Oil Dropping and Ever Low Interest Rates-Bad for US mFg (profit, job)

[bobtn]

People love the stuff above, but if one laments the decline of US mfg, they should be BOOING the above. Higher oil would increase the cost of importing from Asia, and higher interest rates would also raise the cost to import. Corps in times with higher interest rates calculated the value of the imputed interest cost locked up in excess inventory. Due to LONG shipping times, corps must stock far higher levels of Asian sourced products, vs what they would stock if made stateside.

[andywire]

I think we have lost so much of our consumer goods manufacturing base that the effect of such a trend may be minimal. Many companies that have reshored have also done so due to other issues, especially quality issues and supply chain issues. The costs of waiting 6 months for a batch of (possibly bad) widgets is just not worth the risk while a multimillion dollar assembly line (purchased on interest) sits idle. And if they are bad? Well, that becomes a catastrophe on the bottom line.

I have seen a lot of work reshored over the past couple years, but most people within the companies seem to cite other reasons for reshoring than just oil prices. Interestingly, in the precission machining companies that I have toured, more than a few have "China sections"... Basically, they are displays of some of the epic fails that resulted due to Chinese manufacturing firms, as well as tallies of the costs of such screw ups. This serves as a reminder to management as to why all work can't simply be given to Chinese firms.

Manufacturing in this country I believe has turned a corner. We are becoming specialized in the difficult work that can't be done in China, while turning over our Marti Gras bead empire for the communists to devour. I'd say we didn't make out too bad on that deal. The only problem I see today is the profit margins in manufacturing, particularly that difficult work, makes it difficult to attract the potential talent needed to do the work. That I believe is going to be the single greatest threat going forward, especially in the JIT manufacturing realm, where the job has to be done right the first time, no excuses. The wages don't match the stress and brains required, and a lot of the older guys are starting to worry about the future viability of the industry, and the lack of interest. Around here, I very rarely see anyone under the age of 40 working in small quantity production or prototype environments, where emphasis on mathematics and concentration is paramount. They are essentially kicking the can down the road.