10 ms·

The Insourcing Boom

dchuk 14y ago
Just finished reading this. Overall I agree with the main point (that quality control is easier to deal with when onshoring versus offshoring) but I think that that's something China can account for and improve on in the relative short term. The thing that China CAN'T overcome at least in the short term is both the cost of shipping and the amount of time shipping takes. As the article mentions, a shipment of product can take up to 6 weeks whereas products produced in the US can be shipped within hours of completing production. There's just not any reasonable way for offshore production companies to overcome this issue that I can see in the short term and that could drive the onshoring movement aggressively, especially with the constantly increasing costs of fuel.
- robryan 14y ago
  I see this is a problem for smaller companies just getting into outsourcing and for brand new products. There have been examples on here like wakemate that have had a really hard time getting quality products produced in a reasonable timeframe. For bigger companies though with more stable product lines I think this is much less of an issue. Bringing manufacturing back is working for GE for more complex and expensive products. I am not sure you will see then bringing back the basic models of appliances though.
  - jeremyjh 14y ago
    Probably not, though if the trend in fuel and energy prices continues that may come to dominate the equation even for those things. The other thing is working capital - if it takes 6 weeks to ship and clear customs you will have a lot of capital tied up and that has an additional cost as well.
    - robryan 14y ago
      True, but that is also a competitive advantage to these large companies. They can afford to have the capital tied up where smaller competitors can't.
  - alanctgardner2 14y ago
    It sounds weird, but I would encourage small companies to look at manufacturing locally. A company I used to work for in Ottawa manufactured small volumes of cameras locally (that really narrows things down). They used other companies in the area to etch and solder the boards (automatically), and then final assembly was performed entirely in the same office building where I worked. The best part was, everyone was involved in the whole 'stack'. The engineering group I worked with handled QA, but also travelled downstairs regularly to help with manufacturing procedures. We watched assemblers and proposed design changes to make their jobs easier. The process created a virtuous cycle where the initial person laying out the board knew what kind of headers would be hard to connect in which enclosure (for example), and as a result the quality was very high while being competitive on cost. I think an assembly process like that would have helped, for example, with the teething problems experienced by the Jawbone Up.
- deleted 14y ago
  [deleted]
Jacob4u2 14y ago
I found the story they give about GE forgetting how to make water heaters interesting. The line you usually hear about startups creating their core technologies in house and outsourcing non core things comes to mind. Was GE originally known for manufacturing (or ability to manufacture) and then lost that core ability? If they did, what would their core ability be after outsourcing, management of manufacturing? Maybe I'm not making a good connection there, but I think it could be.
- robryan 14y ago
  Product design, sales and marketing. Would have to read some more to see which area was really their competitor advantage in the 60's.
- stephengillie 14y ago
  I find dark humor in that we've lost such crucial skills. In the US, we've nearly lost the technology to create water heaters, but can definitely make fart apps. On a lighter note, maybe this will reintroduce some needed humility to American culture. It's easy to forget that each item we touch, everything we use, was put together by another human's hands. Soldering together the proto shield for my Arduino deeply touched me, reminding me that every resistor and LED and processor in my laptop was soldered in by another human. I may be romanticizing it, or maybe I'm just getting old, but I'm starting to appreciate objects crafted by humans more than those generated by machines.
  - juiceandjuice 14y ago
    Actually it's likely that most(all) of the resistors and LEDs are SMDs soldered using reflow or wave soldering. Your electronics from before the 80s (and often the 90s) was soldered by a human though.
    - sliverstorm 14y ago
      These days just about any surface mount part should be assumed to have been attached by a machine, and for very good reason. I am capable of assembly with 402 and 603, but I can't even begin to imagine that going well on an assembly line. (805 is somewhere around the size of small rice, 402 is half that size)
thalecress 14y ago
On one hand, outsourcing rapidly transferred several decades of manufacturing and design knowledge to GE's soon-to-be competitors. (I haven't seen a Haier fridge on sale in the US yet but it's a matter of years, not decades.) On the other, maybe it juiced executive bonuses for a few years and may have permanently removed organized labor from the US private sector. I wonder to what extent insourcing represents surrender for US firms seeking access to the Chinese market. China's leaders don't seem keen on idea of letting foreign firms sell in China longer than it takes for Chinese firms to pick up knowledge. The licensed production of Russian Sukhoi-27 warplanes comes to mind - the Chinese agreed to pay for 200, assembled from kits with Russian assistance. After 100 had been built, the Chinese said "no more" - and started advertising an indigenous copy for international sale. [1] http://en.wikipedia.org/wiki/Shenyang_J-11#J-11 http://en.wikipedia.org/wiki/Shenyang_J-11#J-11
- patrickgzill 14y ago
  I have seen Haier products, including a small fridge, in stores since about 2 years ago.
- meej 14y ago
  All kinds of products from Haier are available on Amazon. For the appliances, it's one of the three brands that qualify for Amazon's professional delivery and installation service.
woodchuck64 14y ago
