For decades now, the manufacturing industry that formed the backbone of the United States throughout most of the 20th century has seemed to be fleeing to other shores, namely countries like China where low cost labor has been abundant. However, recent data shows the potential for a resuscitation of American manufacturing during a time when the costs associated with outsourcing the work continue to rise even in the world’s cheap manufacturing hotspots. Lower energy costs combined with outbreaks of political unrest and worker discontent, such as has been seen recently in Apple’s Zhengzhou and Taiyuan plants, have led to American shores once again becoming an attractive alternative for manufacturing.
Supply Chain Management Review recently reported on the subject, citing evidence that higher worker productivity levels in the United States means that manufacturing some products closer to home will cost 20-45% less than in other large developed economies. Why? Much of the cost difference has to do with the availability of energy; with the recent discovery of large amounts of natural gas deposits in the U.S., energy used to power production is drastically less expensive when compared to Europe.
Recently, other events have led to more frequent backsourcing of manufacturing to the U.S., mostly due to uncertainties in the supply chain. Beyond higher labor costs in developing countries, the supply chain has been shaken by regional political unrest and the impact of destructive events such as the earthquakes and flooding that recently plagued Asia … and much of the supply chain with it.
SCMR estimates a “renaissance” of American manufacturing between 2015 and 2020, with data already demonstrating a rise in U.S. exports of approximately 30% since 2006. The article went on to cite the location of the United States as a contributing factor; the U.S. offers a less expensive export base for goods flowing from Europe to Asia and vice versa.
Additionally, U.S. companies and the manufacturing industry have access to more technology that can help reduce costs. American cloud service providers, in particular, offer many supply chain solutions such as automated warehouse management, inventory management software, and other solutions that offer enhanced visibility and better management of the supply chain as a whole.