Making it in America: a new wrinkle
AS RECENTLY AS A DECADE AGO, THE OFFSHORING TREND
looked unstoppable. It didn’t seem to matter much which industry a
company was in—apparel, toys, electronics, or whatever—if it was a
manufacturer, there was a good chance it had moved (or would soon
move) production overseas, typically somewhere in Asia. And it wasn’t hard to figure out what was the driving the trend: the prospect of
jaw-dropping labor savings.
Over the past two or three years, though, we’ve seen signs that the
winds are shifting. Companies that once focused solely on labor
costs when deciding where to manufacture are starting to broaden
their horizons. While they’re still looking at wages, they’re also
weighing a host of other factors—like shipping costs, cycle times,
Ironically, some of the first to see the advantages
of manufacturing on U.S. soil were foreign multi-
nationals. In 2008, for instance, we reported that
several large foreign corporations were planning to
set up shop in this country. They included the
French power systems maker Alstom, which opened
a factory in Chattanooga, Tenn., in June 2010, as
well as ThyssenKrupp, which opened a steel making
and processing facility in Alabama in December
2010, and Volkswagen, which this past May opened
a plant in Chattanooga to produce the VW Passat.
Now, it appears the story is taking another twist. We recently
received word that an iconic American brand is joining—or to be precise, rejoining—the “Made in the U.S.A.” movement. As DC Velocity
Associate Managing Editor Susan Lacefield learned during a trip to
Kentucky, General Electric (GE) will soon move production of its
hybrid water heaters and dryers from China and Mexico back to its
plant in Louisville.
Although that raises a number of questions, one of the first that
comes to mind is how GE expects to compete with rivals that manufacture in low-wage countries. The appliance giant says it has that all
figured out: As part of the initiative, it is retooling its plant and adopting lean manufacturing processes, which will radically reduce its
labor requirements.
In fact, General Electric believes it has a lot more to gain than it has
to lose by bringing production back to these shores. For one thing, it
expects to reap big savings on transportation costs. It will also see a
reduction in cycle times—no small consideration
in an era when consumers want it now and won’t
hesitate to go elsewhere if you don’t have what
they seek.
And that’s just the beginning. GE also says the
move will make it easier to protect its intellectual
property since it will no longer have to share proprietary information with offshore partners. On
top of that, company executives believe that co-locating GE’s product design and engineering
teams with the manufacturing operations will
bolster its core competency in manufacturing—a
capability that was being
degraded as engineers and
designers who had worked
directly with manufacturing
operations were retiring.
“For years, products have
been designed far away from
the factory and the people who
would manufacture them. By
co-locating all the people who
are involved in bringing a product to life—engineering, quality, production … and sourcing—we increase collaboration
and problem-solving and
shorten development time. The result is going to
be better products for our customers,” said Kevin
Nolan, GE Appliances’ vice president of technology, in a statement.
It’s a high-stakes gamble. In total, GE
Appliances is investing approximately $600 million in its manufacturing and other facilities at
Appliance Park in Louisville.
There you have it: Further evidence that the
rumors of the death of the American manufacturing sector may have been both greatly exaggerated and premature.
