If you want to know what it takes to bring a manufacturing job back to the United States, the best place to start is with someone who’s done it.
Like many manufacturers, the makers of TinkerToys and LincolnLogs shifted a lot of production to China in the late 90’s.
“The savings were dramatic,” recalls Michael Araten, CEO of K’NEX. “In the range of 40 to 70 percent in some cases. Primarily it was labor costs but it was also the supply chain – China in particular subsidized the factories, subsidized the trucks to get things back and forth.”
But in 2009, K’NEX did exactly what the presidential candidates want companies to do, it brought 90 percent of its production back to the U.S..
Why? Because all those pluses in China had started to fade away.
“As labor costs were going up in China, they were morphing from pure exporter to consumption based economy, the savings started to disappear,” said Araten.
Labor costs in China have been on the rise for over a decade, sometimes jumping 15 precent a year. Other costs became more noticeable to Araten.
“So for example you’ve got to carry more inventory if you’re making things in China,” he said “because it takes another month to get here than if you’re making it here. Double layers of management, you need management here and overseas. You have less flexibility in terms of what you want to make to meet market demand.”
Many of the companies who have brought manufacturing production back to the U.S. have done so because they sell into the U.S. market.
“Part of the reason you’re not seeing more reshoring is that a lot of those manufacturers who went to China for low cost reasons have actually found a market there,” said Craig Giffi, Vice Chairman of the automotive industry practice at Deloitte.
“There are two types of manufacturing jobs,” said Nick Bloom, professor of economics at Stanford.
“There are low wage, low skill, frankly quite dangerous manufacturing jobs, and we lost millions of those in the 2000’s . To bring back the low wage low skill jobs you basically have to cut American wages below competitors in east Asia and I really don’t think that’s what we want to be doing.”
Then, there are high skilled jobs. These are jobs that are coming back, and they’re associated with automation. “Companies here that are involved in manufacturing have typically invested a lot more in automation than the ones in China, it takes away the large advantage that China has which is their low cost of labor,” explained K’NEX CEO Michael Araten.
“Number one is to strengthen our skilled workforce,” said Harry Moser, president of the Reshoring Initiative, which advocates for returning jobs to the U.S. “We have lots of communications and philosophy majors and not enough toolmakers precision machinists, welders, chemical technicians.”
Skilled workers. It’s not the catchiest or quickest slogan for a campaign, but according to many business leaders and economists, it’s the reality.
About GreenLeaf: GreenLeaf Industries is an ISO 9001 registered manufacturer that consistently adheres to all its standards to provide our clients with consistent, reliable, quality automotive and industrial plastic parts.
We are an American injection molding company, unafraid to compete in the world market and determined to succeed. Established in 1999, we take pride in our high-quality craftsmanship and superior customer service. Contact us to discuss whether your injection molding project may be a candidate for reshoring.
310 Bussell Ferry Road
Lenoir City, TN 37771