U.S. MANUFACTURING RESURGENCE CONTINUES

Technological advancements, protection of intellectual capital and efficiencies in the supply chain are causing manufacturers to rethink foreign production, Colliers International’s president of brokerage services, US, and national director of industrial Dwight Hotchkiss tells GlobeSt.com. Hotchkiss says there has been a definite trend of manufacturing jobs returning to the US over the last decade or so.

“On-shoring has occurred for a few reasons,” says Hotchkiss. “First, with advancements in technology like robotics, firms don’t need to pursue inexpensive labor from around the globe.” Many manufacturing jobs had gone overseas or to Mexico in order to reduce labor costs, but with these technological advancements, more companies are realizing that they don’t have to offshore.

In addition, keeping proprietary corporate information, such as intellectual capital, in the country and within the company has become more important to firms as competition in the industrial realm especially intensifies. Hotchkiss says firms are looking for efficiencies in the supply chain, and the only logistics companies able to offer this are in the US. “If a firm is manufacturing in Asia, for example, it will have to ship its goods on a container ship to a port like Port of Los Angeles/Long Beach and then put it on a rail car, after which it gets trucked to a warehouse. With demands for same-day delivery, companies can no longer afford long freight or shipping times.”

Plus, labor strikes at ports can cause huge problems with getting product out to customers, he adds. “We’re finding that if you can produce your product in the US, the savings in freight will make up for labor-cost differences.”

Not to mention the fact that labor is not as cheap in some of the Asian markets as it was years ago, Hotchkiss points out. “That gap has been bridged today vs. 20 years ago.”

Another great indicator that industrial strength is returning to the US is the increase in activity on rail. Each month, the Association of American Railroads produces a post-rail activity report, and while it showed that activity was down 4.6% year-over-year, this drop was mainly due to a drop in coal and petroleum products, says Hotchkiss. “But if you look at those statistics relative to intermodal, the amount of freight being pushed through on rail shows strength in the industrial sector. For example, there has been a significant surge of auto manufacturing in Mexico utilizing the southern rail line, which runs from Kansas City into Mexico, to transport product to the US.”

Does the resurgence of manufacturing here have a negative effect on US companies’ globalization efforts? Hotchkiss doesn’t think so. “Companies still have to have their footprint around the globe, but some of the biggest customers are in the US. It doesn’t preclude them from having manufacturing abroad, and they can service some of those areas. But e-commerce business is more advanced in the US; the customers are here. Over time, I think you’ll see other regions  show a dramatic increase in on-line purchasing power, which in turn will generate increased demand for warehousing.”

Hotchkiss adds that the strengthening of the dollar poses a threat to on-shoring. The longer the dollar stays strong here and currency abroad weakens, the greater the discrepancy in wages, which could affect how much manufacturing returns to this country.