The Insourcing Boom

http://www.theatlantic.com/magazine/print/2012/12/the-insourcing-boom/309166/

173 108 14 years ago

dchuk• 14 years 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.

robryan3• 14 years 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• 14 years 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.

alanctgardner25• 14 years 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.

Jacob4u2• 14 years 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.

robryan3• 14 years 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• 14 years 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.

juiceandjuice2• 14 years 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.

krschultz• 14 years ago

GE is/was one of the best manufacturing firms in the US. The "Lean" in "Lean Startup" comes from "Lean Manufacturing". GE probably did more to innovate in Lean Manufacturing (and Six Sigma) than any other company in the US.

ArbitraryLimits• 14 years ago

GE has essentially been a mix of holding company and leveraged buyout firm for a long time now. I think of GE as a stock trader who takes really, really long positions in an industry as a whole by acquiring a subsidiary in the industry rather than buying the corresponding index fund.

DenisM• 14 years ago

Finance

SkyMarshal• 14 years ago

Regarding GE, you can eyeball their public financial statements for a rough idea of their manufacturing:financial ratio:

http://www.ge.com/pdf/investors/events/10192012/ge_webcast_p...

They conveniently split their balance sheet between GE Capital and GE (industrial/manufacturing). Roughly 70% revenue and profit from non-financial (mainly manufacturing - from 747 engines, to trains, to energy, to MRI machines, etc), ~30% from GE Capital.

So yeah, always have been and still very much a manufacturing company.

As a more general answer to your question, in case you missed it, there was a good article and discussion a while back on companies losing manufacturing through outsourcing, and its consequences:

http://www.forbes.com/sites/stevedenning/2011/08/17/why-amaz...

http://news.ycombinator.com/item?id=2907187

TLDR: “So the decline of manufacturing in a region sets off a chain reaction. Once manufacturing is outsourced, process-engineering expertise can’t be maintained, since it depends on daily interactions with manufacturing. Without process-engineering capabilities, companies find it increasingly difficult to conduct advanced research on next-generation process technologies. Without the ability to develop such new processes, they find they can no longer develop new products. In the long term, then, an economy that lacks an infrastructure for advanced process engineering and manufacturing will lose its ability to innovate.”

An interesting counterexample that demonstrates the point is Intel - they've maintained their manufacturing capability, and as a result lead the world in lithography and process technology, a competitive advantage that allowed them to compete with AMD in the mid-to-late 2000s even when AMD's chip designs were better, and to dominate AMD now that both Intel's process technology and chip designs are better.

Andy Grove has apparently dedicated his retirement to advocating for reshoring manufacturing for the deep competitive advantage it confers [1].

[1] http://duckduckgo.com/?q=andy+grove+manufacturing

gvb• 14 years ago

FWIIW, GE Capital was closer to 50% of the revenue before the recession kicked them in the teeth. Hard. Indications and rumors had it that GE Capital nearly took the company down in the 2008/2009 time frame.

Ref:

"Loophole Helps GE Benefit From Bank Rescue Program" (article from 2009) http://www.washingtonpost.com/wp-dyn/content/article/2009/06...

Warren Buffet did a $3 billion "private bailout" in October, 2008 http://www.bloomberg.com/news/2012-09-14/buffett-ge-bet-pays...

thalecress• 14 years 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

patrickgzill• 14 years ago

I have seen Haier products, including a small fridge, in stores since about 2 years ago.

meej• 14 years 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• 14 years 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• 14 years 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• 14 years 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• 14 years 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/

alanctgardner25• 14 years 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.

hapless3• 14 years 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.

rbn• 14 years ago

Timbuk2 Bags are amazing quality.

