The 'Ponderous Chain' That Keeps Jobs Overseas

When the editor of EBN approached me to author this column, I objected, saying, "Wait a minute. I don't know nothin' about supply chains," to which he replied that his readers are eager for variety and would be happy if I wrote about "anything but supply chains."

And so I have. But I have to admit that, as it keeps popping up in the news, supply-chain stuff kind of fascinates me. For example, I know that the invention of the container ship was a big deal for the supply chain, because it expanded the capacity of a single ship while automating the loading and unloading process so drastically that the word "stevedore" has slipped from the vernacular.

This vast streamlining of the trans-oceanic part of the supply chain has resulted in some amazing stories. One that got a lot of attention during the election, because it involved Bain Capital (Mitt Romney's alma mater), was the shift of a sensor manufacturer named Sensata from a little plant in Freeport, Ill., to a new location somewhere in China. Bain Capital, an owner of Sensata, got a lot of bad press because it flew a crew of Chinese workers to Freeport, where the American employees -- all of whom were being laid off -- were compelled to train the unskilled, low-wage communists who were taking their jobs.

All this publicity, however, overlooked the terrific logistical aspects of this offshoring saga. Not only were about 100 jobs moved overseas; every important component of the manufacturing process, including machines, testing equipment, office furniture -- the works -- were rolled into containers, trucked to the West Coast, stacked onto container ships and transported more than 7,000 miles. This is a feat once unthinkable and certainly too costly to accomplish in a past era that didn't have a supply chain so efficient as today's. One has to simply stand back, look objectively past the human tragedy of Sensata, and say, "Far out!"

Even more remarkable is that many customers for Sensata's sensors, which go into cars, RVs, airplanes, heating and air conditioning systems, mobile phone networks, etc., are right here in the US. Before its operations were moved to China, a Sensata truck driver could climb into a Dodge van and haul a half-ton of automotive sensors, switches, and control devices from Freeport to the Chrysler plant over in Belvidere, Ill., in about 50 minutes -- most of the trip on legendary US Route 20.

As of next year, that same shipment -- now from Shanghai to Belvidere -- will take… well, not being well versed in supply-chain stuff, I really don't know how long it might take. But more than 50 minutes, I bet.

But that's not the point. Seven thousand miles on trucks, trains, and ships is -- by the judgment of the MBA wizards at Bain Capital -- way more businesslike and cost-effective than 45 miles in a Dodge van on Route 20. This is apparently how the supply chain works nowadays. It's not for dilettantes like me to plumb its mysteries.

But then, I read about Apple's plans to "reshore" to America a tiny share of its computer manufacturing in China. Apple CEO Tim Cook suggested that he'd like to do more, but he's hobbled by a supply chain that's hard to lift up and move around. This reminded me of Dickens's A Christmas Carol, where the ghost of Jacob Marley describes Ebenezer Scrooge's burden of penance -- for a lifetime of greed and selfishness -- as "a ponderous chain."

Still, I couldn't help noticing a paradox. On one hand, Apple can't make stuff in, say, Freeport, because putting together a new supply chain would cost a fortune and displace a network of established links. On the other hand, Bain Capital and Sensata, for the sake of trimming the wages, benefits, and pensions of a mere 100 hourly workers, found it easy, thrifty, and strangely gratifying to cast aside a comparatively short and completely intact supply chain -- some of whose links are less than an hour away by Dodge van -- in favor of one that stretches some 7,000 miles over two continents, requiring interaction among people who speak at least three distinct languages.

In the process, they shipped a whole factory -- lock, stock, and heavy machinery -- across the Great Plains, the Continental Divide, and the Pacific Ocean. Far, again, out!

Obviously, there's a lot about supply chains that I don't understand, especially the rules for outsourcing. But it does occur to me that if shipping jobs overseas were more like sending Christmas packages to my kids -- the heavier the box and the farther it goes, the more I have to pay -- companies like Bain might be less eager to back up the moving van.