Simply put, if you manufacture in-house as well as design, both processes innovate each other. But if you outsource manufacture, it's a black hole; very little flows the other way because of language and cultural barriers.
- zaidf 14y ago
  That assumes there is enough juice remaining in manufacturing optimization. After a certain stage in a product's lifetime, you've done the bulk of the optimization and doing manufacturing in-house could bring minimal benefit.
  - vajrabum 14y ago
    Let's not swap one assumption for another perhaps hidden one. In this case, the assumption that the product life cycle is long enough that you ever have "mature" products. The article points out that the appliance product life cycles used to be 7 years or so and now they're 2-3 years and that a good bit of the monetary advantage to building in the US came from product improvements that arose from co-locating engineering and manufacturing and getting them to cooperate.
w1ntermute 14y ago
There can be a huge difference in quality between goods produced in the US and those produced abroad, something that many people don't realize anymore because they've gotten so used to buying cheap foreign imports and replacing them more often. When I was in school, I used to buy a new bag every year because they would just tear and fall apart within 12 months. Eventually, getting tired of this, I went online looking for a good bag. I found out about Tom Bihn[0]. Both their management and their production is done in Seattle. The prices are steep, but I decided to take a chance on them, given the good reviews on various sites. I've now had that same Tom Bihn bag for five years, and it looks exactly like it did the day I got it - not a single tear. I don't think you could say that about any bags produced at an overseas sweatshop. 0: http://www.tombihn.com/ http://www.tombihn.com/
- alanctgardner2 14y ago
  I was really impressed with Timbuk2, who make their custom bags in San Francisco. I bought one for a friend and while the design was fairly simple and the price was a bit high, it was solidly made. Fast forward a few years, and I picked up one of their bags at a Mountain Equipment Co-op (not quite a chain store, like REI in the States). This bag also wasn't cheap, but when I checked the label it was made entirely in China. The quality is not bad, but I haven't had a chance to abuse it for a few years. I was mostly disappointed that they seem to promote the pro-American rhetoric while the majority of their channel goods seem to be produced abroad. I'm impressed with those Tom Bihn bags, because they seem to be uncompromisingly made in America. I'm going to keep them in mind when I need a new bag.
  - hapless 14y ago
    Timbuk2 still manufactures made-to-order products in America, where just-in-time production makes sense. Who is going to wait six weeks for a custom bag? Price-minimized, zero-margin, off-the-shelf crap for big box stores are a different story. Then they can trade on their brand equity built with embroidered logo bags and sell trash to the mass market.
    - 14y ago
airlocksoftware 14y ago
I thought this was an interesting article, if a little light on any hard numbers outside of one example (G.E.). Another anecdote that supports this is Apple manufacturing a limited number of their new iMacs in the U.S. http://9to5mac.com/2012/12/02/is-there-some-secret-imac-assembly-plant-in-the-u-s/ http://9to5mac.com/2012/12/02/is-there-some-secret-imac-asse... I'm a little surprised they didn't mention advances in automation / robotics that make cost of labor even less of a reason to offshore. The U.S. manufacturing sector produces more than it ever has, despite the fact that manufacturing jobs are down from 19.4 million jobs in 1979 to 11.5 million jobs in 2010. http://archive.mises.org/17964/u-s-manufacturing-output/ http://archive.mises.org/17964/u-s-manufacturing-output/
- rogerbinns 14y ago
  Unfortunately confusing manufacturing output with manufacturing employment seems to be somewhat persistent in the US. The employment numbers going down are seen as a bad thing, whereas it is the total output and productivity that matter. If the entirety of US manufacturing could be done by one person than that would be great! We've been through this before. In 1870 US agricultural employment was around 75% of the whole workforce (~29 million people). Nowadays it is closer to 2% (~3 million people). We produce orders of magnitude more food with considerably fewer people.
  - makomk 14y ago
    It wouldn't be that great, because no-one would be able to afford all the goods that were being manufactured...
    - suresk 14y ago
      This is an actual first-world problem, and dealing with it is going to be one of the most important and interesting challenges of the next 50 - 100 years. I see technology continuing to improve productivity, drive down demand for labor, and exacerbate current inequality issues. Our economic system isn't really setup to work well in a situation where supply of labor drastically exceeds the demand for it.
jarek 14y ago
So what kind of tax benefits did GE get for moving production to Kentucky?
batgaijin 14y ago
They are also applying this to rebuilding their local IT: http://gigaom.com/2012/11/29/ge-needs-the-data-analytics-minds-of-the-valley-and-knows-it/ http://gigaom.com/2012/11/29/ge-needs-the-data-analytics-min...
temphn 14y ago
Immelt owns NBC and is on the White House board of economic advisors, so has the political juice to get waivers and ward off regulation. If you are a regulator, you will pick an easier target, like Exxon, which doesn't own a news network. Even granting the things in the article (tighter feedback loop, higher gas prices for shipping, increased labor productivity), regulation is not mentioned, so the generalization to other manufacturing companies is suspect.
- 001sky 14y ago
  Immelt owns NBC --part of *
DigitalSea 14y ago
