Executive Outlook 2012: The Trend Is Real, But Only To An Extent

0812outlookNidecWhile more and more companies are moving production back to the U.S., I see it as more of a company-specific issue, not one of general macro-economics. 

It’s true that the wage gap between the U.S. and other developing countries—particularly China—is getting smaller, but the quality and types of products those countries can produce are getting better. For instance, 10 years ago, to compensate for quality and supply-chain risks, U.S. companies typically wouldn’t source products from China unless they were 30% lower in price. Today, many are willing to do so with just 3% to 5% savings.  

Several factors are contributing to manufacturing costs rising faster in foreign countries than back home. Salaries and wages in China have been increasing 12% to 14% annually (compared to 3% in the U.S). China’s appreciating currency has also helped boost U.S. competitiveness. That said, we shouldn’t think China is no longer competitive—and that the U.S. is on the brink of becoming the world’s most prolific manufacturer. China is rapidly improving its manufacturing capabilities and can now produce good quality high-end products at competitive cost.  They have an abundance of intelligent, well-trained workers. (China graduates over half a million engineers per year; the U.S. rate is only about 1/8 -1/10 of that).

Don’t be mistaken: America is still a manufacturing superpower—particularly in areas like airplanes, factory automation, process control, oil & gas drilling and heavy-construction equipment. Although we are becoming more competitive versus China, we cannot compete only on wages and labor costs alone. The game has to be played on a higher level going forward. Our current and future labor force must be prepared academically and institutionally for the demands of the global marketplace in the 21st century. Education (particularly in science and engineering) and on-the-job training are the keys for our future.

Government needs to help industry compete. Many U.S. competitiveness issues are due to matters over which manufacturers have no control.  Government should do what it can to control healthcare costs, while not over-regulating and over-taxing to the point where it’s economically unfeasible to produce goods in this country. Businesses will always try to allocate capital and human resources to where they can make the highest returns.

Certainly, the next decade looks to be more promising for U.S. manufacturing than the last. What’s becoming increasingly important in the global marketplace is not who can best compete in the  “structural” arena, but who can dominate the “intellectual” competition. MT

Newsletter Sign Up



Your First Name:

Your Last Name:

Your E-Mail Address:

Would you like our Newsletter?:

Enter verification image value
  

Congratulations to Our Recent Survey Winner

Paul Kimble, a Vibration Analyst for General Motors, was chosen at random to win a $100 gift card for completing our recent online MT Buying Cycle Survey. You could win, too! Watch your e-mail for our next survey request.

Featured Supplier: Brady

bradyBrady Worldwide Inc. is an international manufacturer and marketer of complete solutions that identify and protect premises, products and people. Our products include high-performance labels and signs, safety devices, printing systems and software, and precision die-cut materials. Along with being a global leader in industrial and safety printing systems and solutions, we have been the company you trust when performance matters most since 1914. We serve customers in electronics, telecommunications, manufacturing, electrical, construction, education, medical and a variety of other industries.

Click here for more.

Featured White Paper: Spraying Systems Co.

SSCo Logo Color w tag

Clean Tanks Faster and Lower Operating Costs

Understanding all the tank cleaning equipment options is difficult because not all tank cleaning nozzles are created equal. Let Spraying Systems Co. show you how to reduce cleaning time, minimize liquid consumption and improve cleaning effectiveness. 

Click here to download the White Paper.