Outsourcing to China has been common place for all big enterprises from Walmart to Apple to cut costs. It has been a rage for more than two decades during which many organizations have reaped profits. The recent issue about the poor working conditions at Foxconn-the world’s largest electronics manufacturer had grabbed many a eyeballs.
But how about the “big switch” – China is slowly outsourcing its production process to US.
China was the best place to go since wages were as cheap as 58 cents an hour and besides the less infrastructure costs. But now we are experiencing a shift in the economy as the labor prices are going up significantly about 15% – 20% every year. On the same breath brands are looking at providing more value for less cost. Hence outsourcing processes especially manufacturing no longer a strategic advantage to cut costs.
The production processes in US have optimized down the years. According to Boston Consulting Group managing director Hal Sirkin – US produces two and a half times more the quantity in 1972 – but with 30% less labor. With increase in use of technology production process can be more lean, and irrespective of increase in wages in US it will be still less than than that in China.
Chinese conglomerates with the vision to set a footprint past the Great Wall of China are now setting manufacturing facilities in US. It also helps them get rid of the “anti-dumping tariffs” imposed on them. The United States imposes these financial penalties on imported products that it believes are being sold cheaper than the cost it takes to produce them. Dumping creates an unfair advantage in the marketplace, according to the Department of Commerce.
Xinxiang, China-based Golden Dragon Precise Copper Tube Group, Inc., the world’s largest producer of copper tubing used in air conditioning, refrigeration and autos, broke ground last month on a $100 million plant in Thomasville, Ala.It’s the first Chinese owned-and-operated plant to enter the state. The 400,000-square-foot facility is expected to create 300 American jobs when it’s up and running in 2014.
Opening up a plant is US allows Chinese producers to save on transportation and fuel costs.For instance, Golden Dragon’s Alabama facility will be right next door to its largest customer Goodman Manufacturing in Houston.
The Value of Brand- ” Made in USA”
Manufacturers must have come in terms about the power of ” Made in USA” brand. It helps them provide products to its consumers which are safe and meet the established standards of the products. United States also has strict labor norms , so we can expect that incidents such as in Foxconn Factory in China are a thing of the past and no longer will harm the credibility of a brand.
Such a shift in the economy will bring a high tide of jobs in the beaches across United States. Then we can expect that the global downturn of the economy effecting millions would be subsided. Time has been the best healer for the crisis that made headlines for months across the years.