Good News on the Outsourcing Front

While there has been considerable outsourcing of production to China, things may be changing.

While there has been considerable outsourcing of production to China, things may be changing. One U.S. industry that has been considerably affected by domestic manufacturing going to China is die casting. But according to a story appearing on the website of the North American Die Casting Association, “Has China Lost Its Cost Advantage in Die Casting” by William Downey, president, Technology Consulting Group, the answer to that question seems to be “Yes.”

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One major change that Downey cites is the exchange rate between the U.S. dollar and the Chinese renminbi that has occurred during the past few years. He writes, “A 10 renminbi casting in 2009 is 16.6% more expensive than a 10 renminbi casting was in 2006.” That is a considerable shift. He admits that while the Chinese die casters may adjust their prices in order to accommodate for the change, things like shipping, delays, and inspections still remain somewhat problematic.

Downey goes on to write, “We expect that average savings from China sourcing. . .would now average around 15%--which would just barely pay for the cost of logistics to have the parts shipped to the U.S.”

And here’s something that ought to make those die casters—and let’s face it, this could conceivably apply to other types of suppliers who have seen their contracts go overseas—who have hung on feel that things will be changing in a positive way soon: “By 2011, we expect American die casters will be fully cost competitive on per-piece prices, even on machined die castings.”