2014 was a pretty heady year for the manufacturing industry. Investment in growth was up, small businesses around the country were optimistic about their future prospects, and more manufacturing jobs were being moved back into the U.S. than in previous years.
The question is, will 2015 be another big year for the manufacturing industry?
While the year isn’t even half over yet, there are a few reasons to be positive about the outlook of the manufacturing industry and the U.S.’s economic growth for 2015, including:
Increased Reshoring of Manufacturing Jobs
In the years following the turn of the millennium, there were a great many companies offshoring their manufacturing jobs to locations outside of the U.S. There were many reasons for this, such as cheap labor and looser regulations, which helped to incentivize the practice of moving jobs to foreign countries.
However, in recent years, many manufacturers have begun to move jobs back to American shores from their overseas locations.
Publications such as Forbes.com have attributed this to new challenges in offshoring labor, such as the fact that “labor costs are rising in many emerging countries including China, with a ten percent increase last year.” This increase in the cost of labor negates one of the primary advantages of offshoring labor, which is the cheap manual labor that is available in developing nations.
Another key obstacle to offshoring manufacturing is the cost and time delay in shipping goods via ship. Goods shipped by sea not only have to wait for available cargo space on a ship, seaborne travel takes weeks once started, and then the cargo has to be loaded onto the port to wait for available cargo truck or rail freight space from there.
For some manufacturing industries, where time is of the essence, such a delay is unacceptable.
By reshoring jobs to America, many manufacturers improve their time-to-market and make themselves more responsive to customer demands in the now, rather than having to try and anticipate demand 3-6 months from now.
Lowered Oil Prices
Energy costs are a huge part of a manufacturer’s expenses. Lowered oil prices in recent months have helped to make it easier for manufacturers to cover these expenses.
However, there’s another added benefit for manufacturers, one that is more indirect. As reported by a Wall Street Journal online article, a combination of “falling oil prices, stronger domestic job growth, and rising profits have boosted U.S. spending.” In other words, the customers of manufacturers both large and small in the U.S. have more money to spend, thanks in no small part to the reduction in oil prices. With extra money on hand, it’s easier to justify expenditures for manufactured goods, and orders pick up as a result.
Speaking of jobs in America…
Strong Domestic Job Growth
As stated in another wsj.com article, “U.S. payrolls grew by a seasonally adjusted 295,000 jobs in February, the Labor Department said Friday. That marked the 12th straight month the economy added more than 200,000 jobs, the best streak since 1995.”
With so many new jobs being added, there are more people earning money, paying taxes, and buying products in the U.S. today. More paying customers creates more demand for products supplied by manufacturers.
Even B2B manufacturing specialists benefit from this phenomenon, as the increased profits of their customers lead to more orders for the goods they need to keep up with demand.
Evidence of this can be seen in Marlin Steel’s own performance over the last year, as demand for custom parts washing baskets from other manufacturers drove the single highest-performing year for the company yet.
Working Together to Build the Future
While there are many positive signs showing that 2015 will be a good year for the manufacturing industry, this is no time to get complacent.
Instead, now is the time to take advantage of the improving U.S. economy to become leaner and more effective as a company, finding ways to save money and outperform the competition. Learn how other companies are improving their productivity and saving time & labor on their final assembly of products at the link below: