Manufacturing Coming Back to the US?
At the Modal Group, we spend a great deal of time strategizing with our clients on their operational objectives.
Many companies are telling us that they are considering bringing various facets of their manufacturing back to North America from countries in the Pacific Rim. Once dramatic operating cost advantages in this region such as lower wage and raw material costs, have become significantly less persuasive for reasons including:
-Significant wage inflation
-Intellectual property theft
-Lack of visibility in the manufacturing and transportation aspects of the supply chain
-Higher supply chain costs and longer transit times
It’s interesting to note that in 2005, U.S. wages were 22 times that of wages in China. However, by 2015, U.S. wages are projected to be only 10 times greater.
Where are companies relocating in the U.S.?
Many municipalities in coordination with their state’s Economic Development Centers are attracting business owners with the following drivers:
-Pro-business, growth minded local governments. Much less “red tape”
-Positive economic conditions for labor and facilities
-Significant economic incentives
-Solid highway and rail infrastructure
Mexico still has some significant benefits from a wage standpoint, however the well-documented violence primarily in the North region of the country causes concerns. In addition, highway infrastructure in various Mexican regions is under-developed. Mexico’s wage rates are becoming competitive to rates in China.
Despite some challenges, many stable areas of Mexico continue to prosper. Kansas City Southern rail (Kansas City Southern de Mexico), the only Class 1 railroad to own track on both inside and outside of Mexico’s boundaries, has continued to grow its operation while stabilizing transportation. As a joint owner of the Panama Canal Railway Company, Kansas City Southern also provides ocean to ocean transport services between the Atlantic and Pacific ocean. This will provide an efficient intermodal option when freight volumes increase following the completion of the Panama Canal expansion in 2014.
It’s time for companies to align their real estate footprint and location needs to their business model.
We can be the real estate link in your supply chain. Let us know how we can help!