Got pointed to two interesting articles on the impact of rising transportation costs and the weak dollar on US manufacturing. The consulting firm Oliver Wyman has a piece titled "How the Weak Dollar is Reviving US Manufacturing" that argues that rising transportation costs and the lower dollar is making US manufacturing more competitive. Key quote:
"Where’s the business case for making car seats in China, when the cost of shipping them 12,000 miles and the redundant cost of storing and sequencing them for an assembly plant in Indiana will far exceed the savings in labor? Factor in additional savings from leaner inventories, more robust assembly processes, and the agility to more quickly respond to changes in market demand and the case for shifting most of your footprint from North America to China or India become dubious."
Related to this is an article in the Financial Times called "Oil prices force P&G to rethink supply network." The article discusses the supply shifts P&G are doing in response to higher energy costs. Key quote:
"Soaring energy prices are forcing Procter & Gamble to rethink how it distributes its products, with the world’s biggest consumer goods company shifting manufacturing sites closer to consumers to cut its transport bill."
The weak dollar clearly helps US manufacturing. Also, with transportation costs rapidly increasing locating supply close to demand will become increasingly common. Added to the cost pressure is a growing focus on reducing manufacturing and supply chain carbon footprints. Combined these trends are helping to drive the increased competitiveness of US manufacturing.
Disclosure: We've done work for P&G in the past year.