Thursday, December 06, 2012

Why manufacturing may be coming back in the U.S.

What goes around comes around. Joe McKendrick at Smart Planet writes an interesting post about why manufacturing jobs are coming back in the U.S.

High transportation costs: “Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.”

Lower domestic energy costs: “The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home,” Fishman relates, adding that “natural gas now costs four times as much in Asia as it does in the U.S.”

Offshore wages are rising: “In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18% a year.”

Labor relations are more cooperative: “Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as ‘Strike City,’” says Fishman.

Employee productivity is rising: “Labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.”

Offshore factories can’t keep up with design and technology changes: “As products change, as technologies evolve, as years pass, as you change factories to chase lower labor costs, the gap between the people imagining the products and the people making them becomes as wide as the Pacific. Factories take a while to settle into a new product, a new design. They face a learning curve. But models that have a run of only a couple years become outdated just as the assembly line starts to hum. That makes using faraway factories challenging, even if they are cheap.”

Read more here: via finest kind clinic and fish market

No comments: