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If It’s on NPR, It Must Be True

I was listening to the radio recently when NPR began to broadcast a report about the increased reshoring of manufacturing to the United States. NPR interviewed Harold Sirkin, a senior partner at Boston Consulting Group who has been surveying companies about reshoring. Sirkin stated that 20%-25% of the manufacturing operations that have been offshored will eventually be reshored. This has been a hot topic in the electronics supply chain since 2007, and though major companies like Walmart and Apple have announced their intention to offer more US-made goods, the continued disparity between labor rates in China and those in the US seem to challenge the feasibility of this movement. Still, this is NPR — the voice of reason. If they report it, it must be true, right?

As it happens, I agree with NPR. Not because I think that the word of any news media outlet is beyond question, but because I know that labor cost is only a part of the equation when it comes to making choices about where to produce a product.

For example, one of the most influential factors in the reshoring decision is the growing demand for last-minute customization by customers in the region. We all want what we want, now. No one wants to wait two months or more for a shipping container to arrive from China. Beyond the considerations of shipping capacities, utilization, and the cost of fuel, today's manufacturers are highly sensitive to the cost of inventory sitting in the transportation mode for weeks on end, as well as the potential detriment to consumer sentiment and the brand image that may come from delayed product releases.

Other key factors in the reshoring discussion are political stability, foreign direct investment, and let's not forget IP protection. Despite some progress, China continues to show a lukewarm commitment to foreign brands and protecting their IP rights. While I am fairly confident that we will see a resurgence in manufacturing in the Americas in the coming years, I believe that small and mid-size OEMs and EMS players are more likely to drive the movement than the big guys like Walmart and Apple.

Whether these Tier 1 and 2 players restart US production facilities or simply halt their offshoring plans, this is where the real impact on consumers and American workers will be most strongly felt. Of course, this will be harder to measure and won't make as big a splash in the press, but the results will nonetheless be significant for the US economy.

The NPR broadcast concluded by drawing an interesting parallel between the re-shoring movement and the impact that Henry Ford had on workers when the mass production of the Model T was introduced — essentially jump starting the new middle class in America. It's not clear that re-shoring will bring about that momentous a change in our country, but there is no doubt that our economy could use a jump start, and manufacturing is just the spark we need.

5 comments on “If It’s on NPR, It Must Be True

  1. Eldredge
    January 29, 2014

    While other cost factors involved in shipping materials and finished goods is an obvious consideration in understanding off-shoring costs, I hadn't really thought much about inventory cost  during shipment. Whatever the reason, it would be nice to see both manufacturing capcity and know-how increasing domestically.

  2. Hailey Lynne McKeefry
    January 31, 2014

    This has a number of potential positive ramifications..but particularly of interest to me is this idea of a new middle class. The ever-widening gap is concerning.  This may be the first generation in a long time that doesn't do bette than the parents before them. That's a sobering reality.

  3. Hailey Lynne McKeefry
    January 31, 2014

    I think the next generation of consumers is going to demand more customization than ever before. My teenager, for example, recently went online and designed her own pair of Converse sneakers. She was willing to plunk down a premium to express herself. We also have the example of the Moto Phone Blok (see a picture here: Component Supply May Be Moto PhoneBlok's Achilles Heel). Clearly, these same customers want products as soon as possible so close ot home manufacturing becomes a key differentiator. Does anyone else have examples of customization that have caught their eye?

  4. J.Lombard
    February 11, 2014

    Hailey,

    I'm not sure that the idea of a “new middle class” is entirely valid. We have to maintain the “old” one first. Without a manufacturing backbone to provide something to sell besides IP and entertainment to the rest of the world, or provide jobs to support the internal economy and contribute to real GDP, we will continue to import more than we export, which is unsustainable in the long run.

    The next generation is already saddled with more debt than any other previous generation. It is the civic duty of Corporate America to look at this situation and do what they can for the long-term health of the country, before we descend into second-tier status.    

  5. Hailey Lynne McKeefry
    February 12, 2014

    @JLombard, we are in agreement, I think. There's definitely a widening gap. It's important to remember that this is a trend that has been a long time coming. 20 years years ago (i say dating myself) I was asked to write a retrospective on electronics products  manufacturing in the US for EBN's 15th Anniversary Edition. Even then, I was hard pressed to come up with uplifting news. We started the television manufacturing business with Zenith and then it was taken over by the Chinese. Car manufacturing, largely overseas. Those are just a couple of examples.

    We are seeing some re-shoring by big manufacturers but it remains to be seen if it will be enough. I live in the Silicon Valley and we have all watched Tessla with great interest (and of course the automobile has become more of an electronics story generation upon generation). Other big organizations have also been in the headlines:Apple, GE, and Google. And it's not all behemoth organizations. I've also read about Zentech (CM), Peerless Industries (audio-visual mounting systems), Sleek (audio headphones)/ Will it be enough?

    What do you see as the key things that need to happen to address these issues? What are the gating factors to a come back?

    Apple, Caterpillar, GE,
    Apple, Caterpillar, GE,
    Apple, Caterpillar, GE,

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