What is in this article?:
- Trends Shaping the Return of Manufacturing to the United States
- Rising Costs and New Technology
Regardless of recent positive developments, the standards for U.S. manufacturers to maintain their global competitiveness continue to evolve.
- Shifting priorities
- China’s adjustments
- What causes the skills gap?
The restoration of domestic manufacturing’s vitality has been in progress for several years, with trends like “reshoring” as well as capital investments in new production capabilities, the embrace of “smart” technologies, and in manufacturers’ adoption of new information standards and data communication capabilities.
The viability and vitality of U.S. manufacturing has been restored, according to the current economic and political trends, but in fact that restoration process has been in progress for several years, with trends like “reshoring” as well as capital investments in new production capabilities, the embrace of “smart” technologies, and in manufacturers’ adoption of new information standards and data communication capabilities.
Even more important, the condition of U.S. manufacturing has been under examination for decades. Against the obvious and impressive expansion of manufacturing economies elsewhere in the world, U.S. manufacturers have had to adapt to evolving standards for product quality and customer satisfaction, in order to remain globally competitive. And, regardless of the recent good news on this front, the standards for U.S. manufacturers to maintain their global competitiveness continue to evolve.
In 1965, manufacturing in the United States accounted for 53% of the economy. For over half a century, American manufacturing dominated the globe. However by 1988, manufacturing only made up 39% of the American economy, today only 9%. What happened? How can the United States ever be a manufacturing center again?
Globalization, outsourcing, and skills — The main causes of manufacturing losses were globalization, outsourcing — and a growing skills gap. The elimination of trade barriers created access to foreign markets for American manufacturers. Some businesses in the United States discovered that it was cheaper to outsource their production activities to countries overseas. In countries like China, people were willing to work around the clock for significantly less per hour than American workers.
Outsourcing manufacturing has cost Americans millions of jobs. However, this is changing. With rising costs for labor overseas and development of new technologies, many American manufacturing companies are revising their business strategies and bringing work (and jobs) back to their U.S. operations.
In order to make the most of this shift, it is essential now for these manufacturers to ensure that their American employees are highly skilled and up-to-date with the latest technology and tools.
Rising labor costs in foreign nations is one reason that manufacturers will return work back to the United States. In the early 1990s, labor was extremely cheap in Asia. Then, as the standards of living increased, labor costs also rose. China alone saw a 10% increase in labor costs, and that number is predicted to continue rising. Add in the costs for shipping and handling and it puts many businesses at an offshore disadvantage.
By reshoring their manufacturing operations, production and delivery costs will decrease, allowing manufacturers to produce more. This, combined with increased quality assurance and communication, is helping manufacturing in the United States to become increasingly competitive. But, it underscores the need to make manufacturing labor costs effective.