Survey: Manufacturers overwhelmingly choose U.S. and Mexico over China as low-cost location

When asked to evaluate low-cost manufacturing locations for the production of goods bound for North America, executives of small and mid-size manufacturing companies taking part in a survey chose the United States and Mexico over China by a four-to-one margin. That is one of the surprising findings of a survey conducted by Entrada Group, a Texas-based firm that assists companies in transfering production operations to Mexico. The survey was completed in early 2014, and more than half of the respondents identified themselves as being at the VP level or higher.

Rising labor and shipping costs are making China a less attractive outsourcing location for companies producing goods that are intended for North American consumption. Also, burdensome and opaque business practices in China, which companies are willing to suffer through when the return on investment is favorable, become a defining deficit as other regions become more competitive.

"With labor costs rising in the Far East, it isn't surprising that companies are considering production locations in their own backyard," said Doug Donohue, Principal and Vice President of Business Development, Entrada Group, in a press release announcing the survey. "For many manufacturers, the United States is becoming more attractive due to rising costs in China coupled with the trend of regionalization." Mexico, however, presents the best of both worlds, according to Donohue, who cites its proximity to the United States and its low labor costs.

For most companies taking the survey, the United States is the most attractive low-cost manufacturing location (33%). It's interesting to note that respondents working for companies that currently manufacture in two or more locations place the United States and Mexico in a dead heat, with each country capturing 23% of their votes.

Ninety-five percent of the companies polled are headquartered in mature markets (73% U.S., 14% Canada, and 8% Europe), with nearly seven out of 10 respondents leading companies with less than 500 employees. The number of respondents was not disclosed.

The entire survey can be downloaded free of charge (registration required) by going to http://www.entradagroup.com/survey2014.

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