mentioned about products that have frequent changes. The speed and accessibility of having factories local allow for changes to be made far easier. I think with rapidly changing trends, this can be a very big benefit for companies, especially those in the fashion and design industry.

  5. The U.S. used to produce 50% of all manufacturing products in the world. Now, it’s about 22%. If you owned an auto manufacturing company and could either continue to purchase your tires from your domestic supplier at $100/ea or purchase them from say, China for $50/ea, what would you do? You’d buy the tires from China, duh! Your domestic supplier is eventually going to say enough is enough, but what can they do? Well, more and more of these companies are forcing these foreign suppliers to pay export tariffs through legislation, to bring back the competition. Companies are also seeing a market interest for quality American made products, and are taking advantage of that demand. Countries like China do not have nearly the same quality standards that American products do. The saying “you get what you pay for” is not only true for the ultimate consumer, but also for companies like the auto manufacturers, and it’s showing.

  6. This is a great article especially sine I grew up during this time of companies/factories leaving the U.S and going overseas. Seeing and hearing people losing jobs due to companies deciding to go with cheaper manufacturing and labor. I work in a High-End Electronic/ Appliance store where customers come in all the time and talk about how the quality of products have gone down. I hear “they don’t make them like they used to” on a daily bases. Customers who had their appliances last over 20 years say their new appliances barely last four. It a shame that this has happened. But hearing that companies are working to make more things with in the USA is great to hear. This will help those who are still seeking jobs and boost our economy.

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