The resurgence of US manufacturing is underway. From lower shipping costs to regional manufacturing centers, here are four reasons why we think it’s here to stay.
1. US costs are getting more competitive
The recent surge in US production of oil and natural gas has pushed down energy costs and helped keep US manufacturing prices steady, while outsourcing prices in China have been on the rise. By 2015, AlixPartners projects that the cost of outsourcing manufacturing to China will equal the cost of manufacturing in the US.
2. Companies are eager to produce near end users
Companies want to get products in the hands of customers as quickly as possible. Manufacturing in the US can shorten lengthy overseas shipping times from months to days and eliminate delays through customs. In addition, it can minimize the impact of unexpected conditions, such as the earthquake in Japan and flooding in Thailand which halted productions for cars, electronic goods and other products.
3. US manufacturing is getting government support
President Obama is on a mission to establish 15 Manufacturing Innovation Institutes in the US. These institutes will be new, high-tech manufacturing centers that bring together government resources, businesses and universities to maximize innovation. First introduced in his 2013 State of the Union speech, the President proposed a one-time $1 billion investment to establish these network in an effort to make America a magnet for jobs and manufacturing.
4. Foreign companies are investing in the US
As the world’s largest consumer market, foreign companies are realizing the benefits of manufacturing in the US near their customers. Recent years have seen an increase in the number of foreign companies investing here, including big names such as BMW of Germany and Michelin of France, making the United States the second largest country for foreign direct investment in 2013. The boost in foreign investment coupled with competitive prices and government incentives, just may signal that US manufacturing is poised for the ultimate comeback.
The boost in foreign investment coupled with competitive prices and government incentives, just may signal that US manufacturing is poised for the ultimate comeback.