Saturday, February 2, 2013

Stay Positive: Reshoring Part II

Last April I did a Stay Positive post about an AP article that details a furniture company bringing jobs back to America. 

A while back in The Atlantic, Charles Fishman wrote about the same phenomenon in his article "The Insourcing Boom." 

Fishman provides the example of GE's appliance plant in Louisville. 

Here are some causes that are significant:

  • Fuel costs for cargo ships are high and are likely to remain expensive.
  • Natural gas costs are "four times as much" in Asia as they are in the U.S.
  • Wages in China are rising.
  • Unions are ready to negotiate lower starting wages than they used to be.
  • "U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can't save much money chasing wages anymore." 

As an MIT-trained engineer notes in the article, "The way we see it, about 60 percent of the companies that offshored manufacturing didn't really do the math. They looked only at the labor rate--they didn't look at the hidden costs." 

And apparently it's not just GE. Fishman notes that Whirlpool brought jobs back to Ohio, Otis reshored elevator production to South Carolina, among others. Hopefully many more will follow. 

What I find additionally interesting is that GE is using input from their front line assembly workers to make the line work more efficiently. Unlike the assembly line gulag Henry Ford established in his River Rouge factory (if you've watched the recent PBS documentary on Ford recently), management is taking input from workers and working with them to make a lean assembly line work smoothly. 


Dr. K said...

I can't say I'm excited about the role of lower wages for union workers in this scenario, but I'd be happy to buy American.

Quintilian B. Nasty said...

Yes, I felt the same way.