LurkingStrnager2• 14 years ago

It's neither here nor there, but I'll happily vouch for the quality of MEC's backpacks, I've used them throughout a sizable chunk of my life, and find they require replacement owing more to folk with sticky fingers than wear and tear - and I'm not the kindest to my backpacks either!

jseliger2• 14 years ago

I have a Tom Bihn bag too, but I don't know what kind of bags you were buying. I had an REI-branded backpack from age 13 or so until I was about 23. It broke, and I took back to REI (they'll take anything back) and got credit towards a new backpack, which is still going strong.

rayiner9• 14 years ago

As long as we're pimping good American brands, I want to give a shout out to Allen Edmonds, which makes all of its dress shoes in Minnesota. About 3x the price of the cheap crap you can buy at the department store, but they'll last you forever and can be refinished (with new soles, etc) for a modest fee.

markkanof• 14 years ago

Not all. Just saw a pair that was marked as made in Dominican Republic. Your points about quality still stand though.

DigitalSea2• 14 years ago

Funny you say that, I've got a Tom Bihn bag lying around as well with stitching and everything still intact as well. I've probably had mine for around the same time, I've carried everything in it from stacks of books to laptops & heavy bottles of water and not one single frayed stitch or piece of material.

jac_no_k• 14 years ago

Another user of Tom Bihn bags. I was teased a bit for paying so much for laptop bag... But also after five+ years of use, it's still good condition.

I don't think it matters where a product is built. It's the design and build quality that makes the product a good value. Initial cost was high but made up by not having to buy another bag, not having to deal with a torn bag, and not having to buy another bag makes it worth it.

airlocksoftware• 14 years 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-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/

rogerbinns3• 14 years 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• 14 years ago

It wouldn't be that great, because no-one would be able to afford all the goods that were being manufactured...

jarek• 14 years ago

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

batgaijin• 14 years ago

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

temphn• 14 years 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• 14 years ago

Immelt owns NBC

--part of *

DigitalSea2• 14 years 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• 14 years 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• 14 years 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...)

nhashem• 14 years 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-...

[1] http://money.cnn.com/2012/12/03/news/economy/record-corporat...

yummyfajitas• 14 years ago

and US labor (depressed because we're still at 8% unemployment)

Wages are not depressed. Per-worker wages have increased in both the public and private sector:

http://research.stlouisfed.org/fred2/graph/?g=duS

Sum[wages] / GDP is down because employers are finding ways of getting more output with fewer employees. I.e., Sum[wages] = (average wages) x (# of workers) is down because # of workers has decreased, not because wages have.

If wages had decreased, we would not have had a recession at all (according to Keynesian economics).

sanxiyn• 14 years ago

Eh... what is wrong with redistribution or socialism? I am all for them.

jseliger2• 14 years ago

>but with the described poverty-level $13.50 wages for skilled line workers that's obviously not the case.

A couple of points: 1. $13.50 * 2080 is $28,080, which is clearly not rockin' Prada but, in places with low costs-of-living, is very livable. Silicon Vally and places where HNers are likely to congregate are much more expensive, in large part due to housing restrictions (http://www.slate.com/articles/business/moneybox/2012/05/face...).

2. $13.50 is where workers start, not necessarily where they end.

3. I'm obviously not arguing that workers are making a LOT of money or that they're likely to get rich, but they're also not poverty-level in most of America and are still much higher than minimum wage and much better than nothing.

pekk2• 14 years ago

One ambulance trip can easily cost $8,000. Now you are down to $20,000 for the year - hope you didn't have any kids.

But the point isn't whether $28k is livable in Nebraska, but how it compares to what people used to get back in the day.

rayiner9• 14 years ago

$13.50 isn't poverty level. At 40 hours a week, 50 weeks a year, it works out to $27,000/year, which is just about the median individual income nationwide.

This yields an after-tax net of $1,750 per month. You can rent a 2 BR apartment in Louisville for $450 per month. The $1,300 left over is enough to live quite comfortably in Louisville--heck I don't spend much more than that in New York City (the difference is I pay $1,500/month on a studio).

stdbrouw• 14 years ago

But does that $1,300 support a family?

debacle2• 14 years ago

You just got out of college. You went to a good school, you got good grades, and you worked hard. There are no jobs in your field.

You're bringing in 1750 a month, but 500 of that is going to student loans. 450 goes to rent. 200 for heating in the winter. Add in the rest of your utilities, and you're looking at 1300 a month. Do you have a car? 300 a month. Do you want to eat? You can probably get by on 150 for food.

