The American Factory Revival: Not a Manufactured Hope

By

Published December 20, 2013

| FOXBusiness

It’s inspiring. It’s exceedingly helpful to the U.S. economy and to jobs, in particular. But is there a manufacturing resurgence in the U.S., or is the “Made in America” rebound no more than anecdotal?

Hal Sirkin, senior partner at Boston Consulting Group, said unequivocally that a revival in American manufacturing is under way.

“The United States’ productivity level is between 3 and 3.2 times as high as China's,” said Sirkin. “And when you add in transportation and shipping costs associated with manufacturing in China, U.S. labor costs have become very competitive.”

It’s true. China’s very low wages, which has made it a force to be reckoned with, have been rising significantly in the last 10 years -- from $.72 cents in 2001 to a projected $6.31 in 2015, said Sirkin.

A recent study by Deloitte looking at global competiveness pointed out that “China needs to balance wage increases with productivity gains.”

And while the increase in the average minimum wage, by about 13% annually, is a good thing for Chinese workers, it undeniably helps the U.S.’s chances of bringing more work back home -- and these new circumstances are being noticed.

According to a survey from the Boston Consulting Group, more than half of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the U.S. from China or are actively considering it.

“It just makes economic sense,” said Sirkin, who also pointed to proximity to customers and product quality as two other central factors driving future decisions on production locations

Manufacturing in the U.S. has increased slightly in the last year, said economist Chris Christopher, director of U.S. and Global Consumer Economics -- but the 2013 findings have yet to be released.

“It is certainly gaining a little traction, but ‘Made in America’ is hard to quantify,” said Christopher.

Mitch Free, chairman of manufacturing company MFG.com, said while he realizes Made in America is rebounding slowly, he is seeing companies firsthand choosing to manufacture more things in the U.S. That, he pointed out, is a big deal.

“On top of the high productivity level, Americans are good at partnering with companies to help them improve their products overall,” he said. “In China, you generally get what you ask for, but it’s not collaborative in the same way.”

According to a recent Gallup survey, almost half of all American consumers make an effort to buy products made in the United States, citing patriotism and the need to create and keep home-grown jobs as their primary motivations.

Shinola CEO Steve Bock said his Detroit-based company, which sells high-end watches, leather goods and even bicycles -- all in the U.S. -- does not rely on the “Made in America” slogan but is extremely proud of it.

“I think ‘Made in America’ in isolation can be a pitfall… but if ‘Made in America’ tied into a product whose design is compelling answers a need in the marketplace and has a product with a better value and quality, if you take all of those dots and put them together, that phrase can be hugely important.”

Shinola -- which was started at the turn of the century before being closed in the 1960’s and then reopened in 2010 -- has grown rapidly in three years, going from 6 employees to more than 200 today. The fact that the thriving company is based in Motor City, one of the places hardest hit by the recent recession, only goes to show Americans’ resilience, said Bock.

“Creating jobs in the United States, in such an iconic city where there is so much enthusiasm and opportunity, it’s wonderful to see that spirit, “ he said. “And Shinola, it is an American company with a 100-year heritage that is dusting itself off, recreating itself and moving forward.”

In many ways, it seems, the American manufacturing industry is doing the same.

Right now, the U.S. and China are the two top manufacturers in the world -- which one is in number one is depends on how economists parse the data (in essence, whether you’re looking at total output or value-added output). But who is in first place is not the point when it comes to an American revival, said Sirkin.

“Even if China is not in first place, it will be in the future because of how massive it is….It’s four times the size of the U.S.,” said Sirkin “But that does not stop more American manufacturing from happening…. It already is. I have no doubt that moving forward manufacturing will dramatically increase in the US at least until 2020 and add up to 5 million new jobs to the economy.”

URL

http://smallbusiness.foxbusiness.com/entrepreneurs/2013/12/20/american-factory-revival-not-manufactured-hope/