Small- to mid-size businesses are bringing jobs back to the United States. The cost of manufacturing overseas is expensive. Due to costly shipments that are usually slow, small companies are beginning to realize the value in having more control over the manufacturing. One such business is Seesmart Inc., a small lighting company that is bringing back factories back to the US which they had originally shipped out of the country. All of their LED products had been manufactured in China, but frustration led the small company to build factories in Crystal Lake, Illinois and Simi Valley, California.
Seesmart isn’t the only company coming back. Other big players returning include Caterpillar Inc., General Electric Co., and Master Lock. Raymond Sjolseth, co-founder and president of Seesmart, says, “When we do the numbers we’re actually ahead manufacturing here instead of paying for air freight and dealing with the logistical issues that we’re having in China.”
Production of clothing and electronics may not return anytime soon, but bulky, heavy items are making a quicker domestic impact. Many businesses are finding that after searching for low costs, manufacturers in the US can compete with Mexico, India, China, and other cheap labor countries. Part of that has to do with the high cost of transportation and the rise in wage inflation occurring in China, but low-cost US manufacturing also has technology to thank because their factories can now run with fewer workers and more machines.
The return of manufacturing has obviously provided a slight rise to American employment. Factory employment was up 4% since early 2010 with nearly 12 million Americans now working in manufacturing. Companies such as Seesmart are also seeing quick results. By moving their manufacturing back to the United States, Seesmart has cut its logistics costs by 30% and products are made and shipped much quicker since they no longer have to be flown over the Pacific Ocean.
In fact, the costs of Chinese-manufactured windshield wiper motors are only 18% lower than that of the US presently. By contrast, the cost of these motors were 45% less in China in 2005. It is predicted by AlixPartners that in 2015, the Chinese production cost of these motors will be 9% less than what the US can produce, and that does not include the cost of transportation and rising wages.
Steve Maurer, managing director of AlixPartners, states, “If you go back to the heyday of outsourcing to China, at that time with the exchange rates and ocean freight it was pretty hard to go wrong…Now that costs in China are increasing…people are stepping back and saying ‘We need to reevaluate this.’”
Malone, Scott. Scheyder, Ernest. “As China costs rise, technology lures U.S. factories home.” Small Business. Reuters. 7/24/2012. (8/2/2012). http://www.reuters.com/article/2012/07/24/us-usa-manufacturing-onshoring-idUSBRE86N0XB20120724?type=smallBusinessNews