Manufacturing: Coming to America

A recent headline in the daily SME Executive e-newsletter proclaims “Some Companies Moving Manufacturing Jobs Back To America”. The story lead continues: “A small but growing band of US manufacturers - including giants such as General Electric, NCR and Caterpillar- are turning the seemingly inexorable off-shoring movement on its head, bringing some production to the US from far-flung locations such as China.”

This development is a good illustration of several key points of supply chain management. Above all else, supply chains must be flexible and agile. As conditions change, the supply chain must adapt ... and conditions certainly have changed. Labor costs in China as rising rapidly. Quality issues have come to the forefront recently. Shipping costs change rapidly and dramatically, and companies are ever more aware of the importance of lead time and inventory buffers required to accommodate longer lead times. That also points to another key supply chain consideration – risk.

Supply chain risk is the recognition that all elements of the supply chain are subject to disruption from any number of causes – natural disasters, labor unrest, political upheaval, pricing changes, and many more. The well-designed supply chain is built around certain assumptions that reflect current conditions. Savvy supply chain managers will anticipate all the ways those conditions might change and prepare contingency plans in case they do (change). Then, when the worst case presents itself, the company already knows what to do and can quickly execute on the contingency plans to keep the supply chain moving.

The reversal of the off-shoring trend is indeed good news for America and American manufacturing. So far, the manufacturing sector has been leading the country out of this recession and this trend promises to help continue that happy development.