Insourcing: Isolated Successes or a Real Trend?

President Barack Obama vowed to create an environment that will bring new jobs and businesses to our shores at the end of his second inauguration speech. A closer look at the numbers shows that despite increasing labor costs, Chinese labor is still 25 times cheaper than US labor. However, the US can offer lower shipping and distribution costs, along with a surprisingly more stable labor market and a shorter time-to-market. Proponents of insourcing highlight GEs success in returning its appliance manufacturing to the US. Although this venture was successful, part of this success can be attributed to GEs failure in recognizing their own flawed design. Once they were forced to manufacture the product themselves, they were able to shorten the assembly time from 10 to 2 hours, and consequently, the price of the water heater from $1599 to $1299. A success story, yes, but who is to say we would not see similar efficiency improvements in China with the updated design? Even if Chinese high-end manufacturing costs get too high, there are plenty of other Southeast Asian countries (and India) to turn to in the short-term. Long-term, exponential growth in industries such as robotics and 3d printing will likely change where and how manufacturing occurs. The king of outsourced labor, Foxconn, has realized that now robots are the future of cost-efficient production. The worlds largest electronics contractor and manufacturer of the beloved iPhone 5 plans to install over 1 million robots in its Chinese factories over the next three years. This leads to the inevitable question of why have automated production overseas when you can just have it in America? The return of this production to the US will lead to jobs new jobs, but the form and number of jobs will be undoubtedly different. Manufacturing will slowly become highly automated similar to agriculture, but this will lead to growth in other underdeveloped or entirely new sectors.