This was a really interesting article. It's interesting the misconceptions that some people have about outsourcing and the perception that it's cheaper. When you factor in transport, the price of oil and rising cost of living everywhere in the world (especially China) it makes sense that less reliance on petroleum and outsourced labour actually works out better in the end. It was once standard for products to say Made in the U.S.A and then the outsourcing boom kicked in and people got used to Made in China for electronics or Made in Indonesia for a lot of shoe-wear. Buying a product made in your own country is currently considered a premium product purchase. For example buying a hand-wired guitar amplifier or even hand-made guitar that is built in the U.S commands a much higher price and some are happy paying it because the quality is considerably higher, attention to detail and intricacies like soldering and component placement. I would really love to see the manufacturing world return to the mantra of, "this needs to be designed and built to last as long as possible", it won't happen but it would be nice to live in a world again where the best components and design decisions are made with the consumer in mind, not lining the pockets of CEO's. Once upon a time companies created products that lasted forever, I've seen televisions from the 50's with original picture tubes and components still working. It's good to hear General Electric (a company I am not overly fond of) have started manufacturing products back in the United States again. Companies like GE returning jobs and manufacturing back home are the only hope this economy has.
- pinaceae 14y ago
  there never was a time when everything was built to last. sure, to this day you can find old stuff that is still working perfectly. but what you don't see is all the other stuff that has been discarded, thrown away, replaced. survivor bias at its best. right now products need to adhere to safety standards, energy efficiency standards and have green certificates. if something breaks and just puts a minor scratch into you major lawsuits are going off. in the past, you simply died in an accident (whoops, sorry about the electrocution or yes, our cars sometimes go up in flames).
droithomme 14y ago
Interesting article but I wish they had more examples than a heat pump based electric water heater and a $3100 refrigerator The article is suggesting that jobs that can support a family are coming back, but with the described poverty-level $13.50 wages for skilled line workers that's obviously not the case. We're not talking high school dropouts either: among the tasks given to the production workers is redesigning from scratch products which use impractical and inefficient designs, at least according to the scenario explained in the article. The article also points out that these are lines where there are not many workers per line. My own thoughts about the market were piqued by the description of the chosen product. Here we have an electric heat pump heater that costs over $1300. This is right at a time when running an electric heater, even an exceptionally efficient one, has become a poor choice given the price of gas. Furthermore, gas is very likely to remain cheaper than electric for many years. Not to mention that gas heaters are simply more efficient for heating to begin with. Rather than buy an $1600 chinese or $1300 american water heater, one can buy a $150 mexican factory built water heater that runs on gas and will save many thousands of dollars in energy costs over its lifetime. That's the rational choice, it is unlikely this complicated electric one is going to be something with a lot of market growth. Hopefully there are better examples of high growth reasonably priced mass market items that can be built as well, which have a chance at creating more than a handful of these $13.50 jobs (comparable to the salary at CostCo or McDonalds, BTW). For water heating one could also do what I did - use $50 worth of materials and junk to build your own solar water heater that reduces the cost of water heating to almost nothing. (http://www.motherearthnews.com/renewable-energy/1979-09-01/A-Homemade-Solar-Water-Heater.aspx http://www.motherearthnews.com/renewable-energy/1979-09-01/A...)
- nhashem 14y ago
  We're essentially reaching an intersection between the cost of Chinese labor (steadily increasing as China's economy grows and their currency gains value) and US labor (depressed because we're still at 8% unemployment). If these workers still wanted to be paid $30/hour, those jobs would still be in China. In December 2011 there was a similar article in the NY Times[0], which addressed the expansion of manufacturing jobs but had a much bigger focus on wages. Unfortunately for those workers, wages won't go up until the US economy continues to improve and unemployment goes down. Until then that "just thankful to have a job" feeling will suppress labor wages in general. Last quarter, corporate profits reached a historic high even as wages reached their lowest-ever share of GDP[1]. Maybe I'm just raw from the hostile election season, but this has always been personally frustrating to me. Our private sector doesn't pay enough for the jobs it offers, yet any suggestion to have the government assist is considered "redistribution" or "socialism." [0] http://www.nytimes.com/2011/12/30/business/us-manufacturing-gains-jobs-as-wages-retreat.html http://www.nytimes.com/2011/12/30/business/us-manufacturing-... [1] http://money.cnn.com/2012/12/03/news/economy/record-corporate-profits/ http://money.cnn.com/2012/12/03/news/economy/record-corporat...
jerf 14y ago
American declinism has been fashionable this past decade or so, even before the economic issues. And there are still economic issues. But it has a history of being the first in the world to rise from the ashes of the old systems and build the future, and while past results are no guarantee of future successes, I am still optimistic that we are not yet spent. American manufacturing will return. It may not be the job engine it once was, but it is still a wealth engine. American energy prospects are suddenly looking up, leading the world in both the tech to extract it and, this time, the resources to extract. We are only at the beginning of tearing down our scelerotic educational systems, but there is a good opportunity to build a truly 21st century education system over the next decade or two. We remain a high-tech economy. And we've got some wild cards up our sleeve, like a budding space industry and advanced medical research, to say nothing of whatever industry will come out of nowhere in the next ten to fifteen years that I'm not even thinking of to become huge. I celebrate anybody who succeeds, and I don't particularly care if America is or remains "exceptional". I want everyone to succeed. I'm just saying that I think there's good reason to believe that for all the challenges in the world that America still has a very good chance to be in the set of successful countries in the medium term (5-25 years).
