BIZMOLOGY — There has been a lot of talk about a possible revival to US manufacturing as more companies shift from outsourcing to bringing jobs back to the country. This week Motorola Mobility announced it is opening a smartphone factory in Texas. It joins other companies such as Apple and Lenovo that also plan to add US manufacturing capacity.
For more than a decade, manufacturers have chosen to produce goods outside the US, mostly in East Asia, where wages are low and regulations loose. But there has been a noticeable shift as more companies look to add US jobs. The US manufacturing industry is poised for a revival thanks to rising labor costs in China, greater demand for US-made goods, and lower domestic-energy costs. Companies also are motivated by government incentives and boosting public sentiment.
While people applaud companies for choosing to reshore some of their operations, there are several factors that could hinder further growth in US manufacturing.
First of all, aging equipment could slow down the process of expanding capacity or opening new plants in the US. The average age of manufacturing equipment in the US is close to 20 years, nearly double what it was in 1990, according to the Bureau of Economic Analysis. While many companies poured resources into plants overseas, their domestic operations were neglected. US manufacturers have typically invested 5 percent of revenue in capital equipment, compared to the 6 to 9 percent usually needed to keep up with top companies, according to a study by the Manufacturing Performance Institute. Equipment maintenance and modernization at US facilities that have been either ignored or postponed will need to be addressed if US manufacturers plan to increase domestic production. Some companies that face capital constraints may find it too difficult to boost US production.
Much like aging equipment, an older, retiring workforce also could hinder US manufacturing expansion. The average age of the US manufacturing workforce is nearly 45 years and 10 percent of the workforce will retire within the next three to five years, according to the Economics and Statistics Administration. As workers age and retire, their expertise could be lost if not enough new workers are ready and trained to fill the gaps.
Only 9 percent of the US workforce holds a manufacturing-related job. That is a significant drop from 25 percent in 1970. Shortages of skilled workers in the manufacturing industry could further prevent some companies from expanding here.
While news about companies opening new plants or expanding old ones in the US is heartening to hear, there are many factors that must be addressed before a larger shift can be expected. Revitalized maintenance programs, as well as workforce training and recruitment, should be at the top of the list for any manufacturer planning to shift jobs to the US.