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I find it odd whenever people claim that there's just no possible way production can't be shifted back to North America and Europe. If there's no labor advanta

by Kadin 9y ago

I find it odd whenever people claim that there's just no possible way production can't be shifted back to North America and Europe. If there's no labor advantage, offshoring production is a logistical nightmare. I mean, the factories that production was offshored to (in China and more recently in SE Asia) were built largely in the last decade or two, by companies with fairly short ROI horizons. There's no particular reason that new facilities couldn't be built in other locations in about the same amount of time. Intriguingly, China basically showed how quickly you can move a big chunk of global industrial production around from one place to another, and it's not that long. What global trade giveth, global trade can taketh away. Modern factories are basically just big steel sheds built on concrete slabs, in which you house machinery and equipment that becomes obsolete over time. It would not be hard to build them elsewhere. My guess is that if you take labor costs away, the next critical factors are energy costs and transportation issues (both raw materials inbound and finished goods outbound). It could lead to some interesting manufacturing locations.

jacquesm 9y ago
There are all kinds of extra costs to consider besides labor, though what labor remains will always be a factor. Other such factors are environmental regulations, tax breaks, shipping costs (which should always work out in favor of domestic production), cost of raw materials and energy (as you noted), access to those raw materials, knowledge, cost of land and other capex. A high volume factory is nothing like a steel shed on concrete slabs, a factory is a building that is very much optimized for its function, and yes, it's not hard to build them elsewhere but once you have them they are hard to move. A nice example is the semiconductor industry, which used to be a United States / Europe affair and then after a brief detour through Japan ended up mostly in Taiwan, China and South Korea.
forapurpose 9y ago
> people claim that there's just no possible way production can't be shifted back to North America and Europe The assumption that those advanced economies would want manufacturing back seems like nostalgia to me. Wouldn't that be going backward, to jobs of the mid-20th century with their income and quality of life? Those economies should be moving forward to better, more productive, safer, less physically difficult, higher paying jobs. Try working in a factory for awhile and you might appreciate your desk job with its ergonomic challenge of monitor height. > If there's no labor advantage, offshoring production is a logistical nightmare. Based on what I've read, labor plays only a small role. It's local expertise and its network effect, as with any geographical cluster for any industry. SV is an example: All the technical experts, the financiers, the schools ... even the real estate developers and local governments know what startups and IT giants need.

by Kadin 9y ago

jacquesm 9y ago

There are all kinds of extra costs to consider besides labor, though what labor remains will always be a factor. Other such factors are environmental regulations, tax breaks, shipping costs (which should always work out in favor of domestic production), cost of raw materials and energy (as you noted), access to those raw materials, knowledge, cost of land and other capex. A high volume factory is nothing like a steel shed on concrete slabs, a factory is a building that is very much optimized for its function, and yes, it's not hard to build them elsewhere but once you have them they are hard to move. A nice example is the semiconductor industry, which used to be a United States / Europe affair and then after a brief detour through Japan ended up mostly in Taiwan, China and South Korea.

forapurpose 9y ago

> people claim that there's just no possible way production can't be shifted back to North America and Europe The assumption that those advanced economies would want manufacturing back seems like nostalgia to me. Wouldn't that be going backward, to jobs of the mid-20th century with their income and quality of life? Those economies should be moving forward to better, more productive, safer, less physically difficult, higher paying jobs. Try working in a factory for awhile and you might appreciate your desk job with its ergonomic challenge of monitor height. > If there's no labor advantage, offshoring production is a logistical nightmare. Based on what I've read, labor plays only a small role. It's local expertise and its network effect, as with any geographical cluster for any industry. SV is an example: All the technical experts, the financiers, the schools ... even the real estate developers and local governments know what startups and IT giants need.