I suspect I’m like most of you when I hear about all the bad economic news that gets thrown at us from the media every day: The possibility of a second recession, Europe’s (and our) debt crisis, the inability of Washington to come to a consensus on how to move the country forward. It gets depressing after a while, especially when we, as consultants, rely on businesses to provide our services to.
So why, if everything is so bad in the manufacturing sector, has Fishbowl’s lead flow from manufacturers doubled year over year? And it’s not just Fishbowl. I keep in touch with the other software vendors in the SMB space and they all say the same thing. Manufacturing leads are way up! Sure, as we expand our offerings, we naturally should expect more leads from businesses interested in what we’re doing. And yes, our respective marketing departments continually improve how they get the word out, but the reality is that none of us are doing things a whole lot differently now than we did last year. We simply have a lot more demand for our offerings this year than our own improvements over last year should account for.
So, at the risk of sounding like I know more than I really do, I thought I’d share with you some of the encouraging news I’ve been following regarding why some U.S. companies are already starting to move production back home:
Wages in China: According to a March 6, 2011 Businessweek article, wages throughout China have increased over the past two years and wages for factory workers specifically, who are responsible for producing most of China’s exports, went up 40% in 2010! Even at a VERY low starting wage, an increase of 40% in one year has GOT to make a potential manufacturer start wondering if it’s time to move production back to the states.
Shipping Costs: Prices for ocean shipping containers are up 40% and fuel has been up as high as 150% over the past two years. Add to that a minimum distance of around 7000 miles, a shipping time of about 2 weeks, and U.S. Manufacturers with overseas production facilities have got to be asking, why?
Undervalued Currency, The Chinese Yuan: China deliberately keeps their currency low in order to make their products inexpensive to foreign buyers (like U.S. Consumers). But this can’t last forever. It’s an artificial level which means it can’t stay there forever, and when it moves to the appropriate level, production costs in China will go up overnight, the cost of Chinese-made goods will increase, and the idea of bringing some of that production back home will become more attractive.
Excess Capacity in the U.S.: Many U.S, businesses kept their factories alive during the downturn, instead of shutting them down, even though the cost of delivering the product was higher here than overseas. Why? Well, here’s a quote from Martin Franklin, the CEO of Jarden Corporation, one of the largest consumer products manufacturers in the world: “Keeping the factories open in the U.S. is an important hedge for what we think is an inevitable shift” back towards U.S. manufacturing. Now, as the economics of production begin to favor U.S. factories again, the relative lower cost of domestic production means some facilities are cranking out product again.
So what does this all mean for SMB consultants to the manufacturing sector? It means that if you haven’t contacted your manufacturing clients for awhile, then maybe NOW would be a good time to do so. Manufacturing is looking up and when it starts taking off again these businesses will be looking for your help to get the ball rolling.
And for those of you who just haven’t had enough good manufacturing news today, let me show you a link to two more positive articles on manufacturing today:
Till next time!