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Bringing Manufacturing Back to the United States

As the cost of doing business rises in traditionally low-cost countries, particularly China, companies are rethinking their offshoring plans. Can the United States become a manufacturing powerhouse again?

Dec/Jan 10
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Abulhaj explains that he was one of the people taking products from the United States to China in the early 1990s and throughout his career. "We once had 4,000 employees and did all types of manufacturing, including injection molding, extrusion, and assembly for high-volume products all related to the healthcare industry," he says. "One of the main decisions that drove us offshore was the startup of a new product - it is much cheaper offshore because the volumes are low. But if you have high-volume products, it makes more sense to manufacture them domestically, especially if you have automation. We can do it at home in our back yard for the same cost, and we have control over our intellectual property."

IP theft is an ongoing problem with offshoring, and many OEMs find that it's difficult if not impossible to enforce patents, copyrights, and other laws that are meant to protect products from counterfeiters. "You don't have laws in China that will protect you against IP theft," says Abulhaj. "We have a lot of investment in our IP, and we have more control over it in the U.S." He also cites quality control as a piece of the puzzle. "We have to adhere to FDA regulations," he says. "When you make products in the U.S., you make them to a higher standard; particularly in healthcare, the FDA is the law. If you don't comply, you get your products recalled. In China there are no ramifications."

Still, Abulhaj notes that he couldn't afford to make a low-tech product here. Yet, the major benefit for Diagnostic Devices' products is the assurance of quality of a product made in the USA. "Everyone, even people offshore, understands the higher quality standard of U.S.-made products," he says. "A U.S. product is of a much higher quality, and the consumer is driving us toward more U.S.A. products," he says. "We need to allow U.S. manufacturers to compete more effectively."
The U.S. Manufacturing Comeback
While globalization has had significant impact on U.S. manufacturing, there is reason to believe that manufacturing in the U.S. can make a comeback. Not all of globalization's impact has been negative, and many manufacturing OEMs believe that global competition has made them stronger, more productive, and more competitive. Global challenges have forced companies in the U.S. to find ways to produce more with fewer employees, and that has been borne out in recent productivity numbers.

In July 2008, Deloitte - in cooperation with the National Association of Manufacturers (NAM), the Manufacturing Institute, and Canadian Manufacturers & Exporters (CME) - published Made in North America, in which it surveyed 321 executives of leading North American manufacturing companies across product sectors to obtain their perspectives on their current and expected future competitiveness. Of those surveyed, 45 percent were from the U.S., 36 percent from Canada, and 17 percent from Mexico. Among those companies, 23 percent had revenues over US$1 billion; 15 percent had revenues between US$200 million to US$1 billion; and 62 percent were below US$200 million in revenues.

Overall, the results indicate that North American Manufacturing Enterprises (NAMEs) - as the survey refers to them - have a "positive view" of their global competitiveness. Many would "strongly prefer" North America as a hub for their manufacturing operations in an ever-expanding global economy "if proper investments (both public and private) are made and if government policies focus more on reducing or eliminating competitive barriers."

When asked where they would be expanding production, 44 percent said in the United States; 37 percent said Mexico; another 37 percent said China; 24 percent said Canada; and 24 percent said India. Obviously, some will be expanding in more than one country. When asked where sourcing would be expanded, 50 percent said China; 49 percent said the United States; 43 percent said Mexico, and 23 percent said Canada.

Nypro Inc., a global contract manufacturer of custom plastic components with 1,500 presses at 49 locations in 16 countries, began nearly two decades ago putting manufacturing plants near their customers wherever those customers needed their suppliers. Richard Moore, the company's global director of technology, said in a recent presentation: "We are seeing a shift now, from everything going toward Asia to wanting to manufacture more products locally for the large U.S. consumer base. Not that it's all coming back from China, but with respect to sustainability there is a lot of concern by the big brand-name companies with respect to carbon footprint, and consumer concerns are driving this."

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