When German-based Bosch Rexroth Corp. sought to improve its manufacturing operations, it decided to build in Bethlehem Township in Northampton County.
The maker of drive and control technologies, including hydraulics and electric drives, wanted to be closer to its aerospace and defense customers. Today it can serve 600 of them from its new 150,000-square-foot distribution and logistics center near Route 512.
The April expansion underscores one of the primary reasons why manufacturers — international and domestic — are investing more in operations in America and the Greater Lehigh Valley. They want to be where the action is.
Specifically, more manufacturers choose to build and expand in the U.S. and, in particular, this region because:
• U.S. consumers want American-made products, and manufacturers are noticing.
• The gap (or lower cost) to manufacture overseas vs. in America is shrinking.
• The Greater Lehigh Valley location is ideal for distribution – near major markets, ports and airports and with excellent access to interstates and highways.
• That central location also has spawned dozens of large warehouse, distribution and logistics centers in the Greater Lehigh Valley that attract new manufacturing.
• The region is seeing lower energy costs thanks to the natural gas growth in the nearby Marcellus Shale region.
It adds up to what could be a reversal in the trend to move manufacturing operations offshore. And it bodes well for the American economy.
And also for Pennsylvania, which today is a growing market for attracting overseas companies, with all signs pointing to a manufacturing sector that will only get larger.
For example, when 11 foreign direct-investment professionals representing various nations met at Hotel Bethlehem in June to discuss the impact of global investment on the region, manufacturing growth was a key focal point.
And the state Department of Community and Economic Development revealed that manufacturing and research and development are the biggest sectors of growth in Pennsylvania. From 2008-2014, more than 5,000 jobs were created in the state through direct foreign investment, the department said.
“Berks County and the Lehigh Valley are in essentially an overnight delivery for over 100 million people,” said Jon Scott, president and CEO of the Greater Reading Economic Development Partnership. “That’s just a very enviable location geographically. The region is still well-known for having a strong manufacturing base and a workforce with a positive work ethic and skill set within the manufacturing sector. …
“What we are really seeing now is the re-shoring phenomena.”
Surveys have shown that more and more American consumers prefer to buy products made in the U.S.
In fact, manufacturers are even marketing their products as made in America, as seen on television commercials and billboards, for example.
To that end, the American Made Matters movement was established on July 4, 2009, to encourage people to buy American-made products. Today, it has more than 200 members across almost all manufacturing industries.
One member is The Rodon Group in Hatfield, a manufacturer of plastic injection molds and K’NEX construction toys. Last October, in fact, the company hosted a Manufacturing Day program in which the founder of the American Made Matters initiative gave a presentation.
It’s not necessarily cheaper anymore to make products overseas. Energy costs often are higher, foreign wages are growing and there is the additional cost of transporting products to America – plus U.S. consumers want products delivered faster.
Those are some of the reasons why Chinese manufacturer Fuling Plastics chose Upper Macungie Township to build a new manufacturing plant – a $23 million investment to renovate a vacant building that will bring 75 jobs to the region.
According to economic development official Don Cunningham, growing wages overseas and increased safety, health and environmental standards – mostly demanded by customers outside of China – have reduced the manufacturing cost gap between Asian and American manufacturing.
Cunningham, president and CEO of the Lehigh Valley Economic Development Corp., also said the increasing cost of transporting goods across oceans to the American consumer market shrink the cost disparity even more.
In Berks, Scott said as costs rise to make goods overseas, quality does not go up. For this reason, some manufacturers who are doing manufacturing overseas in places such as China have moved operations back to Berks County or are in the process of doing so, he said.
Bosch Rexroth has cited much higher energy costs in Germany in its decision to build in Bethlehem Township.
“We want to lower the energy costs that we have; we sell technology that helps manufacturers lower their costs,” said Kevin Gingerich, spokesman for Bosch Rexroth.
The Greater Lehigh Valley’s location is critical for manufacturers, as more than one-third of Americans live within a day’s drive of the region.
It’s a big reason why Bosch Rexroth spent $2.2 million to expand to the Bethlehem Township site.
Bosch Rexroth wanted to locate and expand its manufacturing facility to be closer to its customers, Gingerich said.
There have been many other stories of manufacturers opening up new facilities or expanding operations because of the region’s prime location and highways.
Interstate 78, Route 22 and the Pennsylvania Turnpike, for example, offer key transportation routes for the East Coast. And there are major plans to add a lane to Route 22 in both directions in Lehigh County to further accommodate truck traffic.
Meanwhile, Lehigh Valley International Airport in Lehigh County is close to hundreds of manufacturers. And intermodal rail traffic is on the rise thanks to efforts in Bethlehem.
It’s no surprise that distribution centers are growing, particularly those along interstates and highways that serve manufacturers in the Greater Lehigh Valley.
As an example, Hillwood Investment Properties, a commercial real estate investor and developer based in Texas, recently built a 980,000-square-foot facility for NFI, a national trucking company.
Its location? Just off Interstate 78 in an industrial park in Weisenberg Township, Lehigh County.
That type of access to trucking and distribution is a big lure for manufacturers. As is a major FedEx distribution facility scheduled to be built in Allen Township, Northampton County, near LVIA.
By virtue of what they do, manufacturers consistently use a lot of energy – and they are always looking to trim those costs. That makes Pennsylvania even more attractive because of the Marcellus Shale natural gas mining boom in the western and northcentral parts of the state.
Manufacturers are poised to take advantage of the benefits of natural gas, said David N. Taylor, executive director and first vice president of the Pennsylvania Manufacturers Association based in Harrisburg.
“They consume a tremendous amount of energy to do what they do,” Taylor said.
Proximity to the fuel source and reduced transportation costs all work to slash energy costs for manufacturers.
These benefits already have occurred in western Pennsylvania. Thanks to a recent proposal to build a 100-mile natural gas pipeline from Pennsylvania to New Jersey, manufacturers in eastern Pennsylvania would profit. The pipeline is proposed to run through Carbon, Northampton and Bucks counties.
In addition, the growth of the natural gas industry would mean more jobs in steel mills, refineries, supply chain networks, logistics and other manufacturing segments, according to Taylor.
“This is how you make the economy grow,” he said.