It’s Time to Bring Manufacturing Back to the U.S. – David Simchi-Levi – Harvard Business Review

A growing number of executives of U.S.-based companies are repatriating their manufacturing capabilities — moving some production operations back from overseas. One such company is Ford, which announced last year that it will move jobs from China and Mexico back to the U.S.

Another example is Caterpillar, which is investing $120 million in a new plant in Victoria, Texas, which will make excavator machines — including some models that had been made at a Caterpillar plant in Japan and exported to the U.S.

Washington policy makers strongly support these moves. But if corporate leaders and government policy makers are increasingly focused on American manufacturing, why has this sector lost six million jobs since 1997? Are we truly entering a new era or are the above examples rare exceptions to a largely irreversible trend?

The United States remains a large, affluent market that generates significant global demand. It has — and will continue to have — many demographic characteristics that are extremely attractive to companies. The reality, however, is that less and less of that demand is being filled by stateside manufacturing operations.

Still, manufacturing is now going through a genuine transformational period, driven particularly by increased labor costs in developing countries, shifting demand patterns, heightened market volatility, and significant rises in the price of oil. Manufacturing companies should acknowledge that these events might be the impetus for a shift in how and where they make their goods…

via It’s Time to Bring Manufacturing Back to the U.S. – David Simchi-Levi – Harvard Business Review.