Can US Support Low-Cost Manufacturing?

For decades, American companies have taken advantage of low-cost manufacturing in other countries by offshoring their production operations. Now, as consumers and government bodies push for a resurgence of American manufacturing, many industry professionals wonder if the United States can support the low-cost manufacturing that is necessary to rebuild the industry into an economic powerhouse.

According to a recent report from the Boston Consulting Group (BCG), low-cost manufacturing is not only a possibility—it is a reality. The report, which was released on April 25th, states that the United States is now the second-most cost-competitive manufacturing location in the world. It cites a number of factors, including wage stability and increased productivity from American manufacturing workers. Dropping domestic energy prices also play a key role in lower manufacturing costs.

In the coming years, the United States is set to become even more competitive in the global market. Rising wages in China are chipping away at the country's competitive advantage. According to Bloomberg, Chinese labor wages are expected to rise by another 10 percent in 2014, on top of an estimated 10.7-percent increase in 2013.

Despite its shifting position in the global manufacturing marketplace, the United States is a long way from becoming a true center of low-cost manufacturing. Currently, the domestic infrastructure is not set up to support the high productivity and reduced costs that are necessary to cement the country's manufacturing future. Many traditional facilities rely heavily on expensive human labor for operations and quality control.

Technology is the largest obstacle in the quest for large-scale, low-cost manufacturing in the United States. Promising options exist. 3-D printers, for example, have the potential to streamline the prototyping process. At this stage, however, 3-D printing technology is not nearly advanced enough to become a viable solution for most businesses, as scientists and engineers must first improve the speed, material selection, strength and finishing processes. Robotic automation technology is perhaps the best available option for companies looking to cut costs and boost production, but it comes with a high initial investment.

In response to the need for updated technology, President Obama has created the National Network for Manufacturing Innovation (NNMI). Each new center in the NNMI will allow scientists, engineers and manufacturing experts to work together and develop faster, more efficient systems. Four institutes have already been established in the areas of additive manufacturing, electronics fabrication, digital manufacturing and metals. Even so, it will be years before the NNMI produces and commercializes viable technological solutions to support low-cost manufacturing.

The United States is on its way to becoming a center for low-cost manufacturing, but the road ahead is paved with challenges. With government support, financial incentives and appropriate technology developments, the American economy may once again become a major player in the global manufacturing marketplace.

(Photo courtesy of joesive47 / freedigitalphotos.net)