In interviews with both Businessweek and NBC, Apple CEO Tim Cook revealed that, starting in 2013, Apple will begin manufacturing some Macs in the U.S. Cook notes that Apple will invest more than $100 million to bring some of its manufacturing back to the U.S. from China.
Apple’s decision to invest in U.S. manufacturing was just the latest in a string of announcements from major companies that are onshoring manufacturing. Last October, for example, Lenovo announced that it would create a production line for PCs and tablets in North Carolina, near the company’s U.S. headquarters. GE opened new assembly lines in Kentucky to begin manufacturing appliances.
This isn’t a story about selling more products because they’re “Made in the U.S.A.” It’s a financial equation. Quite simply, it’s becoming economically wise to manufacture in the U.S. But as U.S. businesses bring their manufacturing home, a challenge arises: how to attract and train the next generation of manufacturing employees.
A changing equation
A number of changes over the past 15 years have rewritten manufacturing’s financial equation. Wages in China have increased 500 percent since 2000 and are expected to continue to rise at a rate of 18 percent per year. Oil prices have tripled since 2000, and that jump is reflected in higher shipping costs. More recently, natural gas prices in the U.S. have fallen so far that natural gas in Asia now costs four times as much.
Many companies are increasingly concerned about lack of IP protection in China, which may encourage them to keep manufacturing closer to the vest. Companies are also beginning to understand the hidden costs of separating manufacturing from marketing and engineering. Companies lose time to shipping components and products, or flying management from country to country to oversee production. Potential communication issues can hurt the quality of a product. When manufacturing is outsourced overseas, the time to market hamstrings true innovation. And of course, there’s a human cost — some overseas manufacturing plants have awful working conditions.
The next challenge
All of these factors have made the U.S. a more attractive option for manufacturing in recent years. Higher U.S. worker productivity and more flexible unions are adding to the list of reasons for companies to onshore their manufacturing. On top of the financial equation, many companies — both B2B and B2C — just want to be closer to their customers.
But onshoring jobs will require an investment, both in new assembly lines and new workers. The shift toward electronics and other high-tech products requires different facilities and skill sets than the U.S. employed in its manufacturing heyday. And as a country we need to portray manufacturing as an attractive, stable career. The government and universities are partnering with the industry to offer relevant training and courses for careers in manufacturing. In addition, more companies need to take the initiative to train manufacturing workers. Apprenticeship programs, such as those that have had success in Germany, are one way to attract qualified individuals who may not have thought about going into manufacturing. SCHOTT North America recently initiated an apprenticeship program modeled after the tried and true German apprentice model.
Businesses looking to onshore manufacturing should begin laying out a growth plan for the next five years, including worker training. If more companies do the math on the true cost of manufacturing overseas, the onshoring trend established by GE, Lenovo, and Apple is sure to continue.