By: Braden Kelley, The Atlantic
As wages and shipping costs rise abroad, unemployment stays high at home, and strategic discontent with offshoring grows, U.S. Manufacturing finds itself facing its best chance at staging a comeback.
American companies are considering a reversal of offshoring and outsourcing to reduce risk, improve agility, shorten product development cycle, and improve their ability to simplify increasingly complex supply chain management.
Missing from this list is innovation, but US companies that commit to engaging American workers in their innovation efforts may also increase their ability to justify manufacturing their products at home.
Moreover, Chinese workers are now three-to-five times more expensive than some other Asian workers, leading American firms to reconsider their sites of production.
One such firm is Nike, whose innovative Flyknit technology could allow it to make shoes easily anywhere in the world by having a machine make the most labor-intensive parts of the shoe. To bring production back to the United States allows Nike to react faster to competitors or to increase the speed of scheduled product launches. In the fashion industry, speed is crucial, and onshore production could create a competitive advantage.
Other firms are taking a second look at their reliance on contract manufacturers in China and elsewhere. Companies that once saw contract manufacturing as a strategic or economic necessity are questioning the wisdom of the arrangement as they watch original design manufacturers like HTC move up-market and strengthen their brands to compete with Apple, Motorola and others.
Adding fuel to the fire are rumors of workers at plants like Foxconn smuggling out plans and components to sell to pirates to make a little cash on the side.
But more importantly, an almost religious focus on cost and increased use of standard components across whole industries has made it more difficult for one brand to differentiate their products from another in the industry – increasing price competition and squeezing margins for all.
As a result, companies like Apple are now looking to reverse some elements of their standardization and outsourcing strategy and instead become more vertically integrated. Apple has acquired a chip design firm — and even their own chip fabrication plant (fab) — in its quest to differentiate itself and control some of its basic inputs and it may still acquire another fab to continue this strategic direction. Not to be outdone, Google is acquiring Motorola, and Nokia and Microsoft are working together closer than before.
It is possible for companies to manufacture their products in the United States and make a profit. When you invest in your workers, engage their hearts and minds and involve them in the innovation process, you can not only optimize your manufacturing processes but also uncover new growth opportunities that no contract manufacturer will ever bring to you.
Companies like New Balance, Snapper Mowers, American Apparel, Caterpillar, Syntax-Brillian (Olevia TV’s), Case IH, American Bicycle Group and many others have been working hard to keep making their products in the United States.
Now is the time for the Obama administration and state and local governments to step up their encouragement of US manufacturing. In these difficult economic times, Americans would love nothing more than to stroll down the aisles of their local Walmart, Target, or independent retailer and find more products on the shelves that say Made in the USA.