Build It In The Back Yard: Why We Need American Manufacturing

12/14/12Follow @bpqhimself

[Editor's Note: This post was co-authored by Brian Patrick Quinn, Patrick Connelly, Patricia Hurter, John Condon, Peter Mueller & Joshua Boger of Vertex Pharmaceuticals.]

American companies, in recent years, have developed a massive appetite for foreign labor. The shirt you’re wearing, the cell phone you’re using, and even the medicine you’re taking might have been designed in Massachusetts or California, but odds are that they were made, in part or in full, by low-cost labor in emerging countries. This “offshoring” of manufacturing is widely known throughout the government, academic, and business sectors. Apart from scattered outcries when American factories go dark, the practice is widely tolerated, and at times celebrated as a paragon of modernization. Public policy has rarely stepped in to restrain it.

However, for most people, “manufacturing” brings to mind the low-skill labor of armies of workers in vast, loud factories. This stereotype belongs to the 19th century, not the 21st – but, dangerously, it is allowed to guide policy even today. To the contrary, modern manufacturing is often a high-precision, highly-skilled process that Charles Dickens or Sinclair Lewis would have a hard time recognizing. It serves as the sharp tip of our innovation economy – not only by incarnating ideas as products, but also by generating important ideas of its own that filter into the rest of the economy. For the private sector, then, strengthening manufacturing in America is smart business. For the public sector, it would prove farsighted and beneficial to society.

Offshoring does have immediate allure and, in some cases, makes good sense. The case of low-skill, high-volume labor is an obvious example, but high-tech manufacturing – of consumer electronics, solar panels, pharmaceuticals, batteries for hybrid cars – is now commonly offshored as well. One of greater Boston’s most technology-intensive industries, pharmaceuticals, illustrates how this comes to be. Simple attention to the bottom line is sometimes what prompts companies to consider a move offshore: if we can outsource our manufacturing to foreign suppliers that cost a fraction of the competition in America, well, why wouldn’t we? However, according to some seasoned pharmaceutical executives, price is not the only factor driving a manufacturing decision – or even the most important. A foreign manufacturer may offer a lower price, but the pharmaceutical environment is so … Next Page »

Brian Patrick Quinn researches and implements new R&D programs, strategic plans, and external partnerships at Vertex Pharmaceuticals in Cambridge, MA. Follow @bpqhimself

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  • http://www.reshorenow.org Harry Moser

    The author links Michael Porter’s work on companies sharing value
    with society with the impact of offshoring manufacturing. The Reshoring Initiative is developing a
    software to help companies estimate the societal impact of their offshoring and
    reshoring decisions.

    Much of the offshoring occurred because companies looked only at
    wages or prices and not total cost. The Reshoring
    Initiative’s free Total
    Cost of Ownership software helps corporations calculate the real P&L
    impact of reshoring or offshoring.
    Current research shows most companies can reshore about 25% of what they
    have offshored and improve their profitability.

    About 10% of the approx. 500,000 manufacturing job growth since
    the low in January 2010 is due to reshoring.
    Based on the 309 published reshoring articles in our Reshoring Library http://www.reshorenow.org/resources/library.cfm,
    we calculate that at least 50,000 manufacturing jobs have been reshored.

    I was one of the business experts in Pres. Obama’s Jan 11, 2012 Insourcing
    Forum. I emphasized, and the assembled
    executives supported, the need for companies to more consistently utilize TCO
    analysis instead of price variance in making their sourcing decisions.

    You can reach me at harry.moser@reshorenow.org
    for help using our tools for sourcing decisions and when selling.