In a just released survey Boston Consulting Group found 37% of executives at large, US based manufacturing companies "are planning to bring back production to the United States from China or are considering it". This number rose to 48% among executives at companies with $10 billion or more in revenues.

Top factors driving production location:

• Labor costs - 57%
• Product quality - 41%
• Ease of doing business - 29%
• Proximity to Customers - 28%

According to BCG the industries reaching this "tipping point" are;

• Computers and Electronics
• Appliances and Electrical Equipment
• Furniture
• Plastics and Rubber
• Transportation Goods
• Fabricated Metals
• Machinery including air conditioners, heaters and pumping equipment

With labor costs in China increasing 20% per year and more the labor cost advantage is falling to single digits. HVAC manufacturers are re-thinking their manufacturing plans with Mexico seeing increased attractiveness as well as low cost countries such as Vietnam, Malaysia and Indonesia.

Does this mean manufacturers are leaving China? Of course not. Making product to serve the huge China market still makes all the sense in the world.

BCG has an excellent website with more insight and data on the topic of Outsourcing and Reshoring.

Editor's Note: CR4 would like to thank Larry Butz, President and CEO of GEA Consulting, for contributing this blog entry.