Insourcing boom!

Two articles in the December edition of Atlantic magazine highlight the very encouraging and exciting trend of “insourcing” – starting or relocating manufacturing operations in the United States.

“The Insourcing Boom,” by Charles Fishman, focuses on the remarkable rebirth of manufacturing at GE’s formerly rusting Appliance Park in Louisville.

James Fallows’ “Mr. China Comes to America” starts with an eyewitness account of the social and economic changes underway in Shenzen.

Some common themes on why insourcing is happening:

·      Labor, as a percentage of total cost in manufacturing, is declining.

·      The cost of labor in China is increasing.

·      The cost of shipping (fossil fuels) is increasing.

·      Some newer manufacturing techniques (especially 3D printing) are better served by small-scale operations.

·      Perhaps most critically, manufacturers are becoming more sensitive to the need to accelerate the design-to-manufacturing-to-shipping cycle and feel that controlling the whole process in one place with one team (including designers and engineers and hourly workers) gives the best value.

All great stuff for sustainable economic development in the U.S.!

How do we in the transportation community respond to these changes?

In recent years, there has been a significant increase in public investment in freight infrastructure, oriented mainly toward subsidizing the import economy – what I call the Shenzen-to-Walmart supply chain.  Billions of dollars have been pumped into port improvements and double-stack rail corridors.  And certainly there will continue to be major imports.  But a manufacturing sector that is more domestic, more localized, more oriented toward speed, more focused on nimbleness, will make demands on the transportation sector that we are not fully prepared to meet.  More to come on this topic.