Making chips and shoes in U.S. factories

Although many offshored jobs will not return, U.S. manufacturing is in good shape, according to Donald B. Rosenfield, director of the Leaders for Global Operations program and a senior lecturer at the MIT Sloan School of Management. Writing in the Boston Globe, he notes, “Industrial production remains near its all-time peak, as measured by the Federal Reserve Board, and the sector will likely continue to thrive. More companies will set up—or indeed keep—their production here as the manufacturing sector becomes more efficient, innovative, and technologically sophisticated to allow for greater product variety.”

Rosenfield says companies have five criteria for where they locate their manufacturing operations: they want proximity to suppliers, proximity to technology developers, proximity customers, low transportation costs, and low labor costs.

“The United States wins on most of these fronts,” Rosenfield writes, “a reality that many companies grasp.”

He cites two companies as examples. First, shoe manufacturer New Balance assembles a quarter of its footwear in five American factories, which enables it to provide inventory support to replenish its stores quickly with a wide variety of sizes and styles. And local manufacturing helps the company understand and quickly respond to customer preferences. In addition, the company invests in advanced manufacturing methods, including 3-D printing, where the U.S. is at the forefront.

The second company he cites is Intel, which performs three-fourths of its cutting-edge wafer fabrication in the U.S. as well as three-fourths of its combined R&D and capital investment.

“There's a place for onshoring and there’s a place for offshoring,” Rosenfield writes, noting that the manufacturing of apparel and narrow product lines is unlikely to return. However, he concludes, other industries “…have great potential to thrive in the United States. The challenge for us is to make the investments to fully realize this potential.”

See related posts:

More in Industries