Thread: For Some U.S. Manufacturers, Time to Head Home

February 02, 2012, 6:00 PM EST
For Some U.S. Manufacturers, Time to Head Home

More companies are assessing the true cost of outsourcing

By Matthew Philips
Thirteen days before his State of the Union address, President Barack Obama held a meeting at the White House to discuss how to bring outsourced jobs back home. Among the 25 participants was Harry Moser, ex-president of machine-tool firm GF AgieCharmilles, and founder of the Reshoring Initiative, a group of companies and trade associations trying to bring manufacturing jobs back to the U.S.
When asked by the President what costs manufacturers typically ignore when making decisions on where to make products, Moser mentioned the total cost of ownership. That includes factors such as intellectual-property risk, the cost and time of travel to visit distant suppliers, and the negative impact of separating manufacturing from engineering staff back at headquarters. Using data compiled from 10 manufacturers that compared the costs of products and components made in the U.S. vs. China, Moser told Obama that when measured on price, the U.S. was on average 108 percent higher. When Moser analyzed the total cost of ownership, which includes 28 additional factors, the U.S. averaged 12 percent higher. In six cases, the total cost for the U.S. was lower than China by an average of 22 percent. “The U.S. is a lot more competitive than people realize,” he says. “Over the last several years, firms got caught up in the outsourcing trend without thinking through the costs.”

Manufacturers, including Caterpillar (CAT), Ford (F), and General Electric (GE), are starting to move some production back to the U.S., although it’s still just a trickle. The two factors that drove companies overseas, cheap fuel and labor, no longer favor far-flung ventures. The average price of a barrel of oil has gone from $22.81 in 2002 to $87.48 last year, so the price of shipping finished goods has jumped. China’s wages have risen 15 percent a year in that time. Measured against more than 20 other currencies, the dollar has declined 23 percent since its peak in 2002. As a result, the cost of factory labor in dollar terms fell 11 percent in the U.S. from 2002 to 2010, according to the Bureau of Labor Statistics. America’s cheap natural gas is especially appealing to the metals and chemicals industries, particularly since natural gas prices in China are more than twice as expensive, according to research by the Jefferies Global Energy Team.

As companies have gotten better at reducing inventory and adopting just-in-time delivery, supply chains stretching around the world have started to look like liabilities. The fragility of global supply chains became vividly apparent when the tsunami in Japan and floods in Thailand last year caused major disruptions for companies.

A survey of 150 shipping companies by transportation research firm Wolfe Trahan showed a dramatic shift over the last year in their clients’ thinking. Among companies planning to move production, those considering an increase in outsourcing to China fell to 9 percent in October from 18 percent in April 2011. Those expecting to shift production back to the U.S. rose to 21 percent from 10 percent. Supply chain analysts at researcher Gartner (IT) recently predicted that by 2014, the production of 20 percent of goods now made in Asia and destined for U.S. consumers will shift to the Americas. In a recent study by Accenture (ACN) entitled “Manufacturing’s Secret Shift,” 61 percent of 287 manufacturers surveyed reported that they’re thinking of moving operations closer to customers.

Don’t expect a hiring frenzy if some factories return. “It’s a marginal improvement, not a tidal wave,” says Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity & Innovation, a public policy and economics research firm. Manufacturing employment peaked in 1979 at about 20 million jobs and stands at 11.5 million jobs today. Over the past 15 years, U.S. manufacturing productivity has increased about 4 percent a year, while the economy has grown on average by 3 percent. “If manufacturing grew as fast as the economy, right there the math says you don’t need a single new job,” says Meckstroth.

The bottom line: China’s wages have risen 15 percent a year over the last decade, prompting U.S. companies to rethink where they manufacture.



For Some U.S. Manufacturers, Time to Head Home - Businessweek

Even though they call it a "marginal improvement," this trend is certainly good news for American workers!

Agreed - in fact, outsourcing started with a trickle, so maybe a trickle in the opposite direction will develop into a trend.

In six cases, the total cost for the U.S. was lower than China by an average of 22 percent. “The U.S. is a lot more competitive than people realize,” he says. “Over the last several years, firms got caught up in the outsourcing trend without thinking through the costs.”

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The tremendous tangible cost of outsourcing, combined with the insourcing of millions of illegal alien workers is mind boggling.

The cost of having huge capabilities of our heavy industrial base, most electronics, textiles, clothing, shoes, appliances, and furniture industries alone are incalculable.

