Meet customer demands

To meet consumer demand, companies increasingly want to make products closer to where their customers are and react to trends and ship faster. Additionally, there are shipping costs and import duties to contend with when a company manufactures the products that it intends to sell into the U.S. market overseas. Meanwhile, such variables as environmental issues, product-quality scandals, and incidents like the 2013 Bangladesh garment-factory collapse or this year’s West Coast port slowdown have made domestic production more appealing. Government incentives and a relatively skilled U.S. workforce are also among top factors.

Cost effectiveness

In fact, among the world’s top 10 export economies, the U.S. last year ranked No. 2 — behind only China — for cost competitiveness, according to the Boston Consulting Group, with real estate and natural gas and other energy prices tending to apply downward cost pressure in the U.S.

Patriotism

Patriotism and the pursuit of positive corporate images as standing behind the U.S. economy is another factor for companies opting to bring manufacturing stateside. A 2013 Gallup poll found 45% of Americans saying they had made a special effort to buy U.S.-made products. The survey showed 64% said they would be willing to pay more to buy a U.S.-made product than a similar item made overseas.

Retail giant Wal-Mart Stores Inc. WMT, -0.79%  is a key driver of the trend, the Reshoring Initiative’s study showed. Wal-Mart in early 2013 said it would buy an additional $250 billion in U.S.-made products over the next 10 years. General Electric Co. GE, -0.99%  is one supplier that has taken up Wal-Mart’s call to make more energy-efficient light bulbs domestically; Wal-Mart sells a GE bulb line exclusively at its stores.

Boston Consulting Group estimated Wal-Mart’s move could create up to 1 million direct and indirect American jobs. On Wal-Mart’s website, there’s a special section displaying its “Made in the U.S.A” products. Wal-Mart has said that creating jobs in the U.S. makes economic sense in that it boosts the spending power of its customers.

Is US manufacturing a resurgent investment option?

 The last few decades showed a sharp decline in manufacturing in the United States. There are many reasons for this: competition from emerging economies such as China resulted in a labor and manufacturing cost war with which the US could not compete; high fuel costs led many firms to look for ways to cut costs; unfortunately, this meant sometimes completely moving manufacturing to foreign locations. Conditions have begun to change and the resurgence of US manufacturing has commenced. Here are some reasons why US manufacturing could again be a good investment option.

Niche markets

Small manufacturing operations creating unique products have a lot of potential; there are some things that cannot be mass-produced without severely impacting quality. At the same time, some products can be wildly successful with a particular demographic, but not widely used enough to be practical to manufacture on a large scale.

Cost and time of shipping

 Manufacturing products overseas requires massive amounts of shipping. Packaging costs and travel times are higher and large container ships can take more than a month to reach their port of destination. Manufacturing of goods closer to home helps reduce these costs.

Shale oil

Domestic fuel and energy costs are now lower, thanks to the larger amounts of domestic oil production. This means the cost of doing business is lower than it was when foreign oil prices were high. This is just one factor that has led to some manufacturers moving back to the US, or sourcing more of their raw materials domestically.

Labor costs are lower

 One effect that the Great Recession had was little growth in wages, and though a domestic workforce still has not seen recovery in wage up-tick, for manufacturing, this means that seeking an overseas work force does not save as much money as it once did.

Small and mid-sized companies are on the rise

 Much of the growth being experienced in US manufacturing is through small and mid-sized firms. While large manufacturing facilities can be efficient, they cost more to build initially and product quality can be harder to manage. When it comes to precision manufacturing instruments, it is essential that quality is the emphasis and not mass production. Transducer Techniques is a small US-based manufacturer of load sensors and quality-control equipment used in many areas of manufacturing. They have experience, and increased interest in their products as a direct result of the return of US manufacturing.