The Insourcing Boom

[Thailandnotes]

http://www.theatlantic.com/magazine/...ngle_page=true

"Harry Moser, an MIT-trained engineer, spent decades running a business that made machine tools. After retiring, he started an organization called the Reshoring Initiative in 2010, to help companies assess where to make their products. “The way we see it,” says Moser, “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.” Moser believes that about a quarter of what’s made outside the U.S. could be more profitably made at home."

[don]

Re: The Insourcing Boom

" . . . Moser believes that about a quarter of what’s made outside the U.S. could be more profitably made at home."

Blowing out the FIRE that heats up American labor costs would add significantly to that competitiveness while being less vulnerable to global arbitrage conditions . . .

[shiny!]

Re: The Insourcing Boom

Blowing out the FIRE that heats up American labor costs would add significantly to that competitiveness while being less vulnerable to global arbitrage conditions . . .

We also need to cut back on excessive regulations. If FIRE had to contend with as much expensive regulation as factories do, it would never have succeeded the way it has. I know it's only anectdotal, but these stories are telling:

In the 80's my husband was the machinery maintenance engineer for a brass bed factory in Los Angeles. The OSHA inspector came in and said he had to paint the lockers OSHA blue. He did so. Two weeks later, the fire inspector came in, said the paint was a fire hazard and had to be removed. He stripped the paint. Two weeks after that, the OSHA inspector came back and cited them for failing to paint the lockers. He handed the fire marshall's card to the OSHA inspector, told him to give the guy a call and work it out between them.

The owner of a motorscooter company told me they outsourced their factory to China because regulations here were too expensive. It wasn't labor costs that drove them out, it was the expense of complying with regulations. He had a safe factory and cared about his employees, but it wasn't good enough for the inspectors. He actually wanted to employ Americans, but he couldn't afford to.

Another fellow I know is disabled; his legs are only about four inches long. He owned a little shop in Phoenix for which he was the only employee. He installed a very low toilet and a low handrail in the bathroom. Inspector came in and told him his bathroom didn't meet ADA requirements. For wheelchair accessibility he would have to install a high toilet, raise the handrail and expand the room. He demonstrated how raising the toilet and handrail would be unworkable for him, a disabled person. The inspector wouldn't listen and shut him down. He couldn't afford to remodel the bathroom or move, so he went out of business.

[Shakespear]

Re: The Insourcing Boom

The owner of a motorscooter company told me they outsourced their factory to China because regulations here were too expensive.

GE will fix this, but ONLY for themselves.

I get the vibes that the plant will be full of robots and 2 humans in the control room.

[thriftyandboringinohio]

Re: The Insourcing Boom

GE will fix this, but ONLY for themselves.

I get the vibes that the plant will be full of robots and 2 humans in the control room.

They say the factory of the future will have only 2 employees - a man and a dog.
The man's job will be to feed the dog.
The dog's job will be to bite the man if he attempts to touch any of the machines.

[gwynedd1]

Re: The Insourcing Boom

Blowing out the FIRE that heats up American labor costs would add significantly to that competitiveness while being less vulnerable to global arbitrage conditions . . .

+1

[lektrode]

Re: The Insourcing Boom

" . . . Moser believes that about a quarter of what’s made outside the U.S. could be more profitably made at home."

Blowing out the FIRE that heats up American labor costs would add significantly to that competitiveness while being less vulnerable to global arbitrage conditions . . .

We also need to cut back on excessive regulations. If FIRE had to contend with as much expensive regulation as factories do, it would never have succeeded the way it has. I know it's only anectdotal, ....

+1
there also needs to be strict COST VS BENEFITS analysis before any new regulations can be foisted upon the private sector, esp small biz (true small biz, which does NOT include businesses larger than the 50empl that is the cut off in obamascare - as if upto '500 empl' is a 'small biz')

this is the crux of the unemployment problem, IMHO.
my obs is that most biz operators are frozeup, deer-in-the-headlights style, awaiting the next wave of profit-munching BS that rains down upon us practically daily.

this is my basic gripe about the lib/dem political M.O. - they all seem to think that "with just another tweak here, another new law there and a few more rules/regulations - along with just a bit more 'funding' (and its always MORE) - we can fix all of OUR problems" - just re-elect us...

too bad 'our' problems dont really seem to matter, unless one is part of one of their pet slivers of the electorate....

[GRG55]

Re: The Insourcing Boom

Blowing out the FIRE that heats up American labor costs would add significantly to that competitiveness while being less vulnerable to global arbitrage conditions . . .

