Offshore manufacturing services have been the default method of economic manufacture for many years. Most of the electronics, clothing, and other products bought today are made in other countries.
Many domestic brands have adapted the “Made in the USA” motto as a selling point, and many people believe that domestically-made products are of better quality than those made overseas. However, there is some recent and very interesting news coming from some forward-thinking “foreign” manufacturers.
In the news recently, are stories of Chinese businessmen building or refurbishing factories here in the US, and transferring their manufacturing services to America. They believe it is less expensive for them overall because, in being geographically closer to their customers, they can eliminate most of the transportation costs in serving the US and Canadian markets. States such as Arkansas and North Carolina are also offering tax incentives, infrastructure grants, and training assistance dollars to foreign companies to come into their state bringing jobs. Other incentives are low corporate taxes, favorable regulations, and a good quality of life. As to whether this is a lasting trend is too early to confirm.
China is not the only country that is interested in bringing manufacturing services to the US. Per a permit application on file, a Japanese firm, Tokyo-based Nissei Plastic Industrial Co., plans to make a $13 million investment in Brooks City Base in San Antonio, by building a 115,000-square-foot manufacturing facility.
What this indicates is that the nature of international manufacturing services is becoming a little blurry. As international commerce becomes more sophisticated, and countries work with each other, more and more manufacturing facilities will be opening up in different countries based on the net benefits to that individual company, that company’s customer base, expected growth rate, and product/industry in which that company believes it can compete.
These trends are interesting to watch, but also interesting to watch will be if these bold moves will be for the long term or the short term. Depending upon the incentives offered by the various states, cities, etc. to entice these foreign companies to locate here in the US it will be interesting to watch if there will be “buyer’s remorse” down the road. A business venture that cannot hit its target profit objectives on its own and relies on special incentives may not last. It will be interesting to watch.
There are Sure Benefits in US Manufacturing
- State of the art communication technology. The U.S. is one of the world’s most technologically advanced countries. It is sometimes difficult to work with suppliers who have not yet updated their technology.
- Domestic job creation. This is, as we all know, one of President Trump’s campaign platforms; bringing jobs back to the USA. Currently, the North American Free Trade Agreement (NAFTA) is being reviewed. Most likely NAFTA will be re-negotiated in some form or fashion. How the modified agreement will look in its final form and how it will affect domestic production as well as Canadian and Mexican factories is yet to be made clear.
- Decreasing pollution. The apparel and textile manufacturing service industries are responsible for much of the world’s industrial waste resulting in heavy pollution in China and other countries. Some believe manufacturing in the U.S., where regulations are stricter may help the world control the amount of waste produced by these industries.
Trends to Watch for Regarding Manufacturing in the US
- Despite the beneficial examples above of the Chinese and Japanese companies looking to open manufacturing facilities here in the United States, goods made in the USA are typically more expensive due primarily to higher labor costs. Also, what has been categorized as excessive regulations placed on American business, are also part of the reason manufacturing service here in the US is as expensive as it is. One of President Trump’s first actions as president was to cut almost $200 Billion in regulatory costs to American businesses. President Trump also has signed executive orders aiming at the on-going reduction of business regulations. One of the most recent executive orders requires government agencies requesting a new regulation to identify two they will eliminate.
- China and other Asian countries have sharpened their manufacturing service skills over the past few years. It will be interesting to watch how the decrease in government regulation, and the increasing of certain manufacturing here in the Unites States, will affect the total price of manufactured goods abroad.
As with most things, there are pros and cons to consider regarding manufacturing in the United States or offshore. Fortunately, the choice still resides with each individual company to make its own decision as to what is best. The great news is that ITI Manufacturing can help companies make the best choice.
If your company is at a decision point whether to investigate China to manufacture a particular finished good or component, you can stop guessing and know the facts about manufacturing that item in China. Take the first step and contact ITI Manufacturing for a no cost, no obligation quote.
Call to speak with an expert at ITI Manufacturing today, at (281) 242-7030.