While firms in China have long been a favored manufacturing partner for many U.S.-based companies, a new poll shows that sentiment is changing.
More than a third of manufacturing executives, at American companies with sales greater than $1 billion, are planning to, or considering, bringing their production back to the United States from China, a survey by The Boston Consulting Group found.
The study revealed labor costs, product quality, ease of doing business and proximity to customers are driving the return back to the States. In addition, more than 90 percent of the executives surveyed believe labor costs in China will continue to escalate, while 70 percent agreed that their sourcing is more costly than it looks on paper.
"Companies are realizing that the economics of manufacturing are swinging in favor of the U.S., for goods to be sold both at home and to major export markets," said Harold L. Sirkin, a senior partner with Boston Consulting Group. "This trend is likely to accelerate starting around 2015."
Shifting manufacturing back to the U.S. is strongest among companies in a number of different sectors, including transportation goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products and computers and electronics.
The Boston Consulting Group predicts that production of up to 30 percent of U.S. imports from China in these industries, which account for approximately 70 percent of goods that the U.S. imports from that nation, could shift back home before the end of the decade.
"Not long ago, many companies regarded China as the low-cost default option for manufacturing," said Michael Zinser, a Boston Consulting Group partner who leads the firm's manufacturing work in the Americas. "This survey shows that companies are coming to the conclusion surprisingly fast that the U.S. is becoming more competitive when the total costs of manufacturing are accounted for."
The research was based on surveys of more than 100 executives at companies across a broad range of industries.
Chad Brooks is a Chicago-based freelance business and technology writer who has worked in public relations and spent 10 years as a newspaper reporter. You can reach him at firstname.lastname@example.org or follow him on Twitter @cbrooks76.