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Home Bridgeport Machine Rebuilders Blog Bridgeport Machine Rebuilders Blog U.S. Manufacturing: “Cost Gap Closing?”

U.S. Manufacturing: “Cost Gap Closing?”

 

U.S. Manufacturing 2012 Forecast - Closing the Gap?Our 2-cents on a recent article in the Modern Distribution Management magazine: 2012 Forecast: Structural Challenges to U.S. Manufacturers Will Hold Industry Back.

In this article Jeremy Leonard, an economic consultant for the Manufacturers Alliance for Productivity and Innovation (MAPI), clearly states that U.S. government policy and involvement with manufacturing and business in general will continue to restrain manufacturing’s economic growth. While we agree in principal, we also understand that many successful businesses have prospered playing by these rules. We also understand many businesses just couldn’t compete with foreign competition and its low labor costs. One other factor is in play that may help Mr. Leonard’s claims, while also disputing it. On the ground level of manufacturing many US companies that survived the last few years are extremely busy, but hesitating to hire and expand their operations. It proves that we can compete with our foreign competition, but US policy towards manufacturing and business in general may hinder our growth. Certainly sounds like an oxymoron, but it does make sense.

 

There are many factors in play here. Of course we have higher corporate tax rates, employee benefits, torts, energy, and pollution abatements than our 9 largest trading partners. Our foreign competition is also starting to see labor costs rise, distribution costs rise, and delivery times that are sometimes unknown. As for US companies, they are beginning to focus on logistic issues (cost/time), economic/political issues, quality and safety concerns, patriotism, and overseas skills shortages for highly technical manufacturing processes.

The “cost gap” between US and China manufacturing is slowly closing to the point executives will be forced to stay home. We’re not quite there, but with a little help from our government, that “cost gap” could force executives to rethink their decisions about going overseas. We will never be less expensive than our counterparts, but with all the factors in play, we just may see our foreign competitors rise closer to U.S. standards, instead of us trying to play by their rules.

 

 

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