But you have no health insurance. You have no savings. You cannot start a family because you can't support a family.

And, unless you get very lucky, this is going to be your situation until your loans are paid off. You will be 35 when your adult life can actually start.

But if you're unlucky - if you get sick, if you need to take care of your family, if nearly anything bad happens, regardless of how minor, you're probably completely and utterly fucked to an extent that a lot of people can't possibly realize.

MatthewPhillips• 14 years ago

A 2BR in Louisville for $450 puts you squarely in the bad part of town. Aside from it being less safe and generally less enjoyable to live in (probably noisy neighbors, people up all night, etc.), you also are going to be commuting 20 - 30 mins per day to the other side of the city where the decent jobs are.

bathat2• 14 years ago

Sorry to go off on a tangent, but,

>Not to mention that gas heaters are simply more efficient for heating to begin with.

Are you sure about that? A heat pump with a COP of, say, 2 is 300% efficient (it is said to have an Energy Factor, EF, of 3). That is, for every Joule of electrical energy supplied to the pump, 3 Joules are added to the water tank. On the other hand, the combustion products of a natural gas heater need to be exhausted outside the building. Unless they are first cooled to the temperature outside, the heater is less than 100% efficient.

Where I live, a Joule from the electric company costs about 2.5 to 3 times as much as a Joule from the gas company. A quick Google search indicates that this type of water heater typically has an EF of 2 to 2.5. The cheapest gas heater I could find on the Home Depot website was over $300 (twice your Mexican one) with an EF of 0.62. So it wouldn't surprise me if the energy cost of an electric is on par with the energy cost of a gas heater, and it would surprise me if the electric actually used more energy. I don't see how you would save thousands of dollars in energy with a gas heater: Even in the worst case (a 2 EF electric heat pump vs. a 0.62 EF gas in a location with a 3x energy cost ratio), the gas only just breaks even.

Maakuth2• 14 years ago

Market effects affect to the economic perspective, but considering the transformation of fuel to heat, gas is sure to be more efficient. Electricity used to run the heater is generated by burning something and running a turbine - a process that itself runs with around 30% efficiency. Add to that the power loss from electricity distribution. 300% efficiency on the heater isn't enough to break even so that you'd get as much heat from the same amount of gas burned locally versus in a power plant.

LurkingStrnager2• 14 years ago

Maybe I've had too long a day and misread something, but here I go anyhow. The efficiency of a gas water heater may be increased through mechanisms that enable it only when water flows through it, such as when one takes a shower or fills the dishwasher. In contrast, a classic electrically heated water tank sits there to be filled with cold water, which gets heated up, and if it isn't all draining out already, cools back down to require reheating. Reheating a standing tank of water several times over the course of a day is wasteful. In a related thread, also consider the same water tank while one takes a long shower. We've all* (* This is a vast generalization for the internet) had the hot water run out of us during a nice shower, and this is because an electric water heater cannot effectively heat a freshly filled tank of water while said tank is being drained. I'm sure if another person feels the need to expand on this at all, they're quite capable.

leoedin• 14 years ago

I think you're misinterpreting the article regarding production worker tasks. While they do suggest that production workers were involved - "By considering the workers who would have to put the water heater together—in fact, by having those workers right at the table, looking at the design as it was drawn" - they don't say that the production workers themselves designed any products, let alone from scratch. It's fairly clear that feedback from some production workers was taken into account during the design process, nothing more.

Mechanical design work of appliances is not something that you'd do alongside shift work. The workers getting paid $13.50 an hour are not going to be mech-eng degree holding designers.

jerf• 14 years 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• 14 years 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• 14 years 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.

specialist• 14 years ago

What is the role of environmental regulations on locating silicon fabs?

A buddy of mine made a mint working as a welder building fabs in Phoenix when they were leaving California in search of cheaper water and lower regulations. He was very worried about the toxic emissions and very lax (non existent) oversight.

xweb• 14 years 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• 14 years 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• 14 years ago

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

jaggederest• 14 years 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• 14 years 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-P...

teyc• 14 years 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• 14 years 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• 14 years 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• 14 years 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.

The Insourcing Boom

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