BIRMINGHAM, Ala. — Manufacturing that has been outsourced to China and other countries with low labor 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 drew upon his more than 40 years of industry experience to make this prediction in a meeting with trade media last week. 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 $6 to $7 range 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 labor. 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: Fontaine Fifth Wheel, Fontaine Modification Co., Fontaine Spray Suppression, Fontaine Trailer Co., Marmon-Herrington, MHT − Europe, MHT − South America, Perfection, Triangle Suspension Systems, TSE Brakes, Webb Wheel Aftermarket, Webb Wheel OEM, and Webb Wheel Transit. Currently, the companies source materials and parts worldwide.
MHT companies devote a great deal of time and effort to shortening their supply chains, Dier said. For at least one MHT company, transportation is already the second-highest cost of doing business — higher even, than the cost of labor.
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 U.S. That has a serious impact on U.S. truck component manufacturers’ ability to respond quickly to an uptick in orders, he said.
Dier recognizes that 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.”
Of course, Dier added, MHT will continue to maintain strong relationships with international suppliers to support its customers abroad. MHT has business units dedicated to the South American and European markets, with plans for further expansion.
For more information about Marmon Highway Technologies, visit www.mht.bz.
