The resurgence in the U.S. manufacturing’s re-shoring domestically has mainly been attributed to rising labor costs in markets such as China, but a report released by PwC US, “A Homecoming fo
r U.S. Manufacturing?”, argues that there a number of other contributing factors, including transportation costs, energy costs, and protecting the supply chain. And, the report asserts that this re-shoring shift could drive a sustained manufacturing renaissance in the U.S., potentially improving investment, employment, production output, and research and development. PwC’s new report identifies seven factors as the primary catalysts influencing manufacturers’ decisions to establish production facilities domestically and produce products closer to their major customer bases, including:
- Transportation and Energy Costs
- Currency Fluctuations
- U.S. Market Demand
- U.S. Talent
- Availability of Capital
- Tax and Regulatory Climate
- U.S. Labor Costs
These seven factors that may play key roles in making re-shoring decisions, may also help determine whether or not the U.S. will become a more competitive and attractive market for manufacturing expansion.
“Industrial manufacturers may increasingly rethink their U.S. strategies, including the merits of continuing to separate production and R&D and producing abroad and importing back to U.S. buyers. Depending on the industry, there may be considerable benefits to establishing regionalized supply chains and R&D facilities in the U.S., such as reducing costs, shortening lead times, protecting intellectual property and mitigating many of the risk factors inherent in developing markets.”
Of course, there are greater advantages of relocating manufacturing production in the U.S. for some industries more than others.
The PwC report shows that chemicals, primary metals, and heavy equipment manufacturing industries will gain the most from maintaining or expanding facilities in the U.S. given opportunities and cost incentives to re-shore domestically, taking into account labor, materials, transportation, and energy costs. The report also notes that localizing production can mitigate supply-chain disruptions, which totaled $2.2 billion in financial impact for U.S. industrial products companies in 2011.
Categorias: Asset Management