Globalization could be past it's sell-by date for manufacturing

December 31, 2012

With the dawning of the new year, U.S. manufacturers will be relishing the chance to build on the work done in the last twelve months, and there are signs that it could be a banner year for domestic productivity.

According to the Washington Post, one reason for this could be the perceived decline of globalization across a number of industry sectors, including manufacturing. There have been several high-profile announcements over the last few months that have spurred the belief that love of outsourcing is starting to wane, with U.S. companies making a concerted effort to bring goods and jobs back to America.

Apple, General Electric, Nike and Otis have all declared their intent to manufacture product in the U.S., a sign that many economists believe is the signal for a period of "deglobalization," or in other words a retreat from the global marketplace and a belief that quality management in manufacturing is easier to supervise on your own doorstep.

To the average American, the news that manufacturing is rising like a phoenix from the ashes is a welcome respite from the Mexican standoff that pretends to pass for political debate in Washington D.C., while manufacturers can point to the growth of the industry as vindication for the principles of lean enterprise. A recent report from the Boston Consulting Group stated that overseas labor costs were continuing to rise, reducing any perceived benefit that non-U.S. manufacturers may have offered in the past, with analysts predicting that China's global price advantage was likely to drop below 7 percent by 2015.

Of course, the Red Dragon is not the only conduit for outsourcing product, but with markets in Europe in a seemingly perpetual state of crisis and the rest of the Asia-Pacific region experiencing problems with the supply chain, U.S. manufacturers can offer quality product at a reasonable price. This is helped by the costs of energy which have been boosted domestically by the shale gas industry and countered with the rising price of oil, making the price of importing offshored goods less attractive to companies and consumers, while increasing the demand for domestic production.

Of course, this doesn't mean that globalization is dead in the water. There will still be a need for international trade and development, and the flow of companies back to the U.S. is still only a trickle rather than a flood, but it does seem that economic pressures overseas could be the catalyst for the revival that so many believe is just around the corner.