Oct. 19–As production cost in Asia increase and American firms emerge from the recession smarter and more efficient, more companies are looking back at the U.S. for goods or parts.
The economic forces at play challenge the entrenched notion that Asia is the lowest cost option for goods or equipment.
The Northeastern Pennsylvania Industrial Resource Center, in cooperation with other economic development groups is hosting a series of “reshoring” seminars starting Nov. 5 at the Holiday Inn in Wilkes-Barre where they will make the case that after all costs are considered, it makes more business sense to source on shore from U.S. firms.
“The larger manufacturers … we’ve spoken to understand that manufacturing costs have shifted and many of the cost factors that led to the off-shoring of production and importing of consumer products have reversed,” said Eric Esoda, chief executive officer of the center.
The presentation will include a keynote from Harry Moser, president of the Reshoring Initiative and consultant to President Barack Obama.
The factors that made China such a good deal, in some respects, in the past are now gone, said Maureen Mulcahy, the project coordinator for Make it in America in Pennsylvania. Wages in China have tripled over the last 10 years, she said. While still less than U.S. wages, the tripling has made it more difficult to deeply undersell competitors. The cost of power in China — gas and electricity — are up almost 60 percent over the last few years, Ms. Mulcahy said.
In the U.S., meanwhile, manufacturing emerged from the recession with greater efficiency. Wages haven’t increased much and energy costs in the U.S. have fallen.
She estimates that U.S. companies overlook about 20 percent of the costs of sourcing from Asia. For example, while they will take freight costs into consideration, they don’t consider the time-value of money while the purchase is on the slow boat from China. In certain circumstance, companies are forced to airfreight at great expense. Also, products made in Asia have a greater risk of intellectual legal claims, or safety issues. Ms. Mulcahy said the Consumer Product Safety Commission said a product from China is 3 1/2 times as likely to be recalled than a domestic-made product.
The positives of sourcing closer to home include a shorter turnaround time, ease of innovation and redesign, proximity to research institutions, she said.
Contact the writer: dfalchek@timesshamrock.com
Copyright 2014 – The Times-Tribune, Scranton, Pa.
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