From threatening our national security due to not being able to manufacture sustainable key equipment and replacement parts to threatening our national economy and culture due to the massive assimilation and cultural frictions brought on by the influx of tens of millions of illegal aliens all combine into an historic 1-2 Punch right in the middle of the average American's gut.

Originally Posted by BetsyRoss

February 02, 2012, 6:00 PM EST
For Some U.S. Manufacturers, Time to Head Home

More companies are assessing the true cost of outsourcing

By Matthew Philips
Thirteen days before his State of the Union address, President Barack Obama held a meeting at the White House to discuss how to bring outsourced jobs back home. Among the 25 participants was Harry Moser, ex-president of machine-tool firm GF AgieCharmilles, and founder of the Reshoring Initiative, a group of companies and trade associations trying to bring manufacturing jobs back to the U.S.
When asked by the President what costs manufacturers typically ignore when making decisions on where to make products, Moser mentioned the total cost of ownership. That includes factors such as intellectual-property risk, the cost and time of travel to visit distant suppliers, and the negative impact of separating manufacturing from engineering staff back at headquarters. Using data compiled from 10 manufacturers that compared the costs of products and components made in the U.S. vs. China, Moser told Obama that when measured on price, the U.S. was on average 108 percent higher. When Moser analyzed the total cost of ownership, which includes 28 additional factors, the U.S. averaged 12 percent higher. In six cases, the total cost for the U.S. was lower than China by an average of 22 percent. “The U.S. is a lot more competitive than people realize,” he says. “Over the last several years, firms got caught up in the outsourcing trend without thinking through the costs.”

Manufacturers, including Caterpillar (CAT), Ford (F), and General Electric (GE), are starting to move some production back to the U.S., although it’s still just a trickle. The two factors that drove companies overseas, cheap fuel and labor, no longer favor far-flung ventures. The average price of a barrel of oil has gone from $22.81 in 2002 to $87.48 last year, so the price of shipping finished goods has jumped. China’s wages have risen 15 percent a year in that time. Measured against more than 20 other currencies, the dollar has declined 23 percent since its peak in 2002. As a result, the cost of factory labor in dollar terms fell 11 percent in the U.S. from 2002 to 2010, according to the Bureau of Labor Statistics. America’s cheap natural gas is especially appealing to the metals and chemicals industries, particularly since natural gas prices in China are more than twice as expensive, according to research by the Jefferies Global Energy Team.

As companies have gotten better at reducing inventory and adopting just-in-time delivery, supply chains stretching around the world have started to look like liabilities. The fragility of global supply chains became vividly apparent when the tsunami in Japan and floods in Thailand last year caused major disruptions for companies.

A survey of 150 shipping companies by transportation research firm Wolfe Trahan showed a dramatic shift over the last year in their clients’ thinking. Among companies planning to move production, those considering an increase in outsourcing to China fell to 9 percent in October from 18 percent in April 2011. Those expecting to shift production back to the U.S. rose to 21 percent from 10 percent. Supply chain analysts at researcher Gartner (IT) recently predicted that by 2014, the production of 20 percent of goods now made in Asia and destined for U.S. consumers will shift to the Americas. In a recent study by Accenture (ACN) entitled “Manufacturing’s Secret Shift,” 61 percent of 287 manufacturers surveyed reported that they’re thinking of moving operations closer to customers.

Don’t expect a hiring frenzy if some factories return. “It’s a marginal improvement, not a tidal wave,” says Daniel J. Meckstroth, chief economist for the Manufacturers Alliance for Productivity & Innovation, a public policy and economics research firm. Manufacturing employment peaked in 1979 at about 20 million jobs and stands at 11.5 million jobs today. Over the past 15 years, U.S. manufacturing productivity has increased about 4 percent a year, while the economy has grown on average by 3 percent. “If manufacturing grew as fast as the economy, right there the math says you don’t need a single new job,” says Meckstroth.

The bottom line: China’s wages have risen 15 percent a year over the last decade, prompting U.S. companies to rethink where they manufacture.



For Some U.S. Manufacturers, Time to Head Home - Businessweek

I am not impressed with BO talking about how he is going to bring some manufacturing home...He can reverse that trend easily with his high taxes and mouth. I feel this is only an election ploy. If you believe that one we got beautiful ocean side property in Vegas for a good price....his word is as good as what he has done. Hows that change working for ya..