CHICAGO, IL, Mar 22, 2012 (MARKETWIRE via COMTEX) —
Improved U.S. competitiveness and rising costs in China will put
the United States in a strong position by around 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, titled “U.S. Manufacturing Nears the Tipping Point: Which
Industries, Why, and How Much?,” is the latest in BCG’s ongoing study
of the emerging reshoring or “insourcing” trend, conducted by its
Operations and Global Advantage practices. It is being published
today on
www.bcgperspectives.com .
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 formal report, “Made in America, Again: Why
Manufacturing Will Return to the U.S.,” published in August,
explained how 15 to 20 percent annual increases in Chinese wages and
other factors were rapidly eroding China’s manufacturing cost
advantage over the U.S. Then in October, BCG released a second set of
findings identifying seven broad industry sectors that it said were
most likely to reach a “tipping point” over the next five years — a
point at which China’s shrinking cost advantage should prompt
companies to rethink where they produce certain goods meant for sale
in North America.
The second formal report elaborates on those findings and explains
the reshoring trend more fully. For example, it projects how much
production work is likely to shift from China to the U.S. in each of
the seven tipping-point sectors: transportation goods, appliances and
electrical equipment, furniture, plastic and rubber products,
machinery, fabricated metal products, and computers and electronics.
It also predicts that production of 10 to 30 percent of U.S. imports
from China in these sectors, which in 2010 accounted for nearly $200
billion worth of products, could move to the U.S.
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.
“Rising Chinese wages are only part of the reason America is poised
for a manufacturing renaissance,” said Harold L. Sirkin, a BCG senior
partner and coauthor of the report. “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.” When higher U.S. productivity,
logistics, and the many indirect risks and costs of sourcing products
in China are taken into account, Sirkin said, more companies will
find it makes good economic sense to make many products in the U.S.
for consumption in North America.
Through its research, BCG has identified many companies — large and
small — that have added or are planning to add U.S. production after
assessing the total costs and risks. The latest report cites several,
including ET Water Systems, a maker of irrigation controls; high-end
cookware manufacturer All-Clad Metalcrafters; electronics
manufacturing services company AmFor Electronics; and Farouk Systems,
a maker of hair irons and dryers.
“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.”
In another sign of growing American manufacturing competitiveness,
foreign companies are adding capacity in the U.S. to serve both the
domestic market and export markets. Electrolux recently decided to
build a new plant in Memphis, Tennessee; and Bridgestone, Toyo Tires,
and Continental Corporation all have announced plans to add U.S.
capacity to manufacture vehicle tires. “Companies are unveiling moves
with increasing regularity,” noted Justin Rose, a BCG principal and
coauthor.
Strong productivity is a key to America’s improved export
competitiveness. Productivity growth has been higher in the U.S. than
in Western Europe, for example, while the dollar has depreciated
against the euro over the past decade. Adjusted for productivity, the
average U.S. worker is around 35 percent cheaper than the average
Western European worker. A decade ago, the same U.S. worker was only
12 percent cheaper. “We expect this gap will continue to widen,
giving the U.S. one of the lowest manufacturing cost structures in
the industrialized world,” said Douglas Hohner, another BCG partner
who focuses on manufacturing.
The global production shift is still in the early stages, and the
full impact of the changing cost structures may not be felt until the
end of the decade. Still, companies should reassess their global
manufacturing footprints now, especially if they are in an industry
nearing the tipping point.
Sirkin, whose most recent book, “GLOBALITY: Competing with Everyone
from Everywhere for Everything,” deals with globalization and
emerging markets, added: “The decisions companies make today on where
to add new production capacity will influence their competitiveness
for the next 20 or 30 years. These decisions must be based on the
total cost of making a particular product at a particular place —
not just today but well into the future. We firmly believe this
process will lead many companies to take a fresh, hard look at the
U.S.”
To download a copy of the report, please go to
www.bcgperspectives.com .
To arrange an interview with a BCG expert, please contact David
Fondiller at 212 446 3257 or fondiller.david@bcg.com.
About The Boston Consulting Group
The Boston Consulting Group (BCG) is a global management consulting
firm and the world’s leading advisor on business strategy. We partner
with clients from the private, public, and not-for-profit sectors in
all regions to identify their highest-value opportunities, address
their most critical challenges, and transform their enterprises. Our
customized approach combines deep insight into the dynamics of
companies and markets with close collaboration at all levels of the
client organization. This ensures that our clients achieve
sustainable competitive advantage, build more capable organizations,
and secure lasting results. Founded in 1963, BCG is a private company
with 75 offices in 42 countries. For more information, please visit
www.bcg.com .
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SOURCE: The Boston Consulting Group
Copyright 2012 Marketwire, Inc., All rights reserved.
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