Monday, September 23, 2013

The Return of U.S. Manufacturing

Over the last 15-20 years companies have moved much of their manufacturing operations to China, where labor is much cheaper but is on the rise, during a period when the cost of crude oil was a third of what it is today. From 2003 to 2008, crude oil soared from $28 to more than $100 a barrel. As of this morning, the price sits at $105 with a one year forecast of $120 a barrel.

With this dramatic shift in the price of crude oil, a critical component when calculating the cost of shipping, many American companies have begun returning jobs to US plants or are considering bringing manufacturing closer to the US. In the wake of The Great Recession, U.S. manufacturing appears ripe for a rebirth.  According to the report by Accenture, some 61% of manufacturing executives surveyed said they were considering more closely matching supply location with demand location by re-shoring manufacturing and supply. Caterpillar, the world's largest maker of excavators and bulldozers, has shifted some of its production to Texas. In 2012, Whirlpool brought back production of its KitchenAid hand mixers to Ohio, which had been made by a contractor in Huizhou, China. There have been similar efforts made by General Electric and Ford Motor Company. 

The return of some production has not directly impacted job growth in the United States. Much of the growth in manufacturing has been as a result of the economic recovery. This discovery begs the question, if production is leaving Asia, but is not returning to the United States, where are the manufacturing jobs?

McKinsey Quarterly. September 2008. "Time to rethink offshoring?" Ajay Goel, Nazgol Moussavi, and Vats N. Srivatsan.

Wall Street Journal. May 21, 2012. "Once Made in China: Jobs Trickle Back to U.S. Plants". James R. Hagerty.

CNN Money. June 29, 2011. "Made (again) in the USA: The return of American manufacturing". Nin-Hai Tseng.

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