U.S.A. - Great for Manufacturing Businesses
Category: Rebuilding the Supply Chain • Feb 18, 2021
High-Cost with High-Value
On October 16, 2020, the National Association for Manufacturers (NAM) announced that a new assessment ranks the United States fifth among 16 other major manufacturing exporting nations.
Conducted by the Manufacturing Institute and KMPG— a professional services firm providing business, audit, tax, and advisory services—the study evaluated primary and secondary costs associated with the Cost of Doing Business (CoDB). The assessment indices, sources, and methodology can be found in a 47-page PDF entitled, The Cost of Manufacturing Operations around the Globe. Following are some of the highlights.
High primary costs, but low secondary costs
The study found that CoDB primary costs (compensation, real estate, utilities, taxes, and interest rates) in the United States are high compared to other markets, but its CoDB secondary costs (quality of labor, ease of doing business, infrastructure, and risk/protections) are extremely low.
The United States ranks 14th for primary costs, sitting just below the United Kingdom at 13th and tied with Switzerland. In contrast, the United States ranks first for secondary costs—above Switzerland (2nd), United Kingdom (3rd), Canada (4th), and Germany (5th).
The study also noted that low secondary costs in the United States have helped increase Foreign Direct Investment in U.S. manufacturing, which has risen 30%—surging upward from $569.3 billion in 2006 to a record $1,785.7 billion in 2019.
Labor quality is a distinguishing factor for the United States. In the study, the United States scored high for “quality of labor” categories, including learning, adjusted years of schooling, skill set of graduates, and real value-added per employee. Only Switzerland and Germany received the same quality-of-labor score that the United States attained.
“Clearly, American manufacturers are talented and respected for their technical expertise and skills—underscoring the value of our country’s manufacturing supply chain,” says Greg Jones, Vice President - Smartforce Development at AMT – The Association For Manufacturing Technology, which owns and operates IMTS – The International Manufacturing Technology Show.
“In the next few years, as baby boomers retire, in an environment of general economic expansion, combined with innovations in technology, two million advanced manufacturing technology jobs will need to be filled by 2025. U.S. manufacturers must continue to work more closely with policy-makers and the U.S. education system to assure that our workforce needs can be met to sustain the U.S. as a thriving location for manufacturers."
The study found that corporate tax reform increased the United States' ranking, making it a preferred location for manufacturers. The study compared the pre-reform corporate tax rate of 40 % & and the post-tax-reform corporate rate of 27 %—finding the reform significantly increased the U.S. ranking.
“A national plan focused on manufacturing innovation and might would reduce most of the costs of doing business in this country. AMT urges all manufacturers to use the facts in this study to connect with their elected leaders and tell the story of manufacturing in America,” says Amber Thomas, AMT Vice President - Advocacy.” MT will be advocating alongside our members and industry partners for conditions conducive to an innovative, competitive, and advanced manufacturing industry.”
To learn more about Rebuilding the Supply Chain, including topics about sourcing regionally, visit IMTS’s Rebuilding the Supply Chain.