The Source Code

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Last May The Boston Consulting Group released a report indicating jobs would begin to come back to the US as currency inflation and labor costs continue to rise in China. And while some have, the outlook from eastern and southern China is a little different. We know the low skilled labor jobs have begun to move but not back to the US. The majority of it has either headed west to inland China or to other low cost countries like Vietnam, India and Indonesia. 

So what does this mean for the US worker? Not much. The average US worker likely cares less about low skilled labor jobs. What they're interested in, is the return of the higher skilled and better paid factory jobs. So what are the chances of those returning? Well… I’m not going to say they won’t but here are some reasons to be cynical.

1. China’s Infrastructure: Their whole transportation system has been built round their ability to move goods from manufacturers to their ports and from there to the Western World. As a result, their ability to ship goods is one of the best in the World.  
2. Technical Ability: The majority of Chinese people have been employed in the manufacturing sector their entire working life. This means there’s a legion of people who have 20 plus years in the industry, making it nearly impossible to find that type of manufacturing expertise anywhere else in the World. 
3. Future Consumers: The Chinese appetite for goods is unparalleled. Coupled with the country’s ability to move goods. The Chinese market creates enormous potential for organizations. So why would a company after spending 10, 20 years establishing their manufacturing in China move it right before the market is set to explode?
4. Supply Chains: Expensive and can take considerable time to create. Often relying on multiple countries for parts/input components, organizations will be reluctant to change what’s working. Not to mention replacing and recreating an entire supply chain without involving China at some point in the process seems doubtful.  
5. Economies of Scale: “The increase in efficiency of production as the number of goods being produced increases”. China is the World’s manufacturer and virtual one stop shop. In no other country can you purchase the volume and variety of goods for the cost savings you’re able to obtain from China.

That’s it for today. Stay tuned for the next weeks post where I'll look at the other side of the story and point out reasons why some sectors of industrial manufacturing will see job creation over the coming years.

(For more than 10 years, GCP Industrial Products has successfully offered its customers a unique sourcing process that allows them to save money, streamline their supply chain and grow with new products. Our plans are to continue to grow based upon mutually beneficial relationships and the quality of our products and services to our ever growing customer base. To contact us please click here or phone 1-888-893-5427. Thank you.)