Bingo! Just imagine how bubble housing prices made California noncompetitive for any employer. During that FIRE induced "wealth creation" boom the wages one had to pay an employee so they could afford decent housing made most of the state, especially the coastal areas, off limits to any sensible company considering investing in plant and production.

It's not just this, or any one thing such as "too much" regulation.

[flintlock]

Re: The Insourcing Boom

GE will fix this, but ONLY for themselves.

I get the vibes that the plant will be full of robots and 2 humans in the control room.

This is the elephant in the room most don't want to face. People as workers are becoming less relevant. And nobody wants to think of themselves as potentially irrelevant. That's because we tend to see ourselves in this society as valuable based only on our income. Its what you make not who you are. But the world still needs fathers, mothers, artists, etc. ( Not that they don't "work") I can see a time in the future when most people will work less and not be expected to feel guilty about it. But we are a long way away from that!

[RebbePete]

Re: The Insourcing Boom

Very interesting article.

Is this becoming a "bullhorn meme" or still down in the "kazoo chorus?" I'm hearing more stories like this, for example, here.

I must admit, with rising fuel costs, and with some of the quality issues with outsourcing, I expected the wave to reverse eventually, but certainly not this quickly!

- Pete

[lektrode]

Re: The Insourcing Boom

one of the things eye notice, is that this new wave of insourcing - while one the best goodnews stories i've read in quite some time, with GE having overtaken GM's prev aura of "whats good for GE is good for America" IMHO) seems to be focusing on things that have a certain price point - meaning that its the high-end stuff - the $3000 refrigerators and the $1500 water heaters, for example - and that it occurs to me that this level of price point for otherwise common appliances that were relentlessly cut in price (the $495 radar range of the 60's is now the $49 microwave oven) were/are suddenly morphing into must-have status symbols, made fashionable/possible - not necessarily more affordable - by the ATM'g of ones home equity - now, just to keep up with the jones' one needs to have the fully decked-out kitchen, repleat with gleaming sub-zero refrigs and wolff stainless steel ranges = not exactly 'working class' appliances

and as much as i think the return to making this stuff in the US is best news we've seen in a long time, i just wonder if it isnt because of the housing bubble-induced ratcheting-up of consumer tastes, suddenly resulting in the demand for the much hyped $100,000 kitchen remodels - will these too go the way of the dot.coms, once all the borrowed money/equity has been spent?

the question becomes: will this lead to the end of lower priced options for the consumer?
we're already seeing less on display at outlets like home depot

and as further, perhaps anecdotal evidence of what i'm getting at (not being all that skilled at conveying whats in my my little brain to text and running out of time to type) - the SO and i are working on a remodel of her place and have had a couple contractors over for a look to get some ideas of what to do and how much it'll cost - the first guy comes over and noting the location/demographics of the neighborhood etc, sez: "well you wouldnt want to overbuild for the neighborhood, since this ISNT wailea" and in practically the next breath starts talking about granite countertops and "creating the Wow Factor when entering the house"

we're being conditioned to think Sub-Zero is now the starting point for kitchen appliances?

[GRG55]

Re: The Insourcing Boom

one of the things eye notice, is that this new wave of insourcing - while one the best goodnews stories i've read in quite some time, with GE having overtaken GM's prev aura of "whats good for GE is good for America" IMHO) seems to be focusing on things that have a certain price point - meaning that its the high-end stuff - the $3000 refrigerators and the $1500 water heaters, for example - and that it occurs to me that this level of price point for otherwise common appliances that were relentlessly cut in price (the $495 radar range of the 60's is now the $49 microwave oven) were/are suddenly morphing into must-have status symbols, made fashionable/possible - not necessarily more affordable - by the ATM'g of ones home equity - now, just to keep up with the jones' one needs to have the fully decked-out kitchen, repleat with gleaming sub-zero refrigs and wolff stainless steel ranges = not exactly 'working class' appliances

and as much as i think the return to making this stuff in the US is best news we've seen in a long time, i just wonder if it isnt because of the housing bubble-induced ratcheting-up of consumer tastes, suddenly resulting in the demand for the much hyped $100,000 kitchen remodels - will these too go the way of the dot.coms, once all the borrowed money/equity has been spent?

the question becomes: will this lead to the end of lower priced options for the consumer?
we're already seeing less on display at outlets like home depot

and as further, perhaps anecdotal evidence of what i'm getting at (not being all that skilled at conveying whats in my my little brain to text and running out of time to type) - the SO and i are working on a remodel of her place and have had a couple contractors over for a look to get some ideas of what to do and how much it'll cost - the first guy comes over and noting the location/demographics of the neighborhood etc, sez: "well you wouldnt want to overbuild for the neighborhood, since this ISNT wailea" and in practically the next breath starts talking about granite countertops and "creating the Wow Factor when entering the house"

we're being conditioned to think Sub-Zero is now the starting point for kitchen appliances?

