Saturday, February 25, 2012

The New Reallocation of Global Manufacturing and The Renaissance of American Manufacturing



In the Knowledge@Wharton video above, Hal Sirkin of the Boston Consulting Group discusses the rebirth of manufacturing that is underway in the U.S., partly because of the erosion of China‚Äôs manufacturing cost advantages, especially for wages, which has started bringing manufacturing production and jobs back to the U.S., reversing a decade-long trend of outsourcing production overseas. Ten years ago when China entered the WTO and wages there were $0.58 per hour (vs. $15 in the U.S.), it made economic sense for American manufacturers to outsource production to China. But now with ongoing double-digit wage increases in China, high oil costs, long delivery times, and quality and intellectual property issues, American manufacturing can now increasingly compete on cost, productivity, quality and delivery.  Manufacturing in the U.S. makes more sense today than in a generation, especially for those products that are destined for the U.S. market.

The Boston Consulting Group predicts that within a few years, China's manufacturing cost advantage will disappear for 70% of the products currently produced there for the U.S. market, and increasing amounts of production will be "reshored" or "insourced" to the U.S., with the potential to create 2-3 million new factory jobs in America.  Dozens of U.S. companies have already brought manufacturing production and jobs home, and that contributed to the manufacturing sector's strong economic performance in the last two years, with all-time record profits in 2011, almost 400,000 new jobs since the beginning of 2010, and output growth last year more than twice the rate of the overall economy.

Welcome to America's manufacturing renaissance, and it's just getting started.

HT: Dan Greller

7 Comments:

At 2/25/2012 9:51 AM, Blogger Larry G said...

but here's the irony:

U.S. manufacturing sees shortage of skilled factory workers

... and risk...

as the American K-12 education system continues to focus on college as the goal for most and little to nothing for those not bound for college....

... while Europe and China educate for both college and non-college technical skill jobs.

..some will blame the lack of technical schooling on our public school system, not without some justification but the alternative private schools don't focus on this kind of education either.

Community Colleges could...but students would have to have good K-12 math/English skills coming in...

 
At 2/25/2012 12:10 PM, Blogger Buddy R Pacifico said...

The video was very good. Thanks Professor.

Among many interesting points was:

About 70% of the products China manufactures for the U.S. market are in the "tipping zone". Those are products that will probably be more economically U.S. produced, in the next few years.

 
At 2/25/2012 1:54 PM, Blogger Benjamin said...

Larry G is right--we have an incredible effete snobbery in the USA that we need four-year degrees of Foofery, rather than tool-and-die guys.

The GOP has always hated skilled and unionized labor, and always wanted to offshore those jobs. When was the last time you heard of GOP presidential candidate acknowledge America's skilled factory workers?

The Dems have fallen in love with social welfare workers, and may even be worse.

The solution is private sector technical schools. I hope we see many pop up.

 
At 2/25/2012 2:08 PM, Blogger juandos said...

Charles Smith on his site 'Of Two Minds' asks: It's not just gasoline consumption that's declining--petroleum and electricity consumption are also dropping. Is that indicative of economic growth?...

Presently it sure can be seen that might not be...

The posting has some interesting graphs...

 
At 2/25/2012 2:09 PM, Blogger Ben Kinlaw said...

Was not aware US produces 75% of our consumption. Data presented was encouraging as we see a wave of insourcing and US growth as a global competitor.

 
At 2/26/2012 11:26 PM, Blogger VangelV said...

Charles Smith on his site 'Of Two Minds' asks: It's not just gasoline consumption that's declining--petroleum and electricity consumption are also dropping. Is that indicative of economic growth?...

When China reported a drop in energy use readers on this site were eager to use it as evidence of an economic slowdown. For some reason Mark and others want to see it as good news when the US reports similar declines.

What I see is evidence of a decline in the standard of living as Main Street feels the impact of a falling dollar and rising prices that are underestimated by the BLS. Eventually the reality will matter. Obama is hoping that won't be the case till after November.

 
At 2/27/2012 12:15 PM, Blogger VangelV said...

What drivel. The 'consultant' claims that there are no state owned companies in the US. He forgets the government actions to save GM and Chrysler. He claims that the US does not subsidise companies when that is a blatant lie. He claims that it is hard to make changes when manufacturing far away. But Steve Jobs, who was not a consultant, pointed out that the reason why Apple went to China because it is easier to make changes.

A falling dollar, over-regulated environment, and high energy costs do not help countries that have massive debts and need to import capital. The last time I looked that described the US.

 

Post a Comment

Links to this post:

Create a Link

<< Home