A Seattle manufacturer’s decision to expand in the U.S. instead of China provides an excellent case study on the advantages American businesses can find reshoring.
“The lead time for orders coming from China is three weeks, and all of our brewery clients want our products faster — that’s the first thing they saw when we met with them,” Paul Fichter, owner of Taphandles, told the New York Times.
The manufacturer of beer marketing products said labor costs in China are rising and it has to “upgrade benefits like dormitories and food” to attract workers. Plus, the Chinese currency has appreciated and shipping costs have risen since the company first began operations in China in 2006.
Fichter’s reasoning echoes a recent study that suggests up to 3 million manufacturing jobs will return from China to North America over the coming years. The Boston Consulting Group says “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.”
Fichter said the company will produce more signs and displays in the U.S., but nearly all the tap handles will continue to be built in China. His reasoning on the division of operations between continents hints to the what types of manufacturing work will shift back to the U.S. and what will stay in China.
“The tap handles have very intricate shapes — for example, the teeth on a whale — that require detailed handpainting. It’s labor that you can’t automate I've searched the world and not been able to find the same quality of labor elsewhere.”
Computer automation costs in the U.S. have dropped, making it more affordable for the company to have U.S. workers use machines to produce signs and displays, instead of employing Chinese labor, Fichter said.
“The machines will make 10 times more product than a person could in China.”