Large manufacturers shift operations from China to US
ProcurementLeaders.com - Apr 24th 2012, 08:33
More than a third of US-based manufacturing companies with sales greater than $1bn are planning to bring back production to the United States from China
According to a new survey by The Boston Consulting Group (BCG), 37% of decisions makers at 106 companies polled plan to reshore manufacturing operations or are “actively considering” such plans. That response rate rose to 48% among executives at companies with $10bn or more in revenues—a third of the sample.
The top factors cited as driving future decisions on production locations: labour costs (57%), product quality (41%), ease of doing business (29%), and proximity to customers (28%).
In addition, 92% said they believe that labour costs in China “will continue to escalate,” and 70% agreed that “sourcing in China is more costly than it looks on paper.”
BCG said the findings were consistent with previous research hon the changing economics that are starting to favour the manufacturing of certain goods in the US. In a report released last month, the business consultancy predicted that improved US competitiveness and rising costs in China will put the US in a strong position to add 2 million to 3 million jobs in a range of industries and an estimated $100bn in annual output by the end of the decade.
“These survey findings confirm our own analysis and what we are hearing from major companies,” said Harold L. Sirkin, a BCG senior partner.
“Companies are realising that the economics of manufacturing are swinging in favor of the US, for goods to be sold both at home and to major export markets. This trend is likely to accelerate starting around 2015.”
“Not long ago, many companies regarded China as the low-cost default option for manufacturing,” added Michael Zinser, a BCG partner. “This survey shows that companies are coming to the conclusion surprisingly fast that the US is becoming more competitive when the total costs of manufacturing are accounted for.”
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