This whitepaper explores the pros and cons of bringing sewn products manufacturing back to the Americas as well considering available technologies to support domestic and near-shore production.
Demand for Made in America
There was a time when the “Made in USA” trademark carried an incredible amount of cache with American consumers. Like skinny jeans, Aerosmith, and Rocky Balboa it seems that time may be making a comeback. Consumer demand, political pressure, shoddy quality overseas, and the sudden revaluing of the “Made in America” concept have all contributed to the recent movement of bringing manufacturing back to the United States. Labor cost has been widely recognized as the primary reason companies began shifting their manufacturing out of the United States years ago. However, with manufacturing costs in Asia on the rise, offshoring and nearshoring are more comparable from a financial standpoint than you may think. The availability of technologies and worker productivity in the United States are typically superior to what companies will find overseas. In addition, companies are now discovering hidden costs in offshoring and are beginning to reconsider reshoring, or bringing their operations back to the United States. In fact, according to an April 2012 survey by the Boston Consulting Group (BCG), 37% of American manufacturing companies with annual sales over $1 billion are planning or considering moving their facilities from China to America.
Exploring Global Manufacturing Costs
“What many manufacturers don’t realize is that productivity is comprised of more than just hourly labor costs,” says Jim Hoerig, Vice President of Manufacturing Solutions at CGS. “For example, an acre of land in India generally costs several million dollars. So while labor may be cheap, overhead costs are extremely high.” Because of the influx of manufacturing overseas in the 1990s and 2000s, the labor market in countries like China and India has been stretched extremely thin. Companies have been forced to employ people that are under-qualified and, as a result, quality has suffered dramatically. “A critical issue that arises for companies that take their manufacturing offshore to countries like China and India is the quality of their product,” said Hoerig. “It’s a difficult and almost impossible task to have people standing there 24/7 checking quality.” Although the cost gap between manufacturing in America and manufacturing overseas is closing, it’s still currently cheaper in China than it is in the United States, albeit by a smaller margin than it was 20 years ago. By 2015, it is expected to be only about 10% cheaper to manufacture in China.