Saturday, January 21, 2012

Manufacturing Speed, Flexibility And Availability Of A Skilled Workforce Is Why US Plants Have Moved Overseas; Not Labor Costs

The international comparative competitive advantage for manufacturing is not in the US and is now in China And Southeast Asia. Those areas have the speed, the flexibility, the manufacturing facilities to make quick product changes and a readily available skilled workforce. Labor costs are not the reason manufacturing has left the US and moved overseas.

From The New York Times, "How U.S. Lost Out on iPhone Work" by Charles Duhigg and Keith Bradsher:
In part, Asia was attractive because the semiskilled workers there were cheaper. But that wasn’t driving Apple. For technology companies, the cost of labor is minimal compared with the expense of buying parts and managing supply chains that bring together components and services from hundreds of companies.
For [Apple CEO] Mr. [Timothy D] Cook, the focus on Asia “came down to two things,” said one former high-ranking Apple executive. Factories in Asia “can scale up and down faster” and “Asian supply chains have surpassed what’s in the U.S.” The result is that “we can’t compete at this point,” the executive said.
“The entire supply chain is in China now,” said another former high-ranking Apple executive. “You need a thousand rubber gaskets? That’s the factory next door. You need a million screws? That factory is a block away. You need that screw made a little bit different? It will take three hours.”
...building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.
“We shouldn’t be criticized for using Chinese workers,” a current Apple executive said. “The U.S. has stopped producing people with the skills we need.”

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