Factory Jobs returning to the USA?

[Chuckanut]

Here is an article in Atlantic magazine about factory jobs returning to the USA. In particular, it focuses on a huge appliance factory complex owned by GE.

Here is a quote of a quote from the article:

In the midst of this revival, Immelt made a startling assertion. Writing in Harvard Business Review in March, he declared that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.” Just four years after he tried to sell Appliance Park, believing it to be a relic of an era GE had transcended, he’s spending some $800 million to bring the place back to life. “I don’t do that because I run a charity,” he said at a public event in September. “I do that because I think we can do it here and make more money.”

No guarantees, of course. But food for thought, and a nice way to deflect the verbal barrage from the gloom and doom crowd.

Article here: The Insourcing Boom - Charles Fishman - The Atlantic

 

[M Paquette]

Interesting article. One item I found particularly telling was the move to bring fabrication of sub assemblies and components back to the US. That sort of "return of the supply chain" will become important in bringing more of this sort of work back to the US.

It was also nice to see the realization by the corporate beta counters that there is more to reducing costs than simply outsourcing. By "insourcing" and bringing the design, engineering, and factory floor teams together, significant cost savings were seen in that hot water heater project from iterative redesign for manufacturability.

One point that folks should realize, though. Replacing an overseas production line with a thousand workers won't result in a thousand domestic jobs for similar low skill labor. For much outsourced work, bringing the work home will result in a smaller number of moderate to high skilled positions, alongside fairly sophisticated automation. (This will also happen overseas as an incremental change. Foxconn/Honhai will be using their new Foxbot hardware on production lines instead of some laborers, for example.). There will be a need for more educated workers, with good math and logic skills to support these new production lines.

 

[ERD50]

Thanks for posting, I thought the article was very well done (rare for me to think that of any article these days). I'll try to comment a bit more later, when I have time.

A lot of truth to the article - having design and mfg co-located and all working together provides a feedback loop that can speed problems solving and improve the design for manufacture-ability, which can have a big impact on costs and quality.

I'm less hopeful that these ideas will apply to electronics mfg. China has such advantages because there is an entire support infrastructure there. The component suppliers are all nearby, and that cuts costs and improves the speed of problem solving. I don't think this is such an issue for more mechanical based products, like these water heaters.

-ERD50

 

[JPatrick]

The article at this link--
'Lean' Manufacturing Takes Root in U.S. | Fox News
notes similar concepts and actually mentions GE as does the OP's article.
Manufacturing certainly be done here, especially now with the Chinese worker demanding more money and benefits. It's just that the old way is just that--"the old way."

 

[donheff]

I'm less hopeful that these ideas will apply to electronics mfg. China has such advantages because there is an entire support infrastructure there. The component suppliers are all nearby, and that cuts costs and improves the speed of problem solving. I don't think this is such an issue for more mechanical based products, like these water heaters.

-ERD50

I agree that apply this to electronics may be problematic but the issues with design separated from production can still lead to deficiencies. Same in IT systems design. The rigid approach (by some) to keep IT design and implementation teams completely separate can result in failures analogous to those cited about manufacturing here.

 

[Midpack]

Interesting plausible article, and I hope it's true having spent my entire career in manufacturing.

One point that folks should realize, though. Replacing an overseas production line with a thousand workers won't result in a thousand domestic jobs for similar low skill labor. For much outsourced work, bringing the work home will result in a smaller number of moderate to high skilled positions, alongside fairly sophisticated automation. (This will also happen overseas as an incremental change. Foxconn/Honhai will be using their new Foxbot hardware on production lines instead of some laborers, for example.). There will be a need for more educated workers, with good math and logic skills to support these new production lines.

I worry about this too. But in 1900, 36% of Americans were involved in agriculture (much higher in 1800). Now it's less than 2% and the industry produces a surplus (exports). But all those people found productive work in other growing sectors, and everyone prospered greatly. Manufacturing will employ fewer workers than in the past, but (educated) people will have opportunities in other sectors, some yet unknown or barely recognizable.

Doesn't mean America will continue to enjoy a standard of living far beyond the world at large, the end of special circumstances (post WWII) and globalization/flattening will level the field somewhat. But America can prosper as well, and we still have some huge advantages...

