The U.S. is the new place to go for low-cost manufacturing. As unlikely as it might seem, companies overseas are starting to get that image as they begin sending work to U.S. job shops.
“Over the last six months, activity from the U.K. to the U.S. has picked up dramatically. Before that, it was insignificant,” says Mitch Free, owner of Mfg.com, a Web site for sourcing and selling manufacturing services. “We also see work coming back from Canada because the Canadian dollar now has a 28% disadvantage against the U.S. dollar. Canadian manufacturers who get contracts from the U.S. tell us they are scrambling because their profit margins on that work is often less than the 28% decline.”
Other observers have noticed the impact of low-cost dollars, but say the benefits are hard to quantify.
“I would say the manufacturers I follow have benefited to some degree,” explains KeyBanc Capital Markets securities analyst Jeffrey Hammond. Hammond also says the value of the dollar has changed the economics of offshoring. “Companies trying to be vertically integrated are now more likely to keep work in the U.S. when there is intellectual property built in. These jobs would have been candidates for being sent elsewhere. Now, that isn’t going to happen.”
The argument for manufacturing in the U.S. seems particularly compelling for components going into products that ultimately will be sold here. That was the case for Mc- Daniel Manufacturing in Diamond Springs, Calif., a machining job shop. Owner John McDaniel says his firm recently used Mfg. com to get an order from a U.K. supplier of refurbishment kits for printer and copiers. The customer is now convinced of the economies available by manufacturing in the U.S. and aims to send more work here, McDaniel says.
For similar reasons, Custom Build Golf Co. in the U.K. recently outsourced a swing arm and framework to the U.S. The components are part of an exercise machine for aspiring golfers. Owner Willie White says the cost of making components in the U.S. was about the same as that for the U.K. China was cheaper, but, “I wanted to avoid having parts made there. Quality was also important. At some point in the near future I plan to sell in the U.S. So U.S.-based manufacturing made sense as a way to make distribution that much easier,” he explains.
Jon Wilbrecht, owner of Wilbrecht Electronics in Huron, S.D., says similar factors brought his company work from Switzerland. Microprecision Electronics, a Swissbased maker of custom microswitches and sealed position switches, now sends parts to Wilbrecht.
“Four years ago, when exchange rates were switched around, they probably wouldn’t have moved that operation here,” says Wilbrecht. “Now rates are favorable. And their product is a standard part that is customized for the application. So we can do the customization locally and give better turnaround.”
Strong forecast for DINrail PCs
Shipments of DINrail PCs with I/O are expected to more than triple between 2006 and 2011. According to a report from IMS Research, We l l ingborough, U.K., this should have a lasting impact on the worldwide industrial PC market. Shipment growth will far exceed that of any other industrial PC type, to more than 10,000 by 2011. The European, Mideast, and African market is projected to represent more than 60% of revenues and shipments between now and 2011.
Aimed at control applications, these devices will also replace other automation controls such as PLCs. Their high reliability, coupled with extensive processing power (provided by multicore processors), could help shape the future marke t for PC-based controls, according to the report’s author.
IMS Research supplies market research on a wide range of global electronics markets.
Microprecision Electronics in Switzerland moved some manufacturing activities to Wilbrecht Electronics in Huron, S.D., partly because of favorable exchange rates. Wilbrecht’s quality systems put in place to support precision lead welding of NASA-qualified, metal foil resistors also played a role in the decision.