- gadders 14y ago
  American Manufacturing is at an all-time high. It's not employing as many people, but that is due to efficiency, not decline.
- Tuna-Fish 14y ago
  > American manufacturing will return. It never left. The US manufacturing output steadily increased from the 50's to the recent recession. Right now, it is at an all time high. The idea of american manufacturing being shipped overseas is just false, and I'm sick of people repeating it. What happened is that as wages got expensive, US labor was replaced by machines where possible, and by some cheap process steps overseas where not possible. Intel CPUs are a good example: They used to be made wholly in the US, employing a lot of blue-collar workers. To save costs, the factories were automated to the point where the only process steps left that employ a lot of people without advanced degrees are packaging and testing. And then those were shipped to Malaysia and Costa Rica. The high-capital process steps that create most of the value in the system are still in Oregon, Arizona and New Mexico. Manufacturing jobs, as they used to be, are gone. Not because of globalization, but because of robots. And the old kind of manufacturing jobs will never return -- it just doesn't make sense to pay people $30 a hour for what could be done faster, cheaper and better by a robot.
xweb 14y ago
It's interesting to consider the change to insourcing manufacturing in light of the more recent trend of outsourcing (or, probably more accurately, globalizing) white-collar jobs. Although you wouldn't get the same benefits in terms of saving shipping costs, the other benefits of the article seem like they still would apply. At a large corporation I worked at a few years ago, there was an ongoing push to offshore jobs to an internal group in the same company. We were encouraged to use this group by our chain of command despite the fact that previous efforts at outsourcing in our own group had failed disastrously. So it would be good to see the public discourse swing back toward the benefits of insourcing so that managers have more ammunition to fight for what works.
ph0rcyas 14y ago
Here is something that's easily overlooked: bringing design and manufacturing together promotes innovation. Having a more rapid iteration cycle is important, but why? Here's a principal reason: it allows design flaws to become visible in the manufacturing, and leads to a redesign if necessary. Having both these modules in close (spatial and temporal) proximity helps minimizing efforts spent in irrelevant problems. The general rule holds for most softwares with 'manufacturing' replaced by user appreciation. The hidden cost of taking manufacturing offshore is that a GREAT deal of industrial knowledge is lost. How do you know a problem needs to be taken into consideration if... you don't even know what the problem is? The glorious days of Bell Labs seems like heaven for tinkerers. Designing, implementing and manufacturing camps don't alienate but simply part of one living organism.
tobyjsullivan 14y ago
I wonder if this is more a result of exceptionally high unemployment rates making locally-sourced assembly line production practical once again...
jaggederest 14y ago
Manufacturing is converting from blue collar to white collar. It's more important to be a process developer and a technologist to operate the machinery and design the assembly process than it is to actually turn a wrench. I can only imagine 3d printing and accelerating product cycles will increase this effect. Dev ops in the real world - the designers and the manufacturers become the same people and the result is 'autonomation' to use the toyota term.
rmason 14y ago
Here's a complex sitting empty in Detroit for over fifty seven years that dwarfs the GE appliance complex,the old Packard plant. http://www.freep.com/article/20121202/NEWS01/120823062/The-Packard-Plant-Then-now-interactive-comparison-photos?odyssey=mod%7Cdefcon%7Cimg%7CFRONTPAGE http://www.freep.com/article/20121202/NEWS01/120823062/The-P...
teyc 14y ago
There was a passing mention of union dynamics in all this. Without outsourcing, a lot of the improvements could never have been brought on board.
senthilnayagam 14y ago
Redesigning the product, reducing effort needed to build it is all good , but eventually this will go offshore one way or another The only way is constant innovation and engineering , but if people don't go for STEM education , only lowly paid assembly job and sales job would be left here
critium 14y ago
I have been actually pondering this for software for some time now. I used to manage a medium sized development team that was concurrently distributed between the Virginia, Argentina, Ukraine and Pakistan. I've always thought that the amount of communication overhead due to language/layers and time lag caused by that actually increased the cost of the product. For example, during the day, i'd get requirements hand it out to the leads. If the lead is at PK, then guess what, i'm getting up at 3am to talk to them. Sending emails wont cut it. He then has to translate to a different language and hands it out to his devs. Thats several degrees of separation between the analyst and the dev. I've always believed that what was accomplished could have taken half that team if they were all local. I think software development insourcing is ripe for this in the U.S. There is a large cost of living divide between NY, SF and Missoula, MT and the mid lvl salaries i've seen here would go a LOT further in those parts of the country and the time zone and language issues are minimal.
MarkMc 14y ago
Well written article - it grabs your attention with a curious story and doesn't let go. In my experience quality of articles in The Atlantic is up there with The New York Times or The Economist.

