@Risk

Rising labor costs and quality concerns have many US companies reevaluating their overseas strategies.

In fact, new research conducted by Cook Associates Executive Search found that a full 85 percent of manufacturing executives see the possibility of  certain manufacturing operations returning to the US.

What are the reasons for this potential shift? Survey participants cited:

• overseas costs (37 percent)
• logistics (19 percent)
• other, including economic/political issues, quality and safety concerns, patriotism and overseas skills shortages for highly technical manufacturing processes (36 percent)

The study, which polled nearly 3,000 manufacturing executives primarily in small- to mid-sized US companies from October 13 through November 18, 2011, identified low-volume, high-precision, high-mix operations, automated manufacturing and engineered products requiring technology improvements or innovation as the primary forms of manufacturing returning to the US. (more…)

Is US manufacturing poised for a renaissance?

A new study by The Boston Consulting Group (BCG) says it is –and I find the analysis quite convincing.

For starters, BCG points out that the gap between US and Chinese wages is narrowing rapidly. Thanks to the demand for skilled labor in China, Chinese wages are rising at about 17 percent per year, while the value of the yuan continues to increase.

At the same time, flexible work rules and a host of government incentives are making many states—including Mississippi, South Carolina, and Alabama—increasingly competitive as low-cost bases for supplying the US market.

According to BCG, net labor costs for manufacturing in China and the US are likely to converge sometime around 2015.

Factor in the costs, risks and headaches of inventory and shipping, and the advantages of offshoring shrink even more.

The BCG analysis, which is part of an ongoing study of the future of global manufacturing, concludes that: (more…)

Risk is shifting from recession to recovery, according to results of a quarterly risk report released yesterday by AMR Research.

AMR asked 115 business executives about supply chain risks and mitigation strategies, and this new research shows that businesses are now beginning to focus on risks associated with the recovery cycle.

In fact, 44% of respondents in the AMR study believe the recovery cycle is the biggest risk in 2010. Why? They cited a variety of reasons, including potential commodity price increases, limited internal skills after workforce reductions, and problems meeting new demand with constrained capacity, low inventory, and transportation constraints.

(more…)