In every country in the world, the political leaders will at some point in time discuss the issue more manufacturing should be done within the borders of the country. This issue is regularly in the news, many elections had the issue as the top issue among voters, recently it was included in President Trump and America First. Politicians hand out tax grants and various incentives to the companies and most of the public agrees or accepts the need to give corporations free money. The companies promise good paying jobs, spin off activities and the community and state and country are better off, or at least the public believes the world is better off with the incentives that without.
In an article by Kate Holton of Reuters, manufacturing in Britain is starting to come back to the birthplace of the industrial revolution. The British founded the modern factories but over the decades, price was the number one concern, which meant factories moved from the developed world to Asia and in particular China. The Chinese government built the infrastructure that it was worth moving production to China and sending the goods back to Britain or the US to sell at a profit, than make the goods in the host country
According to Tony Hague, President of PP Control & Automation, it takes a bit of a seismic shock to make companies re-evaluate strategy, but price becomes fairly irrelevant if you can not get the stuff. In the past 2 years, his company has received more than $3.1 million worth of work that previously was done in Asia.
A survey by industry group Make UK, of the 132 companies participating in the survey 2/5’s had increased their British supply base. It should be noted the amount of people employed is up but automation and robots are being used in greater numbers.
Roger Crozier, owner of a precision stamping company called Brandauer said in previous years he could not compete against Chinese factories that could churn out products at speed, but with investments in automation, robotics and staff training the dynamics have changed. Now the price may be 5-15% higher, but a couple years it was 30-50% higher.
There are perils involved in the costly and time-consuming process of investing in new machinery, finding new suppliers for materials and building out logistics chains, all with a potential recession on the horizon.
Linking to dividend paying stocks, price and margins are important to maintaining profits to reward shareholders. As an investor, you may want the company to do most of its work in the country you live in, but if they do not make a profit will you keep the shares? Robotics and automation will change some of the pricing. What is important to you?
There are more questions than answers, till the next time – to raising questions.