Rising labor costs and quality concerns have many US companies reevaluating their overseas strategies.
In fact, new research conducted by Cook Associates Executive Search found that a full 85 percent of manufacturing executives see the possibility of certain manufacturing operations returning to the US.
What are the reasons for this potential shift? Survey participants cited:
overseas costs (37 percent)
logistics (19 percent)
other, including economic/political issues, quality and safety concerns, patriotism and overseas skills shortages for highly technical manufacturing processes (36 percent)
The study, which polled nearly 3,000 manufacturing executives primarily in small- to mid-sized US companies from October 13 through November 18, 2011, identified low-volume, high-precision, high-mix operations, automated manufacturing and engineered products requiring technology improvements or innovation as the primary forms of manufacturing returning to the US.
"The executives we polled told us that wage inflation in traditional overseas venues, especially China, is changing the value proposition for American manufacturers," said Kevin Logterman, Managing Director, Industrial and Family Business for Cook. "Once, costs were the primary driver for moving manufacturing offshore, but now companies are doing the math and thinking more about staying at home. Also, executives told us that because logistics are complex to begin with, the financial argument has to be compelling and the dynamics are changing."
These results echo those from an earlier study by The Boston Consulting Group (BCG). That research also concluded that US manufacturing could be poised for a renaissance, thanks in large part to the rapidly narrowing gap between US and Chinese wages. As I said back then, I'm not discounting China as a manufacturing force. But, there does appear to be mounting support for the "Made in America" label and that should make for interesting evolution in the manufacturing sector during 2012.