dchuk 14y ago

Just finished reading this. Overall I agree with the main point (that quality control is easier to deal with when onshoring versus offshoring) but I think that that's something China can account for and improve on in the relative short term. The thing that China CAN'T overcome at least in the short term is both the cost of shipping and the amount of time shipping takes. As the article mentions, a shipment of product can take up to 6 weeks whereas products produced in the US can be shipped within hours of completing production. There's just not any reasonable way for offshore production companies to overcome this issue that I can see in the short term and that could drive the onshoring movement aggressively, especially with the constantly increasing costs of fuel.

robryan 14y ago
I see this is a problem for smaller companies just getting into outsourcing and for brand new products. There have been examples on here like wakemate that have had a really hard time getting quality products produced in a reasonable timeframe. For bigger companies though with more stable product lines I think this is much less of an issue. Bringing manufacturing back is working for GE for more complex and expensive products. I am not sure you will see then bringing back the basic models of appliances though.
- jeremyjh 14y ago
  Probably not, though if the trend in fuel and energy prices continues that may come to dominate the equation even for those things. The other thing is working capital - if it takes 6 weeks to ship and clear customs you will have a lot of capital tied up and that has an additional cost as well.
  - robryan 14y ago
    True, but that is also a competitive advantage to these large companies. They can afford to have the capital tied up where smaller competitors can't.
- alanctgardner2 14y ago
  It sounds weird, but I would encourage small companies to look at manufacturing locally. A company I used to work for in Ottawa manufactured small volumes of cameras locally (that really narrows things down). They used other companies in the area to etch and solder the boards (automatically), and then final assembly was performed entirely in the same office building where I worked. The best part was, everyone was involved in the whole 'stack'. The engineering group I worked with handled QA, but also travelled downstairs regularly to help with manufacturing procedures. We watched assemblers and proposed design changes to make their jobs easier. The process created a virtuous cycle where the initial person laying out the board knew what kind of headers would be hard to connect in which enclosure (for example), and as a result the quality was very high while being competitive on cost. I think an assembly process like that would have helped, for example, with the teething problems experienced by the Jawbone Up.
deleted 14y ago
[deleted]

Jacob4u2 14y ago

I found the story they give about GE forgetting how to make water heaters interesting. The line you usually hear about startups creating their core technologies in house and outsourcing non core things comes to mind. Was GE originally known for manufacturing (or ability to manufacture) and then lost that core ability? If they did, what would their core ability be after outsourcing, management of manufacturing? Maybe I'm not making a good connection there, but I think it could be.

robryan 14y ago
Product design, sales and marketing. Would have to read some more to see which area was really their competitor advantage in the 60's.
stephengillie 14y ago
I find dark humor in that we've lost such crucial skills. In the US, we've nearly lost the technology to create water heaters, but can definitely make fart apps. On a lighter note, maybe this will reintroduce some needed humility to American culture. It's easy to forget that each item we touch, everything we use, was put together by another human's hands. Soldering together the proto shield for my Arduino deeply touched me, reminding me that every resistor and LED and processor in my laptop was soldered in by another human. I may be romanticizing it, or maybe I'm just getting old, but I'm starting to appreciate objects crafted by humans more than those generated by machines.
- juiceandjuice 14y ago
  Actually it's likely that most(all) of the resistors and LEDs are SMDs soldered using reflow or wave soldering. Your electronics from before the 80s (and often the 90s) was soldered by a human though.
  - sliverstorm 14y ago
    These days just about any surface mount part should be assumed to have been attached by a machine, and for very good reason. I am capable of assembly with 402 and 603, but I can't even begin to imagine that going well on an assembly line. (805 is somewhere around the size of small rice, 402 is half that size)

thalecress 14y ago

On one hand, outsourcing rapidly transferred several decades of manufacturing and design knowledge to GE's soon-to-be competitors. (I haven't seen a Haier fridge on sale in the US yet but it's a matter of years, not decades.) On the other, maybe it juiced executive bonuses for a few years and may have permanently removed organized labor from the US private sector. I wonder to what extent insourcing represents surrender for US firms seeking access to the Chinese market. China's leaders don't seem keen on idea of letting foreign firms sell in China longer than it takes for Chinese firms to pick up knowledge. The licensed production of Russian Sukhoi-27 warplanes comes to mind - the Chinese agreed to pay for 200, assembled from kits with Russian assistance. After 100 had been built, the Chinese said "no more" - and started advertising an indigenous copy for international sale. [1] http://en.wikipedia.org/wiki/Shenyang_J-11#J-11 http://en.wikipedia.org/wiki/Shenyang_J-11#J-11

patrickgzill 14y ago
I have seen Haier products, including a small fridge, in stores since about 2 years ago.
meej 14y ago
All kinds of products from Haier are available on Amazon. For the appliances, it's one of the three brands that qualify for Amazon's professional delivery and installation service.

woodchuck64 14y ago

Simply put, if you manufacture in-house as well as design, both processes innovate each other. But if you outsource manufacture, it's a black hole; very little flows the other way because of language and cultural barriers.

