Coming to America: Is Outsourcing of the Past?

Over Thanksgiving, I read an article called "The Insourcing Boom" in The Atlantic. It was an interesting read, and I highly recommend it.

from thetruthaboutcars.com

 Outsourcing began as a way to reduce labor costs. However, that math doesn't always add up; outsourcing is not a sure-fire win. The point of the article is to highlight how several distinct differences between 1960 and today should change our perspective on manufacturing.

1)  By separating production from design with thousands of miles and a language barrier, efficiency is compromised. GE was able to reduce 35% of the labor required for their dishwasher assembly line through lean manufacturing principles.

"If the people who design dishwashers sit at their desks in one building, and the people who sell them to retailers and consumers sit at their desks in another building, and the people who make the dishwashers are in a different country and speak a different language—you never realize that the four screws should disappear, let alone come up with a way they can."- Fishman, discussing how internal collaboration can lead to the detection of inefficiencies

2) There is a growing trend for specialized products that continue evolving as new technology is developed. Not only do American companies want to protect their IP by keeping it within our borders but they also want the ability to deliver cutting-edge products quickly.

"In specific terms, the service that... a growing number of design firms can offer is a “quick iteration” way of deciding which ideas will be most practical for manufacturing. “Over the past couple of years, people have gotten used to the idea of rapid iteration in social-media firms,” Linus Chung told me. “You iterate and adapt quickly based on consumer demand. You learn to ‘fail fast.’ We’re bringing that to the hardware space.”" - Fallows, describing how local manufacturing gives companies the ability to tweak and roll out their products quickly and effectively ("Mr. China Comes to America")

3) Fuel costs are not what they used to be. Rising oil prices make long distance shipments increasingly expensive. Furthermore, energy costs in the US are decreasing due to the availability of cheap natural gas.

4) The weight of labor costs on total production cost is decreasing and the divide between Chinese and American labor wage is decreasing.

"Insourcing" has environmental implications as well. By bringing manufacturing closer to engineering expertise and it's target consumer market, transportation emissions are cut, production efficiency increases, and waste is reduced.

At my company, we put immense focus on integrating all parts of the design/manufacturing/sales process. By having open channels of communication, we are able to design systems upfront that promote efficiency and success in all parts of the supply chain, from design through operation and sales.