Industrial Insight

manufacturing | November 27, 2012

http://www.fool.com/investing/general/2012/11/20/the-manufacturing-boom-you-wont-notice.aspx

The Manufacturing Boom You Won’t Notice

By Morgan House
November 20, 2012

Our analysis concludes that, within five years, the total cost of production for many products will be only about 10 to 15 percent less in Chinese coastal cities than in some parts of the U.S. where factories are likely to be built. Factor in shipping, inventory costs and other considerations, and — for many goods destined for the North American market — the cost gap between sourcing in China and manufacturing in the U.S. will be minimal. … When all cost are taken into account, certain U.S. states, such as South Carolina, Alabama, and Tennessee, will turn out to be among the least expensive production sites in the industrialized world.

This is all great news for American manufacturing, and it will very likely usher in a manufacturing boom.

But here’s what it probably isn’t: good news for manufacturing employment.

While the real production value of manufactured goods has doubled since the 1970s, manufacturing employment has declined by more than 5 million jobs.

The reason is productivity. It simply doesn’t take as many bodies to manufacture a given level of goods today as it did in the past. Automation and robots today do what people did three decades ago. My favorite example of this is the story of a U.S. Steel (NYSE: X ) plant in Gary, Ind. In 1950 the plant produced 6 million tons of steel with 30,000 workers. In 2010 it produced 7.5 million tons with 5,000 workers.

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About author

I'm the executive vice president for a steel casting trade association, the Steel Founders' Society of America. I've got a crazy wife, five crazy children, three crazy people that married into the family, and two crazy fun little grandsons.

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