Shorter cash conversion cycles, faster speed to market and consumer preference may drive more manufacturing stateside.
Is offshoring manufacturing truly a cost-saving strategy? While it may have been true in the past, it may be time to reconsider manufacturing in America. Here’s a look at three ways re-shoring your manufacturing needs could help your company tap into incredible economic opportunity, meet a growing need for American-made products and improve speed to market.
By 2018, the cost of manufacturing in the United States could actually be lower than in China.
According to the U.S. Census, Americans imported $945 billion in goods from China in 2015 and 2016. As domestic manufacturing costs become increasingly competitive with the cost of importing products from overseas, the calculus behind manufacturing decisions will ultimately lead to more and more companies electing to bring their operations stateside.
First, manufacturing locally can decrease a business’s total costs by shortening the cash conversion cycle. Instead of writing a check for parts and waiting months for the products to ship from one country to another, the product ships and sells in a matter of days.
Second, in 2015, Boston Consulting Group, a global management consultancy, estimated that the costs associated with manufacturing in the United States were only 5 percent higher than manufacturing in China. Further, they project that, by 2018, the cost of manufacturing in the United States will actually be 2-3 percent lower than in China. Coupled with streamlined logistics and faster speed to market, that makes re-shoring a very competitive manufacturing strategy. In fact, major brands like Wal-Mart, Ford and Boeing are re-shoring jobs out of China, Mexico and Spain back to the United States.
Americans want to buy American
In 2015, Consumer Reports noted that 8 in 10 American consumers would rather buy an American-made product than an imported one. This sentiment has grown in the past two years, supporting the growth of websites like AmericansWorking.com, MadeInAmericaForever.com, and MadeInUSA.com, which have built directories of thousands of featured products made in America.
Whether consumers want to support manufacturing in the United States out of a sense of patriotism or to support domestic job growth, it’s certainly possible that a “Made in the USA” sticker could be the determining factor for some consumers weighing similar (and similarly priced) products.
“Business today is more than just speed,” says Mark Modesti of the UPS Customer Solutions team. “It’s about the consumers and giving them what they want, especially when they are after quality.”
Improving sustainability and flexibility
Only 1.75 percent of freight moved in the United States is moved over 2,000 miles, compared to the 7,000+ mile journey products make when imported from China. Over time, the environmental impact of shipping inventory over a shorter distance can add up to significant reduction in carbon emissions.
Like many businesses, go-cart and minibike manufacturer Monster Moto initially opted to outsource its manufacturing to China, even though the company was headquartered in Texas. At the time, the company shipped fully assembled bikes to customers in the United States. Over time, however, Monster Moto’s leadership team felt that language barriers and a lack of visibility were impeding the company’s potential for growth. Re-shoring its assembly operations to Louisiana gave the company not only a higher level of product-sourcing flexibility and lower shipping costs, but also opened the doors to increased flexibility, creativity and innovation.
Manufacturing in the United States continues to be on the rise, and for good reason. Companies re-shoring operations in America find themselves streamlining product sourcing, lowering production costs and increasing their speed to market – and that’s a recipe for success, no matter where you’re shipping your products.