Factors that underlie this trend include rising wages in China and India, greater competitiveness of American workers as compared to their counterparts in the third world, and the weakness of the US dollar. The flow of jobs from abroad back to USA is not solely a function currency rate fluctuation.
There is increasing evidence that the trend of bringing jobs back to USA will not only continue, but also that we are coming to the tipping point possibly as soon as 2015. At that time, according to Hal Sirkin, Managing Director at Boston Consulting Group, the US will be at the same level in cost of manufacture as the Chinese.
Jeffrey Immelt, CEO of GE, elaborated on this, stating that US factories can competitively manufacture certain goods such as computer electronics, televisions, and specific types of industrial products. i.e. rubber products and machinery parts.
Specifically, wages in China have risen 20% in the past few years. Shipping costs have doubled. And locating factories nearby the final point of sale in the US and Europe can capture, in some cases (for example, aircraft engine manufacturing), a 50% reduction in cycle time.
Early movers can capitalize on these favorable changes in structural costs to reconfigure their supply chain and bring jobs to USA. Here are 3 examples of companies that have done exactly this.
Bruce Cochrane was scion of a family business that ceased to manufacture furniture in North Carolina, several years ago. The production moved to Asia. However, as he observed the recent rise of the middle class in China and India, and the commensurate increase in local wages overseas, he spotted opportunity for a US-based factory once again. Cochrane tested his plan to re-start the family business at a major furniture show in North Carolina last fall, and given strong interest among buyers, Lincolnton Furniture Company has arisen again, like the phoenix. The North Carolina plant currently employs 170 people, making furniture once more.
Caterpillar has also announced its intention to build a factory in the United States, bringing approximately 1,400 jobs to Georgia. The plant will produce small tractors and excavators, most likely. Before this, Japan was the base of operations for manufacturing these vehicles. Caterpillar has said that it aims to move production closer to the end users, who reside in the United States and Europe.
Since mid-2010, the largest global manufacturer and marketer of padlocks, Master Lock, has brought approximately 100 union jobs back to its factory in Milwaukee, from China. On February 15, 2012, President Obama toured the facility and publicly acknowledged the firm for “making the most of a huge opportunity” by in-sourcing jobs and positively contributing to the strengthening of our economy.
Image source: Lincolton Furniture Company. Used with permission.