The Trend Towards U.S. Manufacturing Continues to Accelerate

The Boston Consulting Group (BCG) is forecasting a major uptick in U.S. manufacturing.  Key quote from their most recent study:

"Over the next five years, a U.S. manufacturing renaissance in home appliances, car parts, and other sectors could accelerate—boosting output by $100 billion and adding 2 million to 3 million jobs."

There are currently about 11.7 million manufacturing jobs in the U.S. - down from over 16 million in the late 1990s.  To paraphrase our Vice President, adding 2-3 million manufacturing jobs would be a big "bad word" deal. 

We first noticed companies starting to shift manufacturing back to the U.S. in 2007.  Although the Great Recession slowed this shift, it's started to pick up again with the global economic recovery.  By early 2010 it was clear this trend was real and would continue to grow in importance.

The drivers are:

• rising overseas production costs, particularly in China
• strong U.S. productivity
• rising transportation costs
• better understanding of the total costs of long supply chains

The last point is growing in importance and is nicely illustrated in the New York Times article A Company Grows, and Builds a Plant Back in the U.S.A.  Key quote on long supply chains:

"The lead time for orders coming from China is three weeks, and all of our brewery clients want our products faster — that’s the first thing they say when we meet with them. ... Right now, we’re losing orders because of lead time."

A growing number of companies have this supply chain "need for speed." Also increasing is the number of products using shorter production runs and/or requiring customization.  These shifts favor locating near sources of demand to cut product cycle times. 

Add in the potential of supply disruptions and the environmental impact of long supply chains, and it's easy to see why manufacturing in the U.S. is becoming more popular. 

Comments

[Matt]

Manufactures need to make sure that they are looking at capabilities that are a generation ahead of todays and they address the critical future issues of the markets they serve. Manufacturing will grow very slowly without a change in our current banking attitude toward small business.
Matt.

[forex training]

On this development, I expect Call Center Jobs to remain outsourced. That maintains profitability for companies where they hire professionals that are qualified as their American counterparts, for less.

[Paul]

Now we need to bring tech support back to the US. So I can get help with all the people calling me for simple Dell or HP tech help under warentied machines. Then they get mad when I tell them that they could have called Dell or HP and had this fixed for free. That will be $100 please.

[Aly]

Hi there - Well, @WLC took the words right out of my mouth saying "US manufacturing is the foundation of rebuilding our economy." I work for a titanium manufacturer here in Houston and couldn't agree more. A strong manufacturing industry is vital to a healthy economy - right now, we have neither.

Anyways, thanks for sharing! - Aly

[Dom DeSantis]

ABC World News has had a "Made in America" Series going on that shows we can meet or beat foreign goods pricing in many, many areas. As a Country, we did "cut our own throats" by sending Manufacturing overseas.

We always took the attitude that we were the "king of the hill" and that arrogance has put us in economic turmoil. If we are going to recover in the World Economy... we must learn "to play well with others" and remember that "charity begins at home".

Unfortunately we are Political Adolescents when it comes to the World and sometimes our "hormones" rage when we should shut up and listen. Foreign Policy needs to become a priority instead of a bother... and Domestic Policy needs to favor American Industry and Americans first!

[Steve]

Gunner: The "bad word" reference comes from VP Joe Biden getting caught on a public microphone using a bad word (rhymes with trucking) to describe his view of the impact of the new health care deal. He said it "is a big ------- deal."

On another topic, we don't consider ourselves "media" in the traditional sense. We are researchers who use this blog to report on our findings and other issues we think are important to small business.

[Gunner]

help me out. What do they mean; "To paraphrase our Vice President, adding 2-3 million manufacturing jobs would be a big "bad word" deal." What is the 'bad' part of adding 2-3 million jobs? Or is this just another example of the sterling talent in our media. Ooops, missed another typo.

[WLC]

US manufacturing is the foundation of rebuilding our economy, just like every counrty in the world. How will we be diffrent? Manufactures need to make sure that they are looking at capabilities that are a generation ahead of todays and they address the critical future issues of the markets they serve. Manufacturing will grow very slowly without a change in our current banking attitude toward small business. Many small companies trying to serve regional / national needs find it extremly hard going when they are unable to get capital to take care current needs, let alone looking to future oppertunities.

[US Engineer]

I have worked as Senior manufacturing executive in USA , Europe and in Asia for 40 years. To my scale USA manufacturing was the most sophisticated in the World , followed by Japan and Germany. Unfortunately , US companies' took an easier solution to control the manufacturing cost by outsourcing to China and other developing countries. They were able to reduce the manufacturing cost to some extent but paid much heavier price by transfering the technology , product quality and export earning. It is encouraging to learn that the manufacturing can bounce back. What we need is to look at the cost of overhead and distribution and not the labor cost , which in any case is a fraction of the total cost of a product.