Back in the U.S.A.

Good news. The term ”Made in the USA” is making a comeback. More businesses are realizing that the costs of manufacturing overseas aren’t all they were supposed to be. With U.S. manufacturing becoming more competitive, outsourcing has become a hassle. "Reshoring," the term used when companies move their operations back home, is becoming more prevalent.

Why the Change?

Manufacturers have found that rising labor costs, increased oil prices causing high transportation costs, and political unrest are factors which are causing them to come back home. The companies are also concerned with the erosion of intellectual property rights overseas and problems with product quality. Poor product quality means poor sales and even poorer profits. The costs of shipping and business travel to another country to conduct the hands on management where required are eating up any saving from offshoring.

Too, there have been significant changes in the manufacturing chain: increases in offshore labor costs, oil prices rising thus increasing the transportation costs in moving products and in business travel; increased waste disposal problems overseas and a rise in automation at home bringing about efficient cost control In the United States. All of these factors affect manufacturing costs. By bringing the jobs back to the United States, manufacturers can cut labor costs by using efficient technology while increasing product quality.

Concerns of Overseas Manufacturing

Operating a manufacturing plant overseas can have a lot of hidden costs. Extensive travel back and forth is needed which is costly because you can’t skype everything. With products being acquired from the local suppliers near overseas factories, quality control is difficult to manage. Also, shipping and distribution have an extra-long supply chain. This causes manufacturers to warehouse more inventory to make sure retailers have sufficient stock. Too, if you have overseas manufacturers as a wholesaler in your supply chain, they have to be paid when the products are shipped, yet the merchandise can be held up on boats for weeks while you are not paid. So then products on a boat are not being received by your buyers; thus no payments to you from your customers and finally clients dropping you as a supplier. Simply put, your buyers’ customers do not want to wait a month or more for orders to arrive from abroad. They want the merchandise stocked and in stores soon or sooner.

What Does the U.S. Need?

Manufacturers in United States are facing a talent crisis. The skilled workers are available here, but outsourcing has driven many skilled workers to areas where the plants were not closed. Manufacturers now also have to take into consideration power development as energy policy has closed electrical power stations. In addition, employee retention is harder today as skilled workers can now choose to jump ship. Managers have to be moved to where new manufacturing plants will be located. So, for manufacturers, the challenge of finding and keeping the right set of employees is greater than it has ever been before.

The shortage of skills is caused by an aging workforce and states not offering the types of training programs and incentives that can be found in other countries. Therefore, businesses need to consider joining in partnerships with local technical schools, community colleges and universities in the areas where they are located to create a pool of skilled workers. Ongoing training will keep the workforce at superior talent levels. Businesses that cooperate with local communities and make commitments with them to develop a skilled workforce will be ahead of other shortsighted manufacturers.

As “reshoring” becomes more popular, the consumer surge for products made in the U.S.A will rise.  Manufacturing will be the home team again.  U.S.A., U.S.A, U.S.A. chanted before the home crowd once more. And you'll be cheering too over increased sales.

Photo courtesy of naypong / freedigitalphotos.net