Logistics, Logistics, Logistics

In a prior entry about how states compete for businesses and jobs, we cited the old military saying, “amateurs discuss tactics; experts discuss logistics.” We cite it again in discussing a recent report about how some U.S. businesses are planning to relocate production (and jobs) back to the U.S.

Last year, the Boston Consulting Group cited rising wages and production costs in China as eroding its competitive cost advantage (Made in America Again: Why Manufacturing Will Return to the U.S.).  In a new report, BCG cites more factors, including “the desire to cut long lead-times, locate production lines closer to design and engineering teams, improve quality control, and reduce shipping costs” (U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much?). 

Where’s the proof that companies are returning home? The report citied these examples:

·     Water irrigation controls manufacturer ET Water Systems recently relocated production and assembly from China to San Jose, California because it was faster and cheaper to make things in San Jose. It also discovered that quality and yield improved after the move and innovation and product development accelerated.

·     High-end cookware manufacturer All-Clad Metalcrafters is bringing lid production back to the U.S. to be closer to both customers and its main factory and to reduce capital costs.

If these moves are part of a broader trend, the economic consequences could be significant. BCG estimates that the relocation of manufacturing jobs from China, combined with increased exports due to improved U.S. competitiveness compared to Western Europe and other major developed markets, will directly and indirectly create 2 million to 3 million jobs in the U.S., reduce unemployment by 1.5 to 2 percentage points, and lower the non-oil-related merchandise deficit by 25 to 35 percent.