5 'Dying' U.S. Manufacturing Sectors

April 10, 2012
Shoe, hardware manufacturing industries among those headed for continued decline, report warns.

Despite upbeat reports in general about U.S. manufacturing, some sectors of the industry are "pushing daisies" and "exhibiting exceptionally sour performance," according to a new study, "Dying Industries," from IBISWorld, an industry research firm.

IBISWorld selected the list of 10 dying U.S. industries based on their being in a declining life cycle stage, having a decline in revenue and in industry participants between 2002 and 2012, and with projected continued declines in these metrics through 2017. The list included five manufacturing sectors: women's & girls apparel, costume & team uniform, shoe & footwear, hardware and recordable media.

The three clothing sectors and the hardware manufacturing industry have shifted production from the United States to international locations such as China and Vietnam to "capitalize on lower production costs," the report notes. The average yearly wage in Vietnam is $1,152 while the average wage for a U.S. apparel worker is $33,579.

While labor costs receive the most attention, points out Douglas Kelly, an analyst with IBISWorld and co-author of the study, other production costs play into decisions to move manufacturing outside the United States.

"A lot of the materials being used in these products are sourced from areas like China so there are certain economic efficiencies to locating closer to your suppliers and distributors. Also, Asia is an up and coming market so they are locating to be closer to their future markets," Kelly said.

The women's and girls apparel industry has been particularly hard hit by offshoring and outsourcing, the report notes. Industry revenue is less than half of what it was in 2002, the study states, and has fallen at an average annual rate of 8.2% over the past decade. While there were 2,272 manufacturing sites in the United States 10 years ago, now there are 1,196. The report forecasts continued movement of the industry abroad as "mounting price pressures from retail customers and competition from import markets force companies to seek ever-greater cost efficiency."

Imports have wreaked havoc with the hardware and footwear manufacturing industries. For example, more than half of all metal hinges, keys and locks sold in the United States are imports, coming primarily from China, Mexico and Canada. For the shoe and footwear industry, imports account for 95% of domestic sales, and China makes up 75% of the imports, the IBISWorld report states.

Technology change has negatively impacted the recordable media (tapes and disks) manufacturing industry, IBISWorld found. With a continuing shift to online downloading and cloud storage, IBISWorld sees industry revenue falling an average of 4.4% over the next five years.

The report says some companies in these manufacturing sectors will be able to compete by transforming their businesses, adopting new technologies and focusing on profitable market segments. "Companies are also focusing on high-value activities like designing and marketing, a strategy that has helped stabilize revenue for womens and girls apparel manufacturers and footwear producers," the report states.

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Steve Minter | Steve Minter, Executive Editor

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An award-winning editor, Executive Editor Steve Minter covers leadership, global economic and trade issues and energy, tackling subject matter ranging from CEO profiles and leadership theories to economic trends and energy policy. As well, he supervises content development for editorial products including the magazine, IndustryWeek.com, research and information products, and conferences.

Before joining the IW staff, Steve was publisher and editorial director of Penton Media’s EHS Today, where he was instrumental in the development of the Champions of Safety and America’s Safest Companies recognition programs.

Steve received his B.A. in English from Oberlin College. He is married and has two adult children.

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