For the past several decades, companies have relied heavily on foreign suppliers and manufacturers for cheap labor. The improvements in cross-border communication and transportation allowed for businesses to partner with a third-party provider, usually in East Asia, to deliver components and products for consumers in the United States.
For a while, it worked so well. Even the biggest companies are sourcing and producing in a myriad of other nations before they ship the final product back to the U.S. The process, albeit it has to travel across miles of land and ocean, costs cheaper than if they were created locally. Companies are paying less and earning more because of it.
American companies are starting to bring manufacturing back to the United States. While there is no by no means a stampede back home, the rate of return or the “reshoring” of American companies is increasing. There are several reasons behind this trend. Some of them are surprising.
Manufacturing is moving from China to the United States not just because of the cost
In addition to the fact that Chinese wages have risen significantly over the last decade, China is geographically distant from major US and European consumer markets. It has been made clear in recent times that companies that are currently, and are considering, manufacturing in China face supply chain risk. Disruption in the shipment of goods across the ocean from the Far East have become more the rule than the exception.
In addition to this consideration, companies that have supply chains that are far removed from their markets often under deliver when it comes to customer service, satisfaction, and product response agility.
Another reason why manufacturing is moving from China to the United States is the loss of intellectual property (IP) through theft. Goods produced by American firms have lost significant percentages of their market share due to Chinese imitations that have made their way to consumers.
Environmental concerns are also behind why manufacturing is moving from China to the United States. The issue of Chinese domestic production and its pollution and sustainability have come into question as of late. It is a well-known fact that China is at the top of the list of the world’s worst polluters. Non-economic factors such as this one now play a major role in how environmentally conscious US manufacturers choose to reorient their production facilities.