Does Rising Labor in China = Reshoring at Home?

USA-China

USA-China (Photo credit: Wikipedia)

The rise of manufacturing in China has been impressive and has made a major impact throughout the world.  China has become the number two manufacturing nation behind only the United States.  Many expect that it is just a matter of time before China becomes number one.

Not everyone is ready to hand over the crown so quickly though. Boston Consulting Group managing director Hal Sirkin points to the rapidly rising labor costs in China. Does rising labor costs in China mean that we will see reshoring of manufacturing back home? Mr. Sirkin predicts that rising labor costs in China and other countries will “reshore” 2-3 million manufacturing jobs back to the U.S. over the next decade.

Some other key points from the video:

  • China’s labor cost was just 58¢ per hour in 2001 but has been rising rapidly.
  • Productivity is up 250% in the United States since 1972 even with less labor.
  • Labor rates are increasing by 15-20% in China
  • There has been a fundamental shift in the economics due to China’s rising labor costs.
  • There is value in made in USA (Safety & Quality)

All of this illustrates that there is more to manufacturing than just labor rates.  People who want their manufacturing plants to survive will strive for excellence on all fronts.  It will not be enough to have high quality or to deliver low costs.  We need to provide the top Quality products. We need to be in touch with what the customer wants and needs. We need to be Lean organizations that eliminate waste in all forms.  This is true in the Americas, Western Europe, Asia, and the rest of the manufacturing world.

What are your thoughts?  What can you do to keep manufacturing strong at home?

Best regards,
Christian Paulsen
Lean Leadership
Written for the Consumer Goods Club

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Please leave a comment below if you liked this article. You can also connect on LinkedIn, follow me on Twitter, subscribe via e-mail (right side bar), retweet, digg, or stumble this article.  You can check out my Facebook page and continue the discussion there as well.  Your feedback is appreciated.

You can also see US Factories Maintain an Edge?, Volkswagon’s New US Factory, The War on Muda at VIBCO, and Running Lean to read about some strong domestic manufacturing.

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About Christian Paulsen

Christian Paulsen is an Executive Consultant with 20 years of Lean Manufacturing. Chris adds value to organizations by driving process improvement and bottom line savings. Chris intends to help others by sharing the lessons learned after a quarter century of operational leadership, marriage, parenting, and even longer as a Cubs fan. Your comments on this blog are welcome. You can also connect with Chris via LinnkedIn, Twitter, and Facebook in the right sidebar. Chris welcomes your comments. Christian's professional services are available by contacting him through LinkedIn (right side bar)
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