Manufacturers are expected to increase construction of manufacturing facilities in the United States within the next five years, bringing back some operations from China.
The trend was identified in the results of a survey conducted by Boston Consulting Group (BCG). The return of multiple manufacturing operations to the United States has the potential to be one of the top industry trends in 2015, according to Dan Parkinson, industrial market sector leader at the construction firm Brasfield & Gorrie.
Cost advantages once made moving manufacturing operations to China a highly attractive prospect, but developments in China have changed the economics of China-based manufacturing, according to BCG.
The return of manufacturing to the U.S. is being fueled by factors that will make manufacturing costs in the U.S. and China roughly equal. For example, cost savings based on sending manufacturing operations to China, particularly in the area of labor, will dwindle into percentage rates of only single digits.
The combination of transportation costs, duties and tariffs, supply chain risks, costs of warehousing and industrial real estate, and related expenses will make cost savings from China-based manufacturing minimal.
Among the factors cited by BCG were increased wages paid to Chinese workers, improved productivity from U.S. workers, and weakness of the U.S. dollar.
Returning manufacturing to domestic facilities could ultimately be highly beneficial to U.S. companies and the American economy. Increasing domestic manufacturing will provide more job opportunities for American workers. At the same time, manufacturers will be better able to monitor and control manufacturing processes and won’t have long waits for products to arrive from China.
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