Over the past 6-months, the U.S. economic landscape has been a rollercoaster. Depending on the day, the outlook is encouraging or quite dire. And its probably a matter of where one looks. And just maybe we’ve been spending too much time looking in the wrong places.
What may surprise most is the next wave in the U.S. industrial engine - manufacturing.
What most economists have been missing is a subtle, yet accelerating shift in the outsourcing - insourcing equation. Ten years ago, the outsourcing move to China was growing by leaps and bounds. The U.S. manufacturing base was weakened as companies downsized and at times, went out of business. But something has happened in recent years, I guess maybe one could attribute it to wisdom. Many companies are beginning to figure out that outsourcing to China was not the holy grail they had bought into. Especially for small to mid-sized companies. The stories from issues related to quality, contamination, slow turn-around times, increasing prices…
Today for many companies, the reasons to pull production back out of China are growing daily.In the Sep/Oct 2010 edition of Chief Executive, they did a feature article titled “the case for ONSHORING.” Here are a few of the key takeaways for that article.
- China is no longer the cheap play it once was.
- Long supply chains are proving themselves too extended and too slow, particularly when middlemen or contract manufacturing are involved.
- Increasing evidence suggests that placing manufacturing offshore and in the hands of outsourcers threatens to disrupt the process of innovation.
- With costs increasing in China and the operating environment toughening, the overall difference in the cost and risks of manufacturing there versus here has decreased.
Today the path to bringing production back into the hands of U.S. manufacturer is growing for good reason. It’s cost effective. Lead times are slashed. Innovation is enhanced. Intellectual property loss is diminished. Supply chain management is enhanced.
Yes, the early stages of a resurgence in the U.S. manufacturing is underway. However, one very important question remains. How much productive capacity remains following years of plant closures and consolidations. This is the question that remains unanswered.
