Hope Is Not Lost for American Manufacturing

Over the past several months almost every manufacturing article you read has focused on American companies outsourcing their work overseas to reduce costs which in turn has damaged the economy and drastically increased the unemployment rate. This attention to manufacturing has made many business owners worry that American manufacturing is becoming an endangered species and will soon become extinct. A recent article in The New York Times has given a glimmer of hope that China’s increasing strength in manufacturing may begin to level off or possibly decrease.

The Chinese government has recently allowed their value of currency to fluctuate and the Chinese employees are striking in an effort to receive wage increases. Labor experts say "the demand for higher wages reflects a younger, savvier work force that is better organized and has higher expectations." This means that the cost of outsourcing will increase and may result in Chinese manufacturing no longer being as inexpensive as it has been in the past. Another problem is that you must pay before your product is shipped; it then can take up to 90 days for you to receive your order from overseas. Once you receive the product you may have to wait another 90 days to receive payment from your customer. It could be 180 days before your investment is returned and could be a drain on cash flow.  An additional cost of outsourcing is the price of shipping, since May 2010 shipping products across the ocean has increased by 30 percent. Shipping containers that previously cost $4,000 to travel from Asia to the United States now costs $5,200.

Instead of outsourcing jobs across an ocean, more companies are now trying to keep their jobs as local as possible. This includes “near sourcing” jobs to Mexico, Canada and Central America where the odds of American money spent has a better chance of returning to the United States. In conclusion, the decisions that the Chinese government has made is giving the United States a chance to regain the roll as the “Manufacturing Giant”.