 

[HawkeyeNFO]

I worked at a factory for about month before Navy OCS started. I worked for 30 minutes, then took a 30 minute break. Repeat continuously for a 12 hour shift. Teamsters.

 

[HFWR]

I worked at a factory for about month before Navy OCS started. I worked for 30 minutes, then took a 30 minute break. Repeat continuously for a 12 hour shift. Teamsters.

I w*rked in several "factories" back in the 70s. Most of what I saw as union "flaws" involved protecting workers who wouldn't work, or often even show up for work. Most showed up on time, did their jobs, took pride in their work and their companies.

Anyway, I've seen several CEOs on CNBC discussing this very issue, that is, on-shoring. Logistics, communication, time lag, cultural differences, etc. have proven more difficult than anticipated.

 

[martyp]

I worked as the Instrumentation Group leader for a DNA sequencing production line. My job involved automating the manual work tasks to improve productivity and safety. I saw first hand, over the last 10 yrs, that automation demands higher skilled labor. I am doubtful that displaced manufacturing workers are going to just get employment in some new opportunity at their lower skill level. It may be that we are moving into an era where the availability of high skilled labor is more important. Demand for higher wages in places like China is great for deciding to relocate and automate a process line in the US. However, the ability to educate workers will be important too and I fear that the quality of education in the US is stagnating while the quality of education in other parts of the world is improving. The balance could easily tip in favor of countries outside the US and then we would see factories moving overseas again. Also, supply chain costs depends on the quality of infrastructure. If we are not careful the quality of the US's infrastructure could effect that cost factor as well. Internet communication has the opposite effect of allowing decentralization of labor but only up to a point.

 

[Chuckanut]

This article indicates that Apple may be assembling certain computers in the USA.

Some new iMacs marked as being 'Assembled in USA'

Below is a quote that attempts to explain what the term "Assembled in the USA" legally means:

Assembled in USA Claims

A product that includes foreign components may be called "Assembled in USA" without qualification when its principal assembly takes place in the U.S. and the assembly is substantial. For the "assembly" claim to be valid, the product’s last "substantial transformation" also should have occurred in the U.S. That’s why a "screwdriver" assembly in the U.S. of foreign components into a final product at the end of the manufacturing process doesn’t usually qualify for the "Assembled in USA" claim.

Example: A lawn mower, composed of all domestic parts except for the cable sheathing, flywheel, wheel rims and air filter (15 to 20 percent foreign content) is assembled in the U.S. An "Assembled in USA" claim is appropriate.

Example: All the major components of a computer, including the motherboard and hard drive, are imported. The computer’s components then are put together in a simple "screwdriver" operation in the U.S., are not substantially transformed under the Customs Standard, and must be marked with a foreign country of origin. An "Assembled in U.S." claim without further qualification is deceptive.

 

[NW-Bound]

All the above good news just got tempered by today's release of the ISM factory index that fell in November, relative to October. And last night, I read that China's manufacturing was picking up. For the Chinese, bad growth is something like 5%/yr, while good is 10%.

Oh well, I am still trying to be positive.

 

[ziggy29]

I think this will become more and more prevalent in heavy manufacturing, primarily of large and weighty goods, in part because of the increased costs in shipping freight overseas. In this sense, higher energy prices could be a plus for domestic manufacturing. And if we could just get health insurance decoupled from full-time employment as it is in many competitive countries, I think it would help even more.

 

[Midpack]

I think this will become more and more prevalent in heavy manufacturing, primarily of large and weighty goods, in part because of the increased costs in shipping freight overseas. In this sense, higher energy prices could be a plus for domestic manufacturing.

Often overlooked, well done. There are quite a few compelling stories re: a "renaissance" in manufacturing on the US, read one recently re: furniture.

However, manufacturing will never be quite the economic engine it once was in the US. We'll have to be ready for new industries in all sorts of fields, some almost unknown today. I really hope we have a workforce with the necessary education/skills. The days when we had plenty of relatively well paid work for unskilled/low skilled workers are obviously gone. Just as we went from farms to manufacturing with great success, hopefully we'll make the next skills move as well.