The U.S. is becoming more appealing as a location for manufacturing capacity, a new survey by Boston Consulting Group suggests.
[ by James R. Hagerty | December 9, 2015 | Wall Street Journal ]
The consulting firm said 31% of manufacturing executives surveyed in September said they were most likely to add production capacity in the U.S. in the next five years for goods to be sold in that country. That was up from 26% in a similar survey two years earlier. The percentage of executives who named China as the most likely place for such production declined to 20% from 30%. Mexico was named the most likely site by 29%, up from 26% two years before.
The survey drew responses from 263 U.S.-based manufacturing executives at companies with annual revenue of at least $1 billion.
Boston Consulting Group said many of the executives cited a wish to reduce shipping costs and the risks of relying on faraway suppliers. In recent years, global supply lines have been disrupted by crises including floods in Thailand and the 2011 Fukushima nuclear accident in Japan. Declining costs for robots and other forms of automation also help the U.S. compete against countries with lower labor costs. Meanwhile, China’s labor costs, though still far below those in the U.S., have risen rapidly in recent years.
Even so, some executives remain hesitant to move production to the U.S. because of “concerns about rising U.S. health-care costs, federal and local regulatory uncertainty, increases in the U.S. minimum wage, and unclear progress on tax reform,” the firm said. Some companies have trouble finding enough skilled labor and suppliers in the U.S.
One company expanding U.S. production is Impact Innovations Inc., of Clara City, Minn. The employee-owned concern is investing about $10 million in equipment to print, cut and package gift wrap at a plant in Memphis, Tenn., reducing the firm’s reliance on wrap made in China.
Impact’s chief executive, John Dammermann, said the company made the move partly because Wal-Mart Stores Inc. committed to purchasing a large share of the added U.S. production. Wal-Mart in recent years has pressed suppliers to make more products in the U.S.
Mr. Dammerman said the investment had already created 25 new jobs at the plant and more were expected.