By Don Loepp, Plastics News
Akron, Ohio -- Here's some good news for US manufacturers -- a new report from Boston Consulting Group titled "Made in America, Again: Why Manufacturing will Return to the US."
According to the report, which was released 25 Au, the return of manufacturing to the United States will accelerate as companies take into account the full costs of outsourcing to China and the strategic advantages of making products closer to consumers in North America.
The report expands on earlier research which predicted that over the next five years, factors including 15-20 percent annual increases in Chinese wages and a strengthening yuan will nearly erase China's manufacturing cost advantage vs. low-cost U.S. states for goods imported into North America.
Even as Chinese factories become more productive, thanks to automation and improved technology, rising factory wages will make it tough to compete with higher US labour productivity, the report says.
"Greater automation would undercut the primary advantage of outsourcing to China, which is access to cheap labour," said Harold Sirkin, a BCG senior partner and lead author of the study. "Once companies carefully look at all the costs, many will find they'll be better off making their products closer to customers in the US."
The report cites a number of specific examples, including one directly from the plastics industry: Coleman Co. is moving production of its 16-quart wheeled plastic coolers from China to Wichita, Kan., "owing to rising Chinese manufacturing and shipping costs."
Won't other low-wage nations like Vietnam and Mexico pick up work from China? Yes, they will, according to the report, but they will not be able to absorb all the higher-end manufacturing that otherwise would go to China, because they lack adequate infrastructure, skilled workers, scale, and domestic supply networks.
China will remain a major manufacturing power. The difference is that it will no longer be the force it is today for supplying customers in North America, the report says.
"Foreign companies will want to maintain their Chinese manufacturing operations to serve the Chinese market and the rest of Asia," said Douglas Hohner, another BCG partner who focuses on manufacturing.
"But in terms of supplying North America, China will no longer be the default option," he said.