I came across this study recently and thought it had some interesting points. At Custom Rubber Corp., we’ve seen a number of companies come to us for domestic production of their rubber parts – after trying to source the molded rubber overseas for some time. We’ve found that we’re generally competitive once our customer adds in all the quality costs, inventory carrying costs, etc., that are mentioned in the study. I’ve highlighted and summarized the key points below.
The U.S. is becoming more attractive as a place to manufacture many goods consumed on this continent, according to “Made in America, Again,” from The Boston Consulting Group, August 2011 (http://www.bcg.com/documents/file84471.pdf).
America’s “increasingly flexible workforce and a resilient corporate sector” are contributing factors. In the last decade, China was the clear choice for manufacturing, with its supply of low cost labor, a developing domestic market, low currency and government incentives.
Sometime around 2015, the report states, manufacturing in some parts of the U.S. will be “just as economical as manufacturing in China,” due to wage and benefit increases at the average Chinese factory, and the costs of transportation, duties, supply chain risks and industrial real estate.
From the 1950s-80s, the U.S. experienced a dramatic loss of market share in areas such as color TVs, steel, cars and computer chips. “But U.S. industry and the economy responded with surprising flexibility and speed to reemerge more competitive and productive than ever.”
Within five years, the report continues, the total cost of production for many products will be only about 10 to 15 percent less in Chinese coastal cities than in some parts of the U.S. where factories are likely to be built. The “cost gap” between sourcing in China and manufacturing in the U.S. will be “minimal.”
What are the components of China’s changing cost equation? The rising cost of labor, electricity, and industrial land. “To secure low real-estate costs in China, companies will need to move inland,” and in doing so incur higher transportation costs. Transpacific shipping rates are on the rise, too.
In addition, there are “headache” costs of inventory expenses, quality control problems, unanticipated travel needs and the threat of natural disasters.
China, the report states, should no longer be treated as “the default option.” The Boston Group’s advice to U.S. companies: “undertake a fresh, rigorous, product-by-product analysis of their … networks; [and] make sure that their supply chains are flexible, dynamic, and globally balanced.”
Custom Rubber Corp. stands ready not only to assist our prospects and customers with the domestic production of their molded rubber component needs, but also to help with product design, to insure the most cost effective and elegant solution to the issue at hand. Contact Us us today for help with your rubber part.
