Companies have been in search for better profits and lower labor costs through contract manufacturing in Asia. During the last decade, however, Chinese labor cost has risen with an increase of 64% since 2011 [1]. Due to this trend, some companies are now taking their business elsewhere with lower wages, or considering automation, to secure competitive production cost. When also considering all hidden costs of overseas contract manufacturing, including the import taxes, customs fees and freight expenses, many companies have realized that it is more reasonable to bring the manufacturing back home to automated factories, instead of searching for another low-cost labor country.
US Manufacturers are voicing concerns about the downside of the import tariffs the Trump administration is slapping on $50 billion worth of Chinese products. At the same time, there are talks about potential changes in NAFTA. And who knows, maybe even EU relations will become volatile if the worst-case trade-war scenarios play out.
Many of the manufacturing business leaders have no way of predicting how all this will impact their business in the long term. Political risks, corruption, changes to the tariffs, supply chain costs, changing exchange rates, a need for big committed capital for the advance payments for outsourcing partners, long lead times, quality risks, etc. Nobody can accurately forecast the global market behavior and its impact on one single business.
It's like driving in fog down a busy highway with no headlights. At the same time, manufacturing CEOs need to continue developing their strategy and make sound investment decisions.
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C/ Sèquia de Benàger 23
Pol. Ind. Alquería de Moret
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