Specialty Graphic Imaging Association Digital Printing & Imaging Association
	Executive Summary August 2008

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New Trends in Globalization Benefit the US

Driven by low-cost labor, many companies moved their US manufacturing plants to countries such as China and India where production costs could be reduced. In terms of production, jobs and revenue, the US had more to lose than gain as globalization expanded. But today, after the first phase of globalization, other factors are affecting globalization and the US is benefiting.

The high cost of transportation is the main factor affecting globalization strategies. Profits realized from low-cost labor are being used to transport products and maintain inventories. Transportation costs, once a secondary issue, are now a big worry for manufacturers trying to balance a global production/fulfillment scheme. Some companies are finding their shipping costs are higher than their production costs. These companies are re-thinking globalization strategies for some products and moving production closer to the point of sale.

According to the RSM McGladrey’s 2008 Manufacturing and Wholesale Distribution National Survey, from 2007 to 2008, there has been a 20 percent drop in the number of US-based manufacturers planning to send production off-shore.

Manufacturers dedicated to sustainable business practices also are finding near-source production saves energy. Instead of burning fuel transporting goods around the planet, these companies are investing in the community that actually purchases their products. They are offsetting higher production costs with reduced transportation/distribution costs.

Buying cycles, especially of consumer products, are getting shorter and shorter. Near-source manufacturing helps companies react quicker to changing consumer dynamics and capture more market share. The efficient production methods that allow companies to quickly adjust to consumer dynamics also reduce production costs.

The weak dollar has helped some companies strengthen their US manufacturing. They have seen a rise in exports as the exchange rate makes US products more affordable. The weak dollar also makes imports more expensive, supporting near-sourcing production efforts.

These factors and many more affect global manufacturing. The two main factors are oil prices and labor costs. And while we don’t expect to see a dramatic drop in oil prices, we do expect to see labor costs in China, India and other countries continue to rise, and rise quickly.

During the first phase of globalization we saw US manufacturing move off-shore. In the future we’ll see these off-shore locations develop into strong markets for US products. Global markets with the purchasing power to buy US products, coupled with increased near-source manufacturing, will benefit US businesses.

Successful specialty imagers are positioning their businesses to support the efforts of manufacturers as they develop global, regional and local manufacturing. Manufacturers need innovative solutions* to meet the needs of rapidly changing markets.

The next phase of globalization won’t be a return to the way things were — globalization is here to stay. However, we will see an effective mix of global, regional and local manufacturing — perhaps with more emphasis on regional and local manufacturing as labor costs are overshadowed by other expense considerations.

*SGIA ’08 will be all about innovation. We’ll see the latest technologies and explore valued opportunities for business development. It’s the one event that will provide an immediate return to your business and help you prepare for the future. SGIA ’08 will be an innovative power-house.