"Back in the USA" - Seattle Manufacturer Provides A Lesson on Reshoring. Expect More of It. Lots More
The NY Times recently featured a Seattle-based company named "Taphandles" that has brought some of its manufacturing of custom beer taps and beer-marketing products (see photo above) back to the United States from China as many of the economic and cost advantages of manufacturing have started to shift back to the United States, including:
1. Manufacturing wages in China continue to increase at 15-20% per year on average, and have actually increased by a whopping 300% for Taphandles since it opened a Chinese factory in 2006. In contrast, manufacturing wages in the U.S. have remained relatively flat, or have even decreased in some industries that have adopted a two-tier wage structure.
2. The lead time for Taphandles' orders coming from China is three weeks, compared to a much shorter time for domestic production, which improves customer satisfaction for Taphandles' clients.
3. In addition to rising wages, the Chinese currency has appreciated by 23% over the last five years, making production there much more expensive for American firms like Taphandles.
4. Taphandles owner Paul Fitcher predicts that international shipping costs will continue to rise along with higher oil prices, which was another factor in his decision to "reshore" manufacturing back to the U.S.
Bottom Line: Look for more and more manufacturing production to come back to the U.S. from China in the future, as China's once-significant labor cost advantage continues to shrink. According to a recent Boston Consulting Group report, the example of Taphandles is part of an emerging trend that will accelerate in the next five years, and in the process could create 2 to 3 million American manufacturing jobs from the reshoring of production back to the U.S.