By Koray Özpolat, assistant professor of supply chain management
Stu Westin, professor of accounting information science
While dining with Silicon Valley executives in February 2011, President Obama asked Steve Jobs what it would take to manufacture iPhones in the United States. Jobs, in his straightforward tone, replied: “These jobs aren’t coming back!” Surprisingly, only two years later, Jobs’ successor Tim Cook announced Apple’s plans to bring some manufacturing jobs home by making the new iMacs in the United States. Since then, reports of iMacs sporting a backside stamp “Assembled in USA” have flooded the media.
Many generations in this country grew up during a “Golden Age” of American manufacturing. These words ring especially true here in New England, which was the cradle of the U.S. Industrial Revolution. The United States had been the leading manufacturing nation since late 1800s, until recently surpassed by China. This dethronement from the East came as no surprise as the U.S. manufacturing industry had been declining for three decades. Consequently, not only has the Golden Age passed, but in 2012 the nation saw a trade deficit of $92 billion in advanced-technology-manufactured products.
Despite these developments, there may be a glimmer of light on the horizon. Another manufacturing trend – so called “reshoring,” seems to be gaining momentum. In addition to Apple, GE and several smaller U.S. manufacturers have already brought home manufacturing jobs. Some foreign companies, most notably Europe’s Airbus and BMW, have also increased their investments in American manufacturing. No less important is Wal-Mart’s January announcement of its commitment to source an additional $50 billion domestically manufactured goods over the next decade. The economics of manufacturing in the global business landscape have certainly changed.
With increasing labor costs in Asia and cheap energy in the U.S., now it makes business sense for many companies to manufacture in the United States again. Nevertheless, it is the deterioration of public opinion on offshoring – especially in the light of the sluggish economy – that has pushed American businesses to consider reshoring. While most Americans are primarily concerned about the domestic job loss and unethical labor practices associated with offshoring, influential leaders further view it as a national security issue to transfer American knowledge and manufacturing capacity overseas.
A recent Massachusetts Institute of Technology study indicates that 14 percent of American companies are planning to bring some manufacturing back to our shores. Aerospace, defense, mechanical, and electrical equipment industries seem to be early adopters of this wave. Reshoring Initiative President, Harry Moser, reports that 50,000 jobs have already been reshored since January of 2010. These statistics are indeed reason for optimism. However, we must also be fully prepared to fill any jobs that are reshored. A New England Council study reports that thousands of advanced manufacturing positions remain unfilled across our region, despite our high unemployment rate.
Advanced manufacturing jobs are no longer the semi-skilled assembly-line tasks of 1970s. These contemporary jobs require computer training and use of cutting-edge technology, making it challenging to recruit workers with appropriate skills. At the 6th Annual Supply Chain Management summit in August, Ashley Singh, president of the Rhode Island manufacturer GSM Metals, put it bluntly: “There is very little talent out there in manufacturing.” Therefore, it is of utmost importance that our educational institutions and businesses in New England collaborate more effectively and aggressively to educate our students to meet the future needs of advanced manufacturing in our region. Success at this can create many well-paid jobs, not only for our students but for the middle class at large. Failure to meet the new labor demands may toll the final death knell for manufacturing here in New England.
This article appeared in The Providence Journal on Tuesday, Oct. 8