Over the past two decades, thousands of US companies outsourced all their manufacturing operations overseas to China, resulting in large losses of manufacturing sector jobs, and the required skills associated with them. As the US shifted to a service-based consumer economy, thousands of machine shop owners closed their shops. Today, many machine shop owners are on the verge of retirement, and they have a smaller number of apprentices to take over the skills of their trade. However, things are beginning to change for the better. Outsourcing manufacturing to improve profits has indeed helped plenty of US companies. But these results are becoming harder to replicate for several reasons, as mentioned in this Wired story.
First, the rising labor costs of Chinese workers, due to inflation, rising food prices, etc., are shrinking the savings gained in the past. Average hourly wages for Chinese workers went from a little over $0.50/hour in 2002 to a little over $1.30/hour in 2008. Second, unless companies have large operations like Apple, it is difficult to control the quality of products made overseas. Companies that outsourced manufacturing are having problems with defective products, shipment deadlines, and cheaper copy-cat imitations of their products. Third, the cost of shipping/moving products from overseas is on the rise due to increasing oil prices, and the time lost with shipping and clearing customs is unattractive.
All these factors are making outsourcing manufacturing a questionable feat. Brining manufacturing back home has several benefits. Even if the cost to make something can more than double, it solves most of the pains (and their unplanned costs) above instantly. The introduction of policies to create more manufacturing jobs, like the recently announced Skills for America’s Future initiative, can also help with jumpstarting the manufacturing sector towards a new beginning. The development of cheaper manufacturing technologies and manufacturing analytics software can greatly improve efficiencies, and reduce the costs of manufacturing products locally. In addition, simply picking up the phone and calling a local manufacturing vendor, and asking for their expertise in customizing one of their parts for a product can greatly improve quality and performance. All these benefits can greatly reduce outsourcing, create more jobs locally, and generate high-quality products. Revamping manufacturing locally is a win for everyone.