With the recent news of many American companies either making moves to reshore their manufacturing operations back to the United States many in the media have been speculating whether there truly is an American manufacturing renaissance and whether the reshoring of American manufacturing back to the U.S. was a myth or really fact.
Here are two of the most commonly viewed questions that we believe are myths about reshoring and then the facts as they stand today.
Myth: It still is cheaper to manufacture in countries like China and India where there are lower wages.
Fact: Although wages still remain relatively low in these and other countries like Turkey, Vietnam, and Mexico, the wage difference between the U.S. and these countries can be offset by other lower expenses such as logistics and lower energy costs. Even wages in other countries are on the rise, so this differential may not be that great in the near future.
For example, the cover story for the April 22, 2013 Time magazine was “Made in USA – Manufacturing is Back ─ But Where are the Jobs?” Important stats from the article showed that China’s average hourly wage was only $0.50 in 2000, however by 2015 it was projected to increase to nearly but $4.50. Another statistic that was mentioned was that the cost to ship a 40-ft. container from China to the West Coast of the U.S. increased from $1,184 in 2009 to $2,302 in 2013. These facts outlined by Time magazine editors backs-up a 2011 Boston Consulting Group report about the eventual convergence of total costs to manufacture in the U.S. and China by 2015.
Myth: If reshoring is happening, then where are the jobs?
Fact: Manufacturing created 500,000 jobs in the past three years, of that Harry Moser, founder of the Reshoring Initiative estimates that between 2010 and 2012, about 50,000 jobs were created because of the reshoring trend. The Reshoring Initiative promotes and tracks cases of reshoring across the U.S.
In addition, a February 2012 Boston Consulting Group survey found that 37 percent of U.S. manufacturers with $1 billion or more sales were contemplating reshoring some of their current China based production back to the United States. Mainly due to rising wages in China as well as other factors related to Chinese labor laws.
And the reshoring isn’t just American companies bringing work back to the U.S. Other countries with higher labor costs such as Japan and Europe are finding that it is less expensive to base manufacturing plants in the U.S. to lower labor costs and to shrink logistical expenses. Examples include, Nissan, Honda, and Toyota are ramping up their exports from their United States facilities. Ikea opened a new furniture factory in Danville, Virginia to cut shipping costs. Airbus, the European airline manufacturer has begun construction of a new factory in Mobile, Alabama.
What do you think? Is this a myth, reality, or somewhere in between?