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BCG predicts more production US-bound from China

A Boston Consulting Group report predicts 37% of US-based large manufacturers are planning to bring back production to the US from China or are considering it.


April 20, 2012
by PLANT STAFF

CHICAGO: More than a third of US-based large manufacturers with sales of $1 billion or more are planning to bring back production to the US from China or are considering it, according to a recent survey by The Boston Consulting Group (BCG).

Thirty-seven per cent of the executives at 106 companies across a broad range of industries who responded to the survey conducted by the Boston business advisory firm in late February said they plan to reshore manufacturing operations or are “actively considering” it.

BCG said that the response rate rose to 48% among executives at companies with $10 billion or more in revenues – a third of the sample.

Top factors driving future decisions on production locations are: labour costs (57%), product quality (41%), ease of doing business (29%), and proximity to customers (28%). Almost all (92%) of the respondents believe labour costs in China “will continue to escalate,” and 70% agreed “sourcing in China is more costly than it looks on paper.”

Earlier BCG reports have also found changing economics are starting to favour the manufacturing of some goods in or much closer to the US.

US Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much?, BCG predicts improved US competitiveness and rising costs in China will put the US in a strong position to add 2 million to 3 million jobs in a range of industries and an estimated $100 billion in annual output by the end of the decade.

“These survey findings confirm our own analysis and what we are hearing from major companies,” said Harold L. Sirkin, a BCG senior partner and coauthor of the firm’s Made in America, Again series, which began last year. “Companies are realizing that the economics of manufacturing are swinging in favour of the US, for goods to be sold both at home and to major export markets. This trend is likely to accelerate starting around 2015.”

Companies in several sectors nearing a “tipping point” where China’s cost advantage is likely to shrink within the next few years include those involved in: transportation goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics.

BCG predicts production of 10% to 30% of the imports from these industries, which the firm said account for approximately 70% of goods coming from China, could shift to the US before the end of the decade.

In the survey, 67% of respondents in rubber and plastic products, 42% in machinery, 41% in electronics, 40% in computers, and 35% in fabricated metal products expect their companies will reshore production from China to the US.

Click here for a copy of the report.