Manufacturing is coming back to America, and it’s coming back for the right reasons. It’s not just out of patriotism, but because putting manufacturing jobs here in the United States is also working out to be a smart business move. And that will help make our recovery and growth more sustainable.
As you read the news, there’s a steady stream of companies either setting up shop here in America for the first time or even returning jobs to America that had been outsourced to China and other countries long ago. And it’s happening in a wide range of industries.
|Google plans to build its Nexus Q tablet in the United States.
Look at the technology world. It is widely associated with foreign labor, especially right now after the lengthy write-ups about Foxconn. But last week, Google, an industry leader, announced that it would be building its new tablet, the Nexus Q, right here in the United States. Where a company like Google leads, you can bet that other technology companies are likely to follow suit. They are coming here for the first time.
On the other hand, heavy machinery manufacturers like Caterpillar are returning. Caterpillar is building a new plant right here in Georgia, taking over production from a factory in Japan. And General Electric is also bringing back thousands of manufacturing jobs from overseas.
And don’t forget about the aerospace industry. Airbus is building a factory in the United States for the first time, setting up shop in Mobile, Alabama. And Boeing was able to build its new plant in South Carolina instead of outsourcing to foreign countries, too.
So why is this revolution happening? It’s not simple patriotism—and that’s good. You can be patriotic, but the only way to create wealth and improve the standard of living is to run more efficiently and effectively. And that’s what has happened.
First, labor costs in China are up—dramatically.
Chinese labor has always been a lot cheaper than American labor, but it had its own tradeoffs. There were higher transportation costs, corruption, and intellectual property theft, for example. And now, the cost of labor is increasing by leaps and bounds — 20 percent a year, in some corners!
So even though Chinese labor is still cheaper than American labor, the cost is creeping high enough that when you add it to the other cost factors that come from manufacturing in China, it’s no longer such an obvious strategy.
Another factor is that businesses are thinking more about operating efficiently. It is far more efficient to have all your operations in one place, where the designers can talk to the engineers who can talk to the assemblers and on up and down the line. When those processes are split up across the Pacific Ocean — and across cultural and linguistic barriers—that has to hamper efficiency.
Putting factories in the United States also puts businesses closer to their customers; both Airbus and Caterpillar cited that as a factor in putting their new factories here.
Finally, American states are learning the value of business-friendly policies. These factories are not only coming to America; they are coming specifically to right-to-work states where they can feel more confident about their labor costs.
Not only are wages higher in union states, but there is always the threat of work disruptions and bitter negotiations. States like Indiana that adopt right-to-work legislation instantly see new businesses popping up all over the place.
All this is happening very quietly, but it’s exciting precisely because it’s happening for the right reasons — sound business reasons. American consumers want the best products at the best prices, and manufacturers are setting up in the United States to meet that goal.
They are taking a good, hard look at security, transportation, coordination, and more. This is a strong, sustainable foundation for American manufacturing, and I believe it will open the door for more American ingenuity and innovation.
Fran Tarkenton is the Founder and CEO of OneMoreCustomer.com, a web resource for Small Business Advocacy and Education. After his Hall of Fame football career, Fran had a successful career in television and then turned to business. He has founded and built more than 20 successful companies and now spends his time coaching aspiring entrepreneurs. Read more reports from Fran Tarkenton — Click Here Now.
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