zaidf 14y ago
That assumes there is enough juice remaining in manufacturing optimization. After a certain stage in a product's lifetime, you've done the bulk of the optimization and doing manufacturing in-house could bring minimal benefit.
- vajrabum 14y ago
  Let's not swap one assumption for another perhaps hidden one. In this case, the assumption that the product life cycle is long enough that you ever have "mature" products. The article points out that the appliance product life cycles used to be 7 years or so and now they're 2-3 years and that a good bit of the monetary advantage to building in the US came from product improvements that arose from co-locating engineering and manufacturing and getting them to cooperate.

w1ntermute 14y ago

There can be a huge difference in quality between goods produced in the US and those produced abroad, something that many people don't realize anymore because they've gotten so used to buying cheap foreign imports and replacing them more often. When I was in school, I used to buy a new bag every year because they would just tear and fall apart within 12 months. Eventually, getting tired of this, I went online looking for a good bag. I found out about Tom Bihn[0]. Both their management and their production is done in Seattle. The prices are steep, but I decided to take a chance on them, given the good reviews on various sites. I've now had that same Tom Bihn bag for five years, and it looks exactly like it did the day I got it - not a single tear. I don't think you could say that about any bags produced at an overseas sweatshop. 0: http://www.tombihn.com/ http://www.tombihn.com/

alanctgardner2 14y ago
I was really impressed with Timbuk2, who make their custom bags in San Francisco. I bought one for a friend and while the design was fairly simple and the price was a bit high, it was solidly made. Fast forward a few years, and I picked up one of their bags at a Mountain Equipment Co-op (not quite a chain store, like REI in the States). This bag also wasn't cheap, but when I checked the label it was made entirely in China. The quality is not bad, but I haven't had a chance to abuse it for a few years. I was mostly disappointed that they seem to promote the pro-American rhetoric while the majority of their channel goods seem to be produced abroad. I'm impressed with those Tom Bihn bags, because they seem to be uncompromisingly made in America. I'm going to keep them in mind when I need a new bag.
- hapless 14y ago
  Timbuk2 still manufactures made-to-order products in America, where just-in-time production makes sense. Who is going to wait six weeks for a custom bag? Price-minimized, zero-margin, off-the-shelf crap for big box stores are a different story. Then they can trade on their brand equity built with embroidered logo bags and sell trash to the mass market.
  - 14y ago

airlocksoftware 14y ago

I thought this was an interesting article, if a little light on any hard numbers outside of one example (G.E.). Another anecdote that supports this is Apple manufacturing a limited number of their new iMacs in the U.S. http://9to5mac.com/2012/12/02/is-there-some-secret-imac-assembly-plant-in-the-u-s/ http://9to5mac.com/2012/12/02/is-there-some-secret-imac-asse... I'm a little surprised they didn't mention advances in automation / robotics that make cost of labor even less of a reason to offshore. The U.S. manufacturing sector produces more than it ever has, despite the fact that manufacturing jobs are down from 19.4 million jobs in 1979 to 11.5 million jobs in 2010. http://archive.mises.org/17964/u-s-manufacturing-output/ http://archive.mises.org/17964/u-s-manufacturing-output/

rogerbinns 14y ago
Unfortunately confusing manufacturing output with manufacturing employment seems to be somewhat persistent in the US. The employment numbers going down are seen as a bad thing, whereas it is the total output and productivity that matter. If the entirety of US manufacturing could be done by one person than that would be great! We've been through this before. In 1870 US agricultural employment was around 75% of the whole workforce (~29 million people). Nowadays it is closer to 2% (~3 million people). We produce orders of magnitude more food with considerably fewer people.
- makomk 14y ago
  It wouldn't be that great, because no-one would be able to afford all the goods that were being manufactured...
  - suresk 14y ago
    This is an actual first-world problem, and dealing with it is going to be one of the most important and interesting challenges of the next 50 - 100 years. I see technology continuing to improve productivity, drive down demand for labor, and exacerbate current inequality issues. Our economic system isn't really setup to work well in a situation where supply of labor drastically exceeds the demand for it.

jarek 14y ago

So what kind of tax benefits did GE get for moving production to Kentucky?

batgaijin 14y ago

They are also applying this to rebuilding their local IT: http://gigaom.com/2012/11/29/ge-needs-the-data-analytics-minds-of-the-valley-and-knows-it/ http://gigaom.com/2012/11/29/ge-needs-the-data-analytics-min...

temphn 14y ago

Immelt owns NBC and is on the White House board of economic advisors, so has the political juice to get waivers and ward off regulation. If you are a regulator, you will pick an easier target, like Exxon, which doesn't own a news network. Even granting the things in the article (tighter feedback loop, higher gas prices for shipping, increased labor productivity), regulation is not mentioned, so the generalization to other manufacturing companies is suspect.

