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New Research Will Help U.S. Businesses Assess Costs Everywhere

Assess Costs Everywhere (ACE) has been recently revised with more modern, up-to-date information. ACE is a resource developed by the Office of the Chief Economist in the Department of Commerce to outline the hidden costs and risks U.S. firms need to consider when evaluating the location of manufacturing operations and supply chains. ACE was originally launched in April 2013, and we are constantly reviewing it to ensure the data and research are current.

Highlights from our newly updated research include:

  • Hidden oversight costs: In addition to the direct costs of travel ACE already measured, transitioning from working in one country to another comes with hidden oversight costs. These costs include expenses for human capital, legal expertise, vendor selection, and recruiting and training new workers.
  • Decreased productivity from high turnover: Turnover rates have declined in China in recent years and are now lower than those in the United States. On the other hand, recent studies have indicated that India has a substantially higher turnover rate than the United States.  Overall, the costs associated with turnover may be more than 1.5 times the annual wage of the lost worker. 
  • Shipping time: In order to reduce costs, many freight companies now use "extra slow steaming", which reduces costs for the transport company and carbon emissions, but shipping speeds are slowed by 25 to 40 percent, costing manufacturers in even longer shipping times.
  • Exchange rates: Many currencies have gotten weaker over recent years, making the calculus of offshoring even more complicated. The U.S. dollar has strengthened against the currencies of Europe, Japan, Australia, Canada, Mexico, and Thailand, along with many other currencies globally.
  • The intangible costs of different communication styles: The different communication styles of different cultures can result in workers not feeling comfortable expressing new, more efficient ideas or slowed productivity from extra language and communication barriers.

ACE now contains data that is current as of August 2015 on these topics and more. It is critical that U.S. companies consider all potential costs when moving offshore—including cultural differences, shipping times, and unique political landscapes. The newly updated ACE will help U.S. companies make an informed decision about the merits of "making it in America" versus offshore.

Rhiannon Grodnik, John Okemah, and Mary Vansuch, Economics and Statistics Administration

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