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Manufacturing businesses avoiding the “herd instinct” in 2013: Economist “Special Report”

Today’s post is the third and final part of our series discussion about a recent special report from notable newsmagazine The Economist. The report, called “Here, there and everywhere,” is an in-depth look at the shifting tides of global manufacturing, with many companies moving production back to domestic factories. We encourage you to take some time and read as much of the report as you are able.

Today we’re turning our attention to something the report calls the “herd instinct” of businesses that simply do not give enough thought about where to send production of materials. According to McKinsey, most of these businesses just follow their competitors or partners to low-cost countries and “allow themselves to be drawn in by governments waving wads of cash and other incentives.”

The recognition of this trend is the first step in reshoring jobs to the United States. The point of the article — and we think it’s a good point — is that businesses need to take much more care in considering the location of their production. For some companies, this may mean continuing outsourcing manufacturing to overseas locations. But for many others, this means that a domestic manufacturing site makes good business sense — and that’s great news for anyone in the manufacturing profession.

There are several good reasons that reshoring makes sense, according to the article:

  • Logistics. Global shipping rates continue to rise, affecting total overseas production costs.
  • Stability. Many of the traditional cheap-labor markets are seeing spikes in worker compensation. Labor strikes are also frequent in these areas, creating an unpredictable and potentially volatile production environment.
  • Innovation. The article places particular emphasis on the concept of an “ideas factory,” which refers to a company’s ability to innovate when production is closer to research and development. It’s now been proven that close proximity between factory and lab leads to quicker and greater innovation.

At Dream It Do It Nebraska, we appreciate The Economist‘s special report and look forward to a new era of businesses returning manufacturing to the United States. “Reshoring” undoubtedly leads to more jobs at home and a stronger overall economy, and that’s important for current and all future generations.

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photo credit: tricky (rick harrison) via photopin cc

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