What is in this article?:
- The Competitive Edge: The Year of the Manufacturing Renaissance?
- Reason for Optimism
Will 2013 be the year of the manufacturing renaissance? Plenty of groups are hoping so. NAM issued its "manufacturing renaissance" strategy over a year ago. Willy Shih and Gary Pisano of the Harvard Business School, as well as Craig Giffi at Deloitte, are leading advocates for policies that will encourage manufacturing innovation on our shores. And Boston Consulting Group has issued a series of reports pointing to a steady rise in new investment in American manufacturing over the next five years.
A year ago, many experts would have even predicted we were on the verge of such a renaissance. Manufacturing has grown faster than the overall economy for several years. Further, in the first quarter of 2012, factory activity took off at a China-like pace, growing at an annual rate of 10%. With a disappearing cost advantage in China, higher U.S. productivity, a fresh awareness of overseas supply chain risks and the comparative advantage arising from a shale gas and oil revolution, a growing number of experts are talking of a dramatic resurgence of American manufacturing.
Indeed, in a recent MAPI survey, roughly one out of five respondents indicated that their companies have returned some activity to the United States over the past two years, and some of those companies plan to bring additional operations back in 2013. The leading reasons for this reshoring include declining labor cost advantage abroad, rising shipping costs and the desire to reduce supply chain uncertainty.
But many hurdles materialized in 2012 to prevent a U.S. manufacturing boom. First and foremost among these, of course, was the fiscal cliff. Combine that with a construction market just emerging from recession, continued economic decline in Europe, mounting concern over new federal regulations and uncertainty over tax rates, and many U.S. manufacturers felt compelled to remain on the sidelines in regard to investments and hiring. As a consequence, industry growth rates struggled to stay positive in the final three quarters of the year.