BBJ: Deloitte report shows parts of New England can be as inexpensive as the South for manufacturing
As originally appearing in The Boston Business Journal

By Jon Chesto

A new report from Deloitte attempts to upend the widespread belief that high-cost New England states just can’t compete for manufacturing jobs with low-cost rivals in the Southeast.

The report, which was conducted for the New England Council and released today, focuses on regions in New England that could be attractive for “home-shoring” (as opposed to offshoring). The goal: to keep those beloved blue-collar jobs right here.

In particular, the report singles out three relatively affordable regions in New England: the I-91 corridor, particularly in the Pioneer Valley area; the Downeast area in southern Maine; and the Blackstone Valley/Quiet Corner region where Connecticut, Rhode Island and Massachusetts intersect. Home-shoring could ensure that Greater Boston companies’ products are made and warehoused closer to where they are being designed.

This is nothing new for the New England Council, whose leaders have long argued that big Boston companies should make better use of the real estate and labor forces in these more affordable parts of New England.

But there’s definitely an interesting twist to this report. Deloitte compared the affordability of these regions with those in southern states – and New England stacked up well, at least when it comes to making highly-technical products. Yes, the southern states still beat us when it comes to taxes and energy costs. But Deloitte argues that the productivity gains and supply-chain efficiencies of running a manufacturing plant closer to home would overcome those disadvantages for New England.

The Deloitte report says that the cost to make a highly engineered product is only 2 percent higher in Maine than in the South, and only 5 percent higher in the I-91 corridor. The Blackstone Valley area, meanwhile, is about 10 percent more expensive to do business as a manufacturer. And Boston? Well, the Hub of New England is roughly 33 percent more expensive for manufacturing, namely because of labor and real estate costs.

All three “home-shore” regions have access to international airports, numerous community colleges and several healthy industry clusters.

The report, entitled “Smart Infrastructure in New England,” offers a number of steps that policy makers can take to foster this concept of home-shoring, such as approving ways to bring in new supplies of natural gas and coordinating workforce training and transportation funding efforts.

If the Deloitte report has a big shortcoming, it’s the focus on the Southeast states as rivals for manufacturing. The real low-cost competitors, of course, are overseas, in places such as China and Vietnam. A valuable comparison could be made between manufacturing in Asia and making stuff here, especially when quality-control issues and high fuel costs are taken into consideration. Maybe this can be fodder for the next New England Council-Deloitte report.

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