U.S. Manufacturing Is Making Its Way Back Home

Re-shoring Manufacturing

According to recent studies and trends, it has become clear that U.S. manufacturing operations are moving back home or nearby. Companies are now recognizing the rising costs of off shore manufacturing. Some of the top factors contributing to this trend are the rising cost of labor, increased need for skillful workers, the high costs of maintaining inventory back home, and the downside of extended time to market. As the need to remain competitive rises, re-shoring is proving to be a plausible solution.

Off Shore Labor is No Longer Cost Effective

In the past, China has been the default choice for off shoring due to its abundance of low cost labor. However, most recent trends indicate that the wage gap between U.S. and Chinese workers is rapidly shrinking. The cause for the shrinking wage gap is a result of China’s increased investments in education, information technology and automation. Off shore businesses are now facing the challenge of increased competition for labor and demand for higher wages. In response, companies are turning to at home or nearby labor, as off shore labor costs are becoming unappealing.

Off shore production means maintaining high volumes of inventory at home, in order to support consumer demands. In today’s fast paced market, consumers have become accustomed to rapid delivery. Catering to a demanding consumer forces companies to stock large quantities of inventory, which bears a high cost. Companies must take into consideration possible theft, damages and spoilage of inventory. Additionally, companies must bear the costs of shipping the product half way across the world.

Battling Rising Costs While Staying Competitive

In an effort to control rising costs, many companies are moving manufacturing to home grounds or near home grounds. In a recent survey conducted by AlixPartners, 55% reported U.S. as the most attractive re-shoring destination, followed by Mexico at 31%; this is an increase from 42% and 28% respectively, from last year. In another survey conducted by AlixPartners, 32% of executives surveyed indicated that their companies have recently re-shored operations to the U.S. or are in the process of doing so. If off shore costs continue to rise as they have, companies will continue to seek relief from costs by re-shoring manufacturing. On a positive note, this means manufacturing jobs are coming home.    

 

About Allyn International

Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance.  Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North America, Europe and Asia and Allyn regional headquarters are strategically located in Fort Myers FL USA, Shanghai P.R. CHINA and Prague, CZECH REPUBLIC. For more information, log on to www.allynintl.com.