GE leading "insourcing" wave – APRO RTO Headquarters

Taking the Pulse

An increasing number of American companies are coming to grips with the fact that outsourcing manufacturing may no longer be a sustainable solution in an increasingly technology-driven ultra fast-paced appliance market.

With spiking oil prices — now three times what they were in 2000 — a domestic natural-gas boom in the U.S. that has dramatically lowered the cost for running a factory here at home and rising wages in China — now five times what they were in 2000.

American made is becoming less of a slogan and more of a realistic “about-face” for some of America’s historic manufacturing titans, according to a recent in-depth feature in The Atlantic.

The prospect, the article notes, “raises a troubling but also thrilling prospect: the offshoring rush of the past decade or more—one of the signature economic events of our times—may have been a mistake.

It was important to innovate, and to protect innovations, 10 or 15 years ago. It was important to have designers, engineers, and assembly-line workers talk to each other then, too. That companies spent the past two decades ignoring those things just shows the power of price, even for people who should be able to take a broader view.

GE’s appliance unit does $5 billion in business—and today, 55 percent of that revenue comes from products made in the United States. By the end of 2014, GE expects 75 percent of the appliance business’s revenue to come from American-made products like dishwashers, water heaters, and refrigerators, and the company expects that its sales numbers will be larger, as the housing market revives.

GE is not alone in moving the manufacture of many of its products back to the U.S. The transformation under way at Appliance Park is mirrored in dozens of other places, with Whirlpool bringing mixer- making back from China to Ohio, Otis bringing elevator production back from Mexico to South Carolina, even Wham-O bringing Frisbee-molding back from China to California.

The recalibration of costs in recent years is one reason, and the competitive benefit of keeping production stateside is another. But the logic of onshoring today goes even further—and is driven, in part, by the newfound impatience of the product cycle itself.

Just a few years ago, the design of a new range or refrigerator was assumed to last seven years. Today, industry experts say, no model will be good for more than two or three years.

This phenomenon is not limited to GE.

The feverish cycle of innovation and new products beloved in the electronics world has infected all kinds of consumer categories. Products that once seemed mature—from stoves to greeting cards—are being reinvigorated with cheap computing technology.

And the product life cycle is speeding up—many goods get outflanked by “smarter” versions every couple of years, or faster.

Bringing jobs back to Appliance Park solves more than one problem. It is sparking a wave of fresh innovation in GE’s appliances—every major appliance line has been redesigned or will be in the next two years—and the experience of “big room” redesign, involving a whole team, is itself inspiring further, faster advances.

In fact, insourcing solves a whole bundle of problems—it simplifies transportation; it gives people confidence in the competitive security of their ideas; it lets companies manage costs with real transparency and close to home; it means a company can be as nimble as it wants to be, because the Pacific Ocean isn’t standing in the way of getting the right product to the right customer.

Turns out, domestic manufacture will likely provide company’s with the opportunity to provide higher quality products at a better price point than traditional outsourcing.”

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