“Made in America” is a Luxury Most People Can’t Afford The world has become smaller, we live in a global economy and, like many companies around the world, our company sources globally to produce superior equipment at affordable prices. This post is inspired by some recent negativity encountered with a potential customer about the location of our factory, which is Nanjing, China. The potential was impressed with our product design and pricing (including freight), but we lost him completely when he asked where our factory was located. We are not ashamed of it and we don’t hide that fact, so I thought it was time to write about global sourcing and why we do it.
A Personal Story About Global SourcingA friend of mine is a talented needlepoint artist. She creates her own unique needlepoint designs, painstakingly painted on a special canvas. Her designs are very beautiful and she decided to turn her unique talent into a business–she would wholesale the hand-painted canvases to needlepoint shops. Because painting a single canvas can take hours and hours, most designs you would buy in a shop are not painted by the original designer, but by copy painters. My friend opted to outsource the copy painting to China because, as she explained, “If I had them painted here, nobody could afford them.” It became a viable business for her, the retailers had a good resource for lovely and affordable designs and the customers were happy with the product and the price.
Why Apple Cannot Manufacture in the U.SThat needlepoint exchange was many years ago–global sourcing is not a new thing, though it is a subject that bothers a number of people these days. But the truth is, “Made in America” has become a luxury most people can’t afford. Most of us buy things made overseas all the time, whether made there by an American company or a straight up import. For most Americans, except for the wealthy ones, buying all American is not even economically feasible. And even for those who can afford to, there are just some things that you will not find made in the U.S.A. That smart phone, for instance. Apple now manufacturers almost all its products in China and it’s not only because of the cost of labor. In “Why Apple Has to Manufacture in China,” Karan Girotra and Serguei Netessine write, “There is simply no factory capable of employing 250,000 workers day and night in the USA, surrounded by flexible and capable suppliers. So the location decision isn’t really about labor costs — it’s about manufacturing risk and where that risk is best managed.” Manufacturing in the USA is simply no longer viable for Apple and may never be. An article in the New York Times, “How the U.S. Lost Out on iPhone Work,” relates how a last-minute iPhone redesign forced an assembly line overhaul and within four days the plant was producing over 10,000 iPhones a day. In the article, an Apple executive was quoted as saying, “The speed and flexibility is breathtaking…There’s no American plant that can match that.” The upshot is that America isn’t producing enough people with the skills needed and doesn’t have the labor force to support Apple’s manufacturing operations.
This is Not Just Apple’s StoryThis story does not just belong to Apple or the electronics industry–global sourcing is common in many industries and most of the outsourced products Americans buy are not luxury items. In an article in the Huffington Post, “Made In America Is A Luxury Label That Will Cost You,” Catherine New tells the story of how one man’s year long experiment of purchasing goods made in America was aimed to “draw more attention to American-made good goodness,” but instead:
…his experiment underscores the new truth about American-made products: The only people who can afford to buy them are the richest ones. “I am capable of it,” he acknowledged, “but I don’t think it’s feasible for everyone to do this.”New concludes her article by quoting an economic historian:
“People are fearful that trade is harmful and they only see that it’s costing us jobs,” said Jason Taylor, an economic historian at Central Michigan University. “But these lower prices keep the cost of living down for every American, but it’s especially relevant for the lower and middle-class.”In “Ignorance Regarding Outsourcing in a Global Economy,” Bill O’Connell, writes that he received an email from his congressman promoting his fight against outsourcing. He states, “In a global economy, it escapes my why this is a good thing and why we need more businessmen in Congress and fewer professional politicians and academics.” O’Connell then gives us his written response to the congressman, which is well worth reading in its entirety, but here is a snippet:
Is it your goal to make America a nation of lettuce pickers, or seamstresses? Is it your goal to make our clothes cost twice as much as they do today so that working families have to spend more of their take home pay on clothes because you insist that clothes only be made in American factories that would have the double edged effect of raising the cost of the clothes and not paying very high wages? Or should we focus on jobs for engineers to design computer controlled looms that we can sell to these counties?O’Connell’s response to his congressman was somewhat scathing but he makes sense. He also brings up another side of the outsourcing story that many of us seem to miss: Should all the overseas companies (like Toyota, Honda, Volkswagen, BMW, etc.) who employee tens of thousands of U.S. workers take their work back to their home countries?