For This U.S. Manufacturer, Overseas Production No Longer Makes Sense
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It’s a common perception that manufacturing is cheaper overseas, especially in China. But recent reports show a reverse of that trend, with many companies opting to move their operations back to the U.S.
Quirky, a U.S. firm that crowdsources ideas online to create unique items, recently began producing home storage units from modified milk crates. To get its new product into major U.S. retailers in time for the back-to-school crowd, Quirky founder and Chief Executive, Ben Kaufman, moved production from China back to the United States. Bloomberg Businessweek reports:
The 25-year-old Kaufman, who grew up above an injection molding factory his mother ran in Queens, hopes to bring half of Quirky’s manufacturing back to the U.S. in the next 18 months. With labor and shipping costs rising in China, companies are looking for American factories to make certain goods, especially when production can be largely automated, as in the case of the milk crates.
Says Kaufman, “Most assume that because wages in China were at 58¢ an hour in 2001 that wages are still low… But you have to think about productivity, because the U.S. worker is 3.2 times [more] productive than the average Chinese worker." That is partly due to “automation and better manufacturing techniques,” he adds.
Despite the advantages of manufacturing in the U.S., exorbitant upfront costs remain a challenge, according to Kaufman:
I can pay $5,000 to $50,000 to launch a product in China. In the U.S., the cost would be 10 times that, at minimum.
Still, he says moving work back to the U.S. from China will make Quirky money in the long run.
Click here to read more about Quirky’s decision to relocate production.