Executives from a broad range of manufacturing disciplines can confidently consider the timeliness of investing in U.S. based factories to manufacture products for the U.S. market. Boston Consulting Group and Accenture recently reported that Chinese net unit manufacturing costs are rapidly converging on U.S. costs. Chinese wages are rapidly rising (approx. 20 percent/year) and the Yuan is gradually appreciating (approx. six percent/year) and expected to rise faster as China fights an inflation rate two to three times the U.S. rate. So Chinese labor costs are rising rapidly and their productivity is, and will be, far below the U.S. level. As a result, by 2015 Chinese unit labor costs will be close enough to the U.S. level that the Chinese Total Cost of Ownership (TCO) will be higher than for the same products produced in lower cost U.S. states such as in the Southeast. (TCO includes the obvious direct costs such as the price plus all of the other costs, e.g. duty, freight, carrying cost, travel, etc., that impact the company’s P&L.) For this economic trend to have a rapid impact on the behavior of major U.S. companies, however, the companies will have to calculate their TCO. Unfortunately, most companies’ calculations are rudimentary, rather than complete, mainly comparing prices rather than the entire costs of offshoring. In fact, Archstone Consulting’s 2009 survey showed that 60 percent of manufacturers ignore 20 percent or more of the cost of offshoring. Accenture’s 2010 survey confirmed the results with 61 percent of respondents acknowledging the need to implement TCO. As a result, companies have offshored more than is in their own self interest. Total cost of ownership and other concepts and tools from the Reshoring Initiative help companies objectively decide which work to reshore and which to offshore. more...