In the last 20 years, manufacturing processes have moved overseas to cut costs and keep prices competitive. Historically speaking, a manufacturing operation based in China cost 25% – 30% less than an identical operation in the United States.
Recently, this trend has changed as overseas manufacturing costs have increased. These increased costs can be attributed to:
- Chinese currency (RMB) appreciating 25% over the US dollar
- Chinese workers receiving annual wage increases averaging 12%
- Increased shipping costs
These factors have many experts speculating that the cost of manufacturing in China will be equal to that of manufacturing in the United States as early as 2015.
Staying Ahead of the Curve
Considering the imminence of a level playing field, it makes sense for businesses to re-localize manufacturing processes now in anticipation of these changes.
Businesses that are just starting up can seriously benefit from the local movement as it takes the pressure off these companies to outsource as a competitive edge.
Existing businesses that have all or some of their manufacturing operations located overseas will be at a distinct disadvantage if they wait until manufacturing costs in China have equaled or even exceeded the costs of operating in the United States.
Switching to a localized model creates massive overhead expenses that are certainly damaging to the company’s bottom line. Additionally, the transition process opens up opportunities for much smaller, local manufacturers to stake out significant market share and possibly edge out corporations accustomed to being at the top.
The Role of 3-D Printing
Advancements in 3-D printing techniques help to level the playing field even further. In a typical manufacturing environment, designing and prototyping products can be extremely expensive.
Local manufacturers are often unable to afford these technologies; giving larger companies a significant advantage.
We have covered 3-D printing techniques in these posts and in our premium newsletter. Hugh Lyman, a retiree, invented a way to make the plastic filament used in 3-D printing significantly more affordable. You can read more about Hugh’s innovative technique at http://www.resilientcommunities.com/how-a-retiree-invented-a-way-to-save-big-on-3d-printing/.
Nick Pinkston is an accomplished maker who has helped co-found a makerspace and distributed manufacturing systems for 3-D printers. These makerspaces allow small operations to compete directly with much larger manufacturing companies.
New 3-D printing technology and the creation of readily available makerspaces that anyone can use to prototype new products means that the US manufacturing movement is on the verge of being able to accomplish everything China can do today. The difference is we can do it better, faster, and less expensively.
The Demand for Local Products
Consumers are demanding local products. We often think about locally grown produce as an excellent example of this shift in consumer demand; however, it also applies to just about any locally manufactured product.
People have begun to realize the benefits of purchasing locally. A healthy local economy is one of the staples of building resiliency. The more products that can be manufactured and distributed from within our own communities, the more robust our communities become.
Perception Research Services International conducted a study last September reporting that 4 out of 5 shoppers notice a “Made in the USA” label. As much as 76% of these people are more likely to buy these products as a result of this label alone.
Let’s take this one step further. A separate study conducted by the Boston Consulting Group found that 80% of consumers are willing to pay more for locally made items.
In fact, many consumers have been conditioned to expect that locally produced items will be more expensive.
Often, these premium prices are a result of increased manufacturing costs. However, the rising cost of manufacturing in China coupled with innovations in 3-D printing mean that local products can actually be made and offered for sale at much more competitive prices.
Although consumers are willing to pay more for locally produced items, a local operation (whether it be produce, manufacturing, or service related) can now compete directly with big business while still increasing the overall health of the local economy.
As the US dollar continues to pale in comparison to foreign currency, we should expect to see a movement back to local manufacturing.
As members of resilient communities, we should be proactively looking to promote local manufacturing whenever possible.