In the midst of the recession, in April 2009, we made a call that the tailwind out of the recession would begin to take hold in Q1 2010 and it would include a newly competitive US manufacturing base . Finally, for the first time since 1997, the US manufacturing sector added jobs (136,000) in 2010. Forecasts for 2011 demonstrate expectations of over 300,000 more.
At CMF, we have been working with US manufacturers that had an excellent 2010 and, for the first time in years, they are beginning to shift their mindset and add to existing capabilities and talent. We believe this is the beginning of a decade-long trend of growth in US manufacturing partially caused by:
- Increasing importance to manufacturers of availability and proximity to a reliable energy source – the US has significant supplies of natural gas
- Increasing importance of flexibility and proximity of manufacturing facilities to their customers – the US is the world’s largest market and fresh, customized offerings can mean the difference between a great company and a mediocre one
- Increasing costs of skilled direct labor in Asia – this will cause executives to reevaluate where work gets done
Although there remain significant cost advantages to manufacturing in Asia, in many situations, taking a fresh and creative look at the entire supply and manufacturing chain may yield some surprising conclusions. Middle-market American leadership teams, generally, are innovators. The innovations we see on the ground are qualitative and anecdotal, but they indicate a growing desire of a subset of the middle market to begin playing offense.
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