Businessweek‘s (Feb.8,2012) headline reads: “For Some US Manufacturers, Time to Head Home”. It 
appears that when the total cost of ownership is computed (which includes intellectual property risk, the cost/time to travel to visit distant suppliers, the negative impact of separating manufacturing from engineering back at HQ, and 28 more factors), the true costs of outsourcing can be assessed.
When measured on price alone, says the Reshoring Initiative, the cost of products and components made in the US vs. China are 108% higher. But when total cost of ownership is included, the US averages only 12% higher. “The US is a lot more competitive than people realize,” says the group’s founder. “Over the last several years, firms got caught up in the outsourcing trend without thinking through the costs.”
Two of the factors that drove firms overseas, cheap fuel and labor, no longer favor far-flung ventures. A barrel of oil has jumped from $23 to $88 in the past decade, so the price of shipping goods has gone up. And wages in China have increased 15% a year in that same time frame. Further, the dollar has declined 23% since 2002, with the result that factory labor here is 11% cheaper in dollar terms over that period.
As companies have also gotten better at reducing inventory and adopting JIT delivery, supply chains that stretch around the world have started to look like liabilities. Researchers at Gartner predict that by 2014, 20% of the goods made in Asia that are destined for the US will shift to the Americas. And a recent survey by Accenture, called “Manufacturing’s Secret Shift,” reports that 61% of 287 manufacturers are thinking of moving operations closer to customers.
Don’t expect a hiring frenzy if some factories return, though. “It’s a marginal improvement, not a tidal wave,” says Businessweek.
Discussion questions:
1. Why won’t a shift in manufacturing result in millions of new jobs?
2. Why should the total cost of ownership be included in outsourcing decisions?
I work for a titanium components manufacturer here in Houston, TX and am always trying to keep up with what is going on in the manufacturing industry as a whole. Bringing manufacturing back to the US is wonderful but may not necessarily mean an extravagant number of jobs. Higher productivity and advanced technology means more can be produced will fewer people. Even so, any new jobs at home would mean good things for Americans.
Anyhow, thanks for sharing! – Aly
Aly,
Thanks for your comment. We appreciate your input and invite you to give us your observations on more blogs. Indeed, manufacturing peaked at 20 million jobs in 1979 and now stands at only 11.5 million jobs in the US.