001sky 14y ago
Immelt owns NBC --part of *

DigitalSea 14y ago

This was a really interesting article. It's interesting the misconceptions that some people have about outsourcing and the perception that it's cheaper. When you factor in transport, the price of oil and rising cost of living everywhere in the world (especially China) it makes sense that less reliance on petroleum and outsourced labour actually works out better in the end. It was once standard for products to say Made in the U.S.A and then the outsourcing boom kicked in and people got used to Made in China for electronics or Made in Indonesia for a lot of shoe-wear. Buying a product made in your own country is currently considered a premium product purchase. For example buying a hand-wired guitar amplifier or even hand-made guitar that is built in the U.S commands a much higher price and some are happy paying it because the quality is considerably higher, attention to detail and intricacies like soldering and component placement. I would really love to see the manufacturing world return to the mantra of, "this needs to be designed and built to last as long as possible", it won't happen but it would be nice to live in a world again where the best components and design decisions are made with the consumer in mind, not lining the pockets of CEO's. Once upon a time companies created products that lasted forever, I've seen televisions from the 50's with original picture tubes and components still working. It's good to hear General Electric (a company I am not overly fond of) have started manufacturing products back in the United States again. Companies like GE returning jobs and manufacturing back home are the only hope this economy has.

pinaceae 14y ago
there never was a time when everything was built to last. sure, to this day you can find old stuff that is still working perfectly. but what you don't see is all the other stuff that has been discarded, thrown away, replaced. survivor bias at its best. right now products need to adhere to safety standards, energy efficiency standards and have green certificates. if something breaks and just puts a minor scratch into you major lawsuits are going off. in the past, you simply died in an accident (whoops, sorry about the electrocution or yes, our cars sometimes go up in flames).

droithomme 14y ago

Interesting article but I wish they had more examples than a heat pump based electric water heater and a $3100 refrigerator The article is suggesting that jobs that can support a family are coming back, but with the described poverty-level $13.50 wages for skilled line workers that's obviously not the case. We're not talking high school dropouts either: among the tasks given to the production workers is redesigning from scratch products which use impractical and inefficient designs, at least according to the scenario explained in the article. The article also points out that these are lines where there are not many workers per line. My own thoughts about the market were piqued by the description of the chosen product. Here we have an electric heat pump heater that costs over $1300. This is right at a time when running an electric heater, even an exceptionally efficient one, has become a poor choice given the price of gas. Furthermore, gas is very likely to remain cheaper than electric for many years. Not to mention that gas heaters are simply more efficient for heating to begin with. Rather than buy an $1600 chinese or $1300 american water heater, one can buy a $150 mexican factory built water heater that runs on gas and will save many thousands of dollars in energy costs over its lifetime. That's the rational choice, it is unlikely this complicated electric one is going to be something with a lot of market growth. Hopefully there are better examples of high growth reasonably priced mass market items that can be built as well, which have a chance at creating more than a handful of these $13.50 jobs (comparable to the salary at CostCo or McDonalds, BTW). For water heating one could also do what I did - use $50 worth of materials and junk to build your own solar water heater that reduces the cost of water heating to almost nothing. (http://www.motherearthnews.com/renewable-energy/1979-09-01/A-Homemade-Solar-Water-Heater.aspx http://www.motherearthnews.com/renewable-energy/1979-09-01/A...)

nhashem 14y ago
We're essentially reaching an intersection between the cost of Chinese labor (steadily increasing as China's economy grows and their currency gains value) and US labor (depressed because we're still at 8% unemployment). If these workers still wanted to be paid $30/hour, those jobs would still be in China. In December 2011 there was a similar article in the NY Times[0], which addressed the expansion of manufacturing jobs but had a much bigger focus on wages. Unfortunately for those workers, wages won't go up until the US economy continues to improve and unemployment goes down. Until then that "just thankful to have a job" feeling will suppress labor wages in general. Last quarter, corporate profits reached a historic high even as wages reached their lowest-ever share of GDP[1]. Maybe I'm just raw from the hostile election season, but this has always been personally frustrating to me. Our private sector doesn't pay enough for the jobs it offers, yet any suggestion to have the government assist is considered "redistribution" or "socialism." [0] http://www.nytimes.com/2011/12/30/business/us-manufacturing-gains-jobs-as-wages-retreat.html http://www.nytimes.com/2011/12/30/business/us-manufacturing-... [1] http://money.cnn.com/2012/12/03/news/economy/record-corporate-profits/ http://money.cnn.com/2012/12/03/news/economy/record-corporat...

jerf 14y ago

American declinism has been fashionable this past decade or so, even before the economic issues. And there are still economic issues. But it has a history of being the first in the world to rise from the ashes of the old systems and build the future, and while past results are no guarantee of future successes, I am still optimistic that we are not yet spent. American manufacturing will return. It may not be the job engine it once was, but it is still a wealth engine. American energy prospects are suddenly looking up, leading the world in both the tech to extract it and, this time, the resources to extract. We are only at the beginning of tearing down our scelerotic educational systems, but there is a good opportunity to build a truly 21st century education system over the next decade or two. We remain a high-tech economy. And we've got some wild cards up our sleeve, like a budding space industry and advanced medical research, to say nothing of whatever industry will come out of nowhere in the next ten to fifteen years that I'm not even thinking of to become huge. I celebrate anybody who succeeds, and I don't particularly care if America is or remains "exceptional". I want everyone to succeed. I'm just saying that I think there's good reason to believe that for all the challenges in the world that America still has a very good chance to be in the set of successful countries in the medium term (5-25 years).

