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KSM Blog | Katz, Sapper & Miller CPA

The Case for "Made in the USA"

Posted 4:48 PM by

Made in China. Made in Mexico. Made in Taiwan. These phrases summarize the direction that American manufacturers have been taking their operations over the past few decades. Cheap labor, subsidies from foreign governments, and fewer regulations are just a few of the reasons so many manufacturing activities have been shipped overseas. This is an attempt on the manufacturer's part to achieve cost savings and increase production efficiency. Consequently, the offshoring of domestic industrial activity has taken away thousands of U.S. manufacturing positions at a time of anemic job growth.

While the globalization of manufacturing processes appears to help American companies gain both competitive advantages and operational competencies, there are several underlying benefits to keeping industrial operations domestically based. In a recent Washington Post article, Five ways ‘Made in the USA’ can cut your company’s manufacturing costs, author Nicholas Ventura argues that while outsourcing manufacturing to countries with cheap labor and favorable regulations may seem like an obvious solution to improving performance, the advantages to companies who keep jobs in the United States far outweigh the pros of foreign operations.

Ventura proposes the following advantages to domestice manufacturing activities:

  • Lower inventory levels – Production costs may be less, but oftentimes foreign manufacturers require larger production cycles to meet a manufacturer’s minimum purchase requirements. Conversely, U.S. manufacturers with smaller turnaround times are able to offer smaller order minimums, which enables companies to maintain just-in-time inventory levels to meet sales requirements while keeping as little cash tied up in inventory as possible.
     
  • Domestic supply chain speeds – Due to logistical issues created by geographical distances, overseas manufacturers tend to be slower in fulfilling the production needs of domestic companies, which in turn hampers a domestic company’s ability to meet customer needs on a timely basis.
     
  • Easier to adapt to marketplace changes – With shorter turnaround times and decreased order requirements, domestic manufacturing operations provide companies with the ability to stay ahead of the curve so as to meet dynamic market conditions.
     
  • Cost savings – Establishing domestic production activities allows companies to reduce capital outlays since inventory optimization allows for smaller amounts of cash needed to maintain sufficient inventory levels.  
     
  • Domestic job creation – At a time when the American economy and labor market sputter along, keeping jobs from being lost to overseas competition is crucial for the United States. In developing a strong domestic workforce, manufacturers can be leaders in alleviating the pressures facing the labor market and help to bring stronger growth to the U.S. economy.

About the Author
Brent Lee is a member of Katz, Sapper & Miller’s Audit and Assurance Services Department. Brent audits and reviews financial statements, and he advises clients in accounting, reporting, compliance and internal control matters. Connect with him on LinkedIn.

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