What is driving the reshoring trend in the U.S. when Australian manufacturers are moving their manufacturing overseas?
With Chinese wages rising 15% per annum and the cost of transportation, the reasons are stacking up for U.S. companies to bring their manufacturing back .home.
A shorter supply chain, being closer to their customers and retaining their IP are other reasons companies like Apple & General Electric are reshoring their businesses, but they’re also implementing strategies that reduce costs too and are realising that making products locally is also, smarter.
The outsourcing trend continues in Australia, with Mitsubishi, Ford, Holden and Caterpillar to name a few leaving our shores to stay competitive. SPC Ardmona are also looking at shutting down their operations if they don’t get a federal injection of $50 million, so what’s the difference between the two nations, are we behind the times and yet to learn the lessons of our U.S. counterparts?
Two factors that stand out are energy and wages. Australians pay higher energy costs, whereas many manufacturers in the U.S. take advantage of cheaper natural gas as an energy source. Our wages here are higher too, which doesn’t help the bottom line, but with the cost of living so high, isn’t it all relative?
Unions seem to think so, saying that the wage rises are below inflationary figures of late, but if you ask Liberal Senator and Industrial Relations spokesperson Eric Abetz, he blames the Unions for pushing wages and conditions higher at the sake of industry and says changes to the Fair Work ACt are in order and wants government to step in if enterprise deals struck between Unions and Employers are too excessive. How they come to define excessive on a case by case basis, I’d like to see.
If the cost of living were lower, wages wouldn’t need to be as high. Government has allowed big business to drive prices higher for fuel, energy and groceries. I drive to the shops, fill a bag of groceries, come back home and turn on the lights and my wallet is empty (God help me if I get a speeding fine!). Added to this is the costs of other goods like electronics being overpriced compared to what they sell for in other countries, with what I can only call the Singapore Distribution Channel Effect, where pricing is controlled and you see a trend that Aussies are being ripped off.
The government bodies who’s job it is to reign in these companies are powerless and underfunded. To blame Unions and wages as one of the primary reasons for manufacturings survival is a bit rich when other factors are driving up costs.
Before Australian manufacturers can get smarter about local operations, Governments have to get smarter, they need to look after our interests and stop the selling out of Australia that has gradually occurred over the years.