Part of the reason for the reduced inventory at Home Depot (and pretty well everywhere else in retailand) is the financial constraints being placed by the banks on companies. At the onset of the financial crisis the first response of banks was to pull or reduce credit lines, and the next response of the retailers was to blow out inventory in order to get it below their newly reduced carrying credit limits. I was about to start my bunker project back then and I ended up stockpiling a lot of my materials and tools at distress prices from practically every building center and other suppliers at the time. EJ made mention of stocking up on durables in several posts in the crisis aftermath as well. The retailers won't ever go back to the inventory levels they had during the pre-crisis housing bubble.

Think out of the box. For the bunker, my wife and I decided to purchase a separate small chest freezer and an "all-fridge", both from Sears (Kenmore). The fridge cost a few hundred dollars, has more actual refrigerator space than a fridge/freezer combo of the same size, and is more efficient to run because it only needs to maintain one temperature. The chest freezer works better than any freezer section on a typical fridge. And the combo cost waaaaay less than we would have paid to get that much total fridge/freezer capacity in a combination unit or side-by-side built in like a Sub-Zero.

[lakedaemonian]

Re: The Insourcing Boom

Part of the reason for the reduced inventory at Home Depot (and pretty well everywhere else in retailand) is the financial constraints being placed by the banks on companies. At the onset of the financial crisis the first response of banks was to pull or reduce credit lines, and the next response of the retailers was to blow out inventory in order to get it below their newly reduced carrying credit limits. I was about to start my bunker project back then and I ended up stockpiling a lot of my materials and tools at distress prices from practically every building center and other suppliers at the time. EJ made mention of stocking up on durables in several posts in the crisis aftermath as well. The retailers won't ever go back to the inventory levels they had during the pre-crisis housing bubble.

Think out of the box. For the bunker, my wife and I decided to purchase a separate small chest freezer and an "all-fridge", both from Sears (Kenmore). The fridge cost a few hundred dollars, has more actual refrigerator space than a fridge/freezer combo of the same size, and is more efficient to run because it only needs to maintain one temperature. The chest freezer works better than any freezer section on a typical fridge. And the combo cost waaaaay less than we would have paid to get that much total fridge/freezer capacity in a combination unit or side-by-side built in like a Sub-Zero.

It's funny how the aisles in grocery and big box retail stores have widened to the point where it seems a giant Aussie mining dump truck could travel two across.....no traffic jams in the aisles anymore.

When it comes to appliances, I wonder how long until a total cost of ownership marketing model becomes common place.

Post 2008 energy price spike we saw people downsize their vehicles to more fuel efficient models......I wonder when fridge/freezer, big screen TVs, and heap pumps will be marketing for higher quality and initial price but lower energy consumption for lower total cost of ownership?

We're seeing the energy star system being pushed, but not converted into $ of electricity saved/consumed over 5-7-10 years yet.

[astonas]

Re: The Insourcing Boom

They say the factory of the future will have only 2 employees - a man and a dog.
The man's job will be to feed the dog.
The dog's job will be to bite the man if he attempts to touch any of the machines.

Good one! I love the imagery!

But I don't see this trend as being necessarily so bad. It will of course require improvements in initial education, and also lifelong learning/retraining opportunities. But in the end, one winds up with an economy that is not only more robust and dynamic, but also produces higher value-add products. In the end, highly automated factories not only provide better jobs, but more of them as well.

Of course, depending on the industry, it can take a while before "In the end" gets here. And a lack of commitment to public education can scupper the whole transition in the meantime.

[dropthatcash]

Re: The Insourcing Boom

+1

this is my basic gripe about the lib/dem political M.O. - they all seem to think that "with just another tweak here, another new law there and a few more rules/regulations - along with just a bit more 'funding' (and its always MORE) - we can fix all of OUR problems" - just re-elect us...

zactly lektrode. When even the 'experts' in private industry can't out-plan for their own future industry, how does any sane person think some buricrate can do that better?
Microsoft lost the internet search to Google
IBM gave away the P.C. market to Microsoft and Intel
Nokia and Rimm gave away to cell phone market to Apple
GM to Toyota
Barnes and Noble to Amazon
etc.