Fuel costs will bring manufacturing home: Marmon exec
August 1, 2010
BIRMINGHAM, Ala. - Manufacturing that has been outsourced to China and other countries with low labour rates will return to North America over the next 20 years, driven by rising logistics costs (fuel...
BIRMINGHAM, Ala. –Manufacturing that has been outsourced to China and other countries with low labour rates will return to North America over the next 20 years, driven by rising logistics costs (fuel in particular) and the need for tighter supply chains, predicts Kelly Dier, president of Marmon Highway Technologies (MHT).
Dier, a 40-year veteran of the industry, made his prediction during a meeting with media May 26. Dier said he believes that although railroads will experience an increase in domestic freight tonnage over the next 10 years, trucks will continue to handle the majority of freight volume.
Additionally, he predicted that diesel fuel prices will soar, hitting the US$6-7 range (per gallon) within the next five years. As a result, he said, North American companies will have to manufacture and source materials much closer to home to control logistics costs.
“We’re going to reach a point where the way we have been running our business logistics will no longer make sense,” Dier said. “Today, it is common to source worldwide for cheap labour. But logistics costs are going to get so high that companies will have to develop much tighter supply chains. This is a total change from what has occurred for the last 20 to 30 years, but it’s a good thing, because it will bring a resurgence of manufacturing to North America.”
As president of MHT, Dier is responsible for 13 companies in the industry: Fontaine Fifth Wheel, Fontaine Modification Company, Fontaine Spray Suppression, Fontaine Trailer Company, Marmon-Herrington, MHT -Europe, MHT -South America, Perfection, Triangle Suspension Systems, TSE Brakes, Webb Wheel Aftermarket, Webb Wheel OEM, and Webb Wheel Transit.
MHT companies devote a great deal of time and effort to shortening their supply chains, Dier said.
He said tighter supply chains offer the added benefit of enabling companies to move more nimbly than they can when their suppliers are thousands of miles away.
For example, Dier said, it currently takes 120 to 180 days for parts to come from China to the US, which has a serious impact on US truck component manufacturers’ ability to respond quickly to an uptick in orders.
Dier says the move back to domestic manufacturing won’t come easily.
“It’s going to be a hard transition,” he said. “North American machine shops, foundries and fabricators are gone and will have to be recreated. It’s going to be a 20-year process, but the result will be good for the businesses and citizens of the United States, Canada and Mexico.”
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