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A RETURN TO FORMER GLORY? PRODUCTION MATERIALS INC. MUSES ON THE FUTURE OF US MANUFACTURING

Manufacturing in the US has always been the lifeblood of the nation. From the nostalgia evoking 60s when the production sector was in full swing to the image of picturesque suburbs with blue collar workers, everything related to this domain and its glory is held sacred by economists hankering for a rejuvenation post the recession onslaught.

Over the past few years, some positive trends have been cautiously observed and experts have issued the statement: A comeback is imminent!

THE HARD NUMBERS

According to the Bureau of Labour Statistics and that of Economic Analysis, the ROI on manufacturing is a decent 37% and is poised to improve if the promise of growth actualizes. On an average this sector contributes 12% of the GDP which is about $2.09 trillion. Most importantly, one out of every six private sector vacancies hails from manufacturing and the number is rapidly rising as 60,000 new jobs are introduced every year.

But perusing data is rather like observing the symptoms of a change without investigating the forces at play beneath the surface. There are logical arguments based on facts which support the numbers and despite scepticism from many lobbies, it does seem that the US factories and units are all set for a grand revival.

DELVING DEEPER:

The following global events have influenced the expansion and strengthening of the manufacturing domain and need to be taken into consideration if the possibility of a true-blue comeback is to be evaluated.

  • The rising awareness amongst consumers and governments of the often difficult conditions in which workers from South and South-East Asia are forced to labour. As a result of the expansive effect of the American dream, employees in China have negotiated for themselves pay-hikes that have bumped their remuneration to. The tax and cost benefits responsible for luring business away from the US have eroded considerably in value and in conjunction with logistics and transportation the recurring investment gap for manufacturers has reduced to a mere 4%.
  • The discovery of new oil reserves and the feasibility of shale drilling. The price of both oil as well as natural gas in the US has plummeted and is expected to drop further. Peers in Germany need to spend twice as much on fuel and power as their American counterparts. This is an immense advantage and the journey back home (or reshoring) is being led by stalwarts like General Electric (GE).
  • Elimination of quality testing hassles. Buyers are empowered with knowledge and as a result they expect the very best from their purchased products. Items sourced and created off-shore are tested under relatively ‘alien’ conditions. Such goods may react unpredictability when exposed to radically different surroundings. This effect is particularly pronounced on electronic equipment and vehicle spare parts. Instead of investing millions in simulating the ‘right environment’, manufacturing R&D teams are suggesting re-shoring as a way to ensure robust performance and lasting value.

A host of issues such as lead-times and logistics within the supply chain when operating offshore has also provided impetus to reshoring and thus a subsequent boost to manufacturing. However the real story will be unveiled by time and Production Materials Inc. is proud to contribute to the upcoming transformation of the economy.

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