America VS. China for Appliance Manufacturing
We found a great article stating that it is possible that by 2015, the US will be in a strong position to bring 200 - 300 million jobs to the US by bringing appliance manufacturing back to the states.
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As
many as 3 million jobs could be added in the United States by the end
of the decade as a result of reshoring of manufacturing from China.
|
With
U.S. competitiveness continuing to improve and costs in China rising,
the United States will be in a strong position by 2015 to eventually add
2 million to 3 million jobs and an estimated $100 billion in annual
output in a range of industries, according to a new report by The Boston
Consulting Group (BCG).
The report - U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much? - is the latest study by the group of the emerging reshoring or "insourcing" trend. The report expands upon earlier BCG research released last year on the changing economics that are starting to favor manufacturing in the U.S.
The first report, published in August, explained how 15-20% annual increases in Chinese wages and other factors were rapidly eroding China's manufacturing cost advantage over the U.S.
In October 2011, BCG's second set of findings identified seven broad industry sectors most likely to reach a "tipping point" in the next five years - the point where China's shrinking cost advantage should prompt companies to rethink where they produce goods meant for sale in North America.
The second formal report - authored by Harold L. Sirkin, Michael Zinser, Douglas Hohner, and Justin Rose - elaborates on those findings and projects how much production work is likely to shift from China to the U.S. in each of the seven tipping-point sectors - including appliances.
The combination of manufacturing work returning from China in these sectors and increased U.S. exports due to improved global competitiveness is expected to create 2 million to 3 million U.S. jobs by the end of the decade. The job gains will come directly through added factory work (600,000 to 1 million jobs) and indirectly through supporting services, such as construction, transportation, and retail.
Harold L. Sirkin, a BCG senior partner and coauthor of the report, said higher wages in China is only part of the reason that America may see a manufacturing renaissance. "The U.S. manufacturing sector has gotten a lot more competitive over the past decade. And in recent years, companies have been paying much closer attention to the total costs of delivering a product made in China compared with making it closer to the end customer."
BCG identified several large and small companies that have added or plan to add U.S. production after assessing the costs and risks. Among them: Farouk Systems Group, a Houston-based producer of professional hair care appliances and spa products. The report noted that Farouk Systems plans to move final assembly of some appliances from China and South Korea to a 1000-worker factory in Houston as a way of cutting inventory costs.
"This trend is still in the early stages," stressed Michael Zinser, a BCG partner who leads the firm's manufacturing work in the Americas. "But we expect it to accelerate as the new math of manufacturing increasingly favors the U.S. and as federal, state, and local governments provide more support for companies considering opportunities to reshore work."
The report - U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much? - is the latest study by the group of the emerging reshoring or "insourcing" trend. The report expands upon earlier BCG research released last year on the changing economics that are starting to favor manufacturing in the U.S.
The first report, published in August, explained how 15-20% annual increases in Chinese wages and other factors were rapidly eroding China's manufacturing cost advantage over the U.S.
In October 2011, BCG's second set of findings identified seven broad industry sectors most likely to reach a "tipping point" in the next five years - the point where China's shrinking cost advantage should prompt companies to rethink where they produce goods meant for sale in North America.
The second formal report - authored by Harold L. Sirkin, Michael Zinser, Douglas Hohner, and Justin Rose - elaborates on those findings and projects how much production work is likely to shift from China to the U.S. in each of the seven tipping-point sectors - including appliances.
The combination of manufacturing work returning from China in these sectors and increased U.S. exports due to improved global competitiveness is expected to create 2 million to 3 million U.S. jobs by the end of the decade. The job gains will come directly through added factory work (600,000 to 1 million jobs) and indirectly through supporting services, such as construction, transportation, and retail.
Harold L. Sirkin, a BCG senior partner and coauthor of the report, said higher wages in China is only part of the reason that America may see a manufacturing renaissance. "The U.S. manufacturing sector has gotten a lot more competitive over the past decade. And in recent years, companies have been paying much closer attention to the total costs of delivering a product made in China compared with making it closer to the end customer."
BCG identified several large and small companies that have added or plan to add U.S. production after assessing the costs and risks. Among them: Farouk Systems Group, a Houston-based producer of professional hair care appliances and spa products. The report noted that Farouk Systems plans to move final assembly of some appliances from China and South Korea to a 1000-worker factory in Houston as a way of cutting inventory costs.
"This trend is still in the early stages," stressed Michael Zinser, a BCG partner who leads the firm's manufacturing work in the Americas. "But we expect it to accelerate as the new math of manufacturing increasingly favors the U.S. and as federal, state, and local governments provide more support for companies considering opportunities to reshore work."
Appliance Industry Factors
BCG's report noted that the U.S. still manufactures 52% of appliances sold domestically.
The report said that China supplies $6 billion in small appliances to the United States each year, as well as major appliances. U.S. imports of products in the Appliances and Electrical Equipment category (which includes lighting products) from China in 2010 were $25 billion. Total goods consumed by the United States in this category, the report said, was $134 billion.
"Conservatively, we expect that around half the appliance manufacturing returning to North America will be done in the U.S., despite Mexico's cost advantage," the BCG report stated, noting that, "Some appliance manufacturers that have moved to Mexico have complained of quality problems due to shortages of skilled workers."
In addition, incentives from federal, state, and local governments in the form of tax breaks and grants are helping to convince producers to bring manufacturing back to the U.S. or expand existing U.S. manufacturing.
Other considerations have long-favored U.S. manufacturing - faster time-to-market, better availability of skilled workers, and government incentives. The report said that, as the cost gap with China continues to shrink, these considerations will become important again and "are likely to tilt the balance in America's favor as a manufacturing location."
The report said that China supplies $6 billion in small appliances to the United States each year, as well as major appliances. U.S. imports of products in the Appliances and Electrical Equipment category (which includes lighting products) from China in 2010 were $25 billion. Total goods consumed by the United States in this category, the report said, was $134 billion.
"Conservatively, we expect that around half the appliance manufacturing returning to North America will be done in the U.S., despite Mexico's cost advantage," the BCG report stated, noting that, "Some appliance manufacturers that have moved to Mexico have complained of quality problems due to shortages of skilled workers."
In addition, incentives from federal, state, and local governments in the form of tax breaks and grants are helping to convince producers to bring manufacturing back to the U.S. or expand existing U.S. manufacturing.
Other considerations have long-favored U.S. manufacturing - faster time-to-market, better availability of skilled workers, and government incentives. The report said that, as the cost gap with China continues to shrink, these considerations will become important again and "are likely to tilt the balance in America's favor as a manufacturing location."
Article found on www.appliancemagazine.com
This has already started in the furniture industry. But there is still a long way to go.
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