Editors Note: Following Apple’s Lead
There’s more to the manufacturing-at-home argument than just rising overseas costs and supply chain risks.
Geraldine Gambale, Editor, Area Development Magazine (Directory 2013)
There’s been a lot of buzz of late about rebuilding U.S. manufacturing. In late December, an announcement came from Apple that it would invest $100 million to make Mac computers in the United States. It makes sense for the company to bring its manufacturing back home since the U.S. represents its largest market. Manufacturing in the U.S. would also alleviate supply chain risks posed by the company’s manufacturing in China. In addition, as the TCO (total cost of ownership, i.e., labor, energy, and transportation costs, etc.) rises in China, manufacturing in proximity to U.S. consumer markets makes even more sense. That’s an argument long put forth by individuals like Harry Moser, founder of the The Reshoring Initiative, among many others.
In their new book — Producing Prosperity: Why America Needs a Manufacturing Renaissance — Harvard Business School Professors Gary Pisano (Business Administration) and Willy Shih (Management Practice) argue that when products and process technologies become interdependent, geographic proximity between R&D and manufacturing can be valuable. By manufacturing innovative products where they are designed, i.e., in the U.S., companies — like Apple — can better coordinate product- and process-innovation work, say the professors.
Why is this important? Doug Woods, President of AMT - The Association For Manufacturing Technology, recently told Area Development’s editors that proximity to the manufacturing process creates innovation spillovers across firms and industries, leading to ideas and capabilities that support the next generation of products and processes, i.e., innovation is the fuel that grows manufacturing.
What will it take for this U.S. “manufacturing renaissance” to truly take hold? Chris Massot, chief marketing officer for Synapse Product Development, explains there’s been an increasing trend toward producing higher-value consumer products that deliver a better customer experience in the last few years, with Apple being a leader of this movement. Consumers will no longer settle for poorly designed and poorly made products at cheaper prices, he says, and they’ll be willing to pay a premium for their goods. Couple that with rising wages in offshore locations and automation here at home, which has already reduced the labor component of products to a very small part of the TCO, and the reasons to offshore are further diminished.
Bringing manufacturing for the U.S. consumer market back home seems to be making more and more sense.