After making the case for reshoring in a previous article, PwC identified 7 key factors influencing potential US manufacturing resurgence. Obviously, labor cost is one of those factors but not the only one.
“Industrial manufacturers may increasingly rethink their U.S. strategies, including the merits of continuing to separate production and R&D and producing abroad and importing back to U.S. buyers. Depending on the industry, there may be considerable benefits to establishing regionalized supply chains and R&D facilities in the U.S.,” said Bob McCutcheon, PwC’s U.S. Industrial Products leader.
The PwC report outlines seven factors that play key roles in making reshoring decisions, as well as in determining whether or not the U.S. will become a more competitive and attractive market for manufacturing expansion:
- Transportation and Energy Costs: transportation costs have increased due to the bull market in energy commodities.
- Currency Fluctuations: the cost gap between a depreciated dollar and a moderately rising Yuan has decreased.
- U.S. Market Demand: the size of the U.S. market, supports investment in new domestic production of goods targeted for U.S. consumption.
- U.S. Talent: the gap in the level of higher education and training between the U.S. and China has narrowed, but the U.S. still holds a significant advantage.
- Availability of Capital: there is evidence that borrowing in China has become more difficult due to increased capital requirements for banks and tighter lending for exporters.
- Tax and Regulatory Climate: the current talks of tax reforms bring uncertainty to the current expansion of domestic manufacturing.
- U.S. Labor Costs: higher labor costs in emerging economies, especially China, are challenging profitability for some industrial manufacturers.