gadders 14y ago
American Manufacturing is at an all-time high. It's not employing as many people, but that is due to efficiency, not decline.
Tuna-Fish 14y ago
> American manufacturing will return. It never left. The US manufacturing output steadily increased from the 50's to the recent recession. Right now, it is at an all time high. The idea of american manufacturing being shipped overseas is just false, and I'm sick of people repeating it. What happened is that as wages got expensive, US labor was replaced by machines where possible, and by some cheap process steps overseas where not possible. Intel CPUs are a good example: They used to be made wholly in the US, employing a lot of blue-collar workers. To save costs, the factories were automated to the point where the only process steps left that employ a lot of people without advanced degrees are packaging and testing. And then those were shipped to Malaysia and Costa Rica. The high-capital process steps that create most of the value in the system are still in Oregon, Arizona and New Mexico. Manufacturing jobs, as they used to be, are gone. Not because of globalization, but because of robots. And the old kind of manufacturing jobs will never return -- it just doesn't make sense to pay people $30 a hour for what could be done faster, cheaper and better by a robot.

xweb 14y ago

It's interesting to consider the change to insourcing manufacturing in light of the more recent trend of outsourcing (or, probably more accurately, globalizing) white-collar jobs. Although you wouldn't get the same benefits in terms of saving shipping costs, the other benefits of the article seem like they still would apply. At a large corporation I worked at a few years ago, there was an ongoing push to offshore jobs to an internal group in the same company. We were encouraged to use this group by our chain of command despite the fact that previous efforts at outsourcing in our own group had failed disastrously. So it would be good to see the public discourse swing back toward the benefits of insourcing so that managers have more ammunition to fight for what works.

ph0rcyas 14y ago

Here is something that's easily overlooked: bringing design and manufacturing together promotes innovation. Having a more rapid iteration cycle is important, but why? Here's a principal reason: it allows design flaws to become visible in the manufacturing, and leads to a redesign if necessary. Having both these modules in close (spatial and temporal) proximity helps minimizing efforts spent in irrelevant problems. The general rule holds for most softwares with 'manufacturing' replaced by user appreciation. The hidden cost of taking manufacturing offshore is that a GREAT deal of industrial knowledge is lost. How do you know a problem needs to be taken into consideration if... you don't even know what the problem is? The glorious days of Bell Labs seems like heaven for tinkerers. Designing, implementing and manufacturing camps don't alienate but simply part of one living organism.

tobyjsullivan 14y ago

I wonder if this is more a result of exceptionally high unemployment rates making locally-sourced assembly line production practical once again...

jaggederest 14y ago

Manufacturing is converting from blue collar to white collar. It's more important to be a process developer and a technologist to operate the machinery and design the assembly process than it is to actually turn a wrench. I can only imagine 3d printing and accelerating product cycles will increase this effect. Dev ops in the real world - the designers and the manufacturers become the same people and the result is 'autonomation' to use the toyota term.

rmason 14y ago

Here's a complex sitting empty in Detroit for over fifty seven years that dwarfs the GE appliance complex,the old Packard plant. http://www.freep.com/article/20121202/NEWS01/120823062/The-Packard-Plant-Then-now-interactive-comparison-photos?odyssey=mod%7Cdefcon%7Cimg%7CFRONTPAGE http://www.freep.com/article/20121202/NEWS01/120823062/The-P...

teyc 14y ago

There was a passing mention of union dynamics in all this. Without outsourcing, a lot of the improvements could never have been brought on board.

senthilnayagam 14y ago

Redesigning the product, reducing effort needed to build it is all good , but eventually this will go offshore one way or another The only way is constant innovation and engineering , but if people don't go for STEM education , only lowly paid assembly job and sales job would be left here

critium 14y ago

I have been actually pondering this for software for some time now. I used to manage a medium sized development team that was concurrently distributed between the Virginia, Argentina, Ukraine and Pakistan. I've always thought that the amount of communication overhead due to language/layers and time lag caused by that actually increased the cost of the product. For example, during the day, i'd get requirements hand it out to the leads. If the lead is at PK, then guess what, i'm getting up at 3am to talk to them. Sending emails wont cut it. He then has to translate to a different language and hands it out to his devs. Thats several degrees of separation between the analyst and the dev. I've always believed that what was accomplished could have taken half that team if they were all local. I think software development insourcing is ripe for this in the U.S. There is a large cost of living divide between NY, SF and Missoula, MT and the mid lvl salaries i've seen here would go a LOT further in those parts of the country and the time zone and language issues are minimal.

MarkMc 14y ago

Well written article - it grabs your attention with a curious story and doesn't let go. In my experience quality of articles in The Atlantic is up there with The New York Times or The Economist.