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Apple's U.S. manufacturing move boosts supply chain stability

Apple's manufacturing move was critiqued by some as little more than a PR stunt, but Mary Shacklett believes that it signals good things for supply chains and jobs beyond just Apple's interests.

Earlier this month, Apple made a small splash by announcing that it planned to open a $100 million U.S. manufacturing facility for Mac production. The most pessimistic of analysts quickly jumped out, with some calling the move a "publicity stunt" while others decried the move by noting that the Mac was one of the least strategic of Apple's current product lines.

One can only conjecture what the core of Apple's thinking is-but after recent attacks in the U.S. media that questioned Apple's commitment to its "home country" with all of the manufacturing it was sending abroad -- a minor investment in a U.S. production facility is not necessarily a bad publicity move. But there's potentially much more to it -- and in a number of places where many of us tend to not look at first glance.

Let's start with jobs. CFOs' pencils are sharper than ever now, so it would be hard to imagine a boatload of well-paying factory jobs coming online here when labor is cheaper elsewhere. Instead, what companies are starting to see is growing strength in the ability of U.S. plants to automate large areas of manufacturing that eliminates labor altogether, and that potentially makes production even cheaper than it is offshore.

A second prong to this is engineering labor. What thrilled Apple and other high tech companies in China was the ability of a skilled engineering contract workforce to be ramped up or down as needed. Flexibility like this has been hard to come by in the U.S., where we are still accustomed to hiring on with a given company to help engineer its products. In the future, this company-centric approach to highly skilled professions could change as it has in Asia. In other words, we might very well move to large contract engineering organizations that "hire out" engineering talent as needed to a variety of manufacturing firms that bid on the labor. Such a move would forever change how employees work, the wages they could command, and the loyalties they would ultimately hold -- but it could happen here.

In short, what we could be seeing in small in-sourcing moves like Apple's is an acknowledgment of the superior factory processing automation that is now coming online in the U.S. and that can favorably compete cost-wise and quality-wise with offshore labor.

But we're not finished yet. The "takeaway" that potentially benefits "Made in USA" advocates more than anything else is a signal that the U.S. supply chains for high-tech companies might be entering rebuilding stages.

Why does this matter?

During the recession years, machinery was unbolted from U.S. manufacturing plant floors and shipped abroad, as were manufacturing and engineering know-how and supply chain technology-the stuff that transforms goods from engineering specifications to internal orders for raw materials and then into finished orders for durable goods which are subsequently shipped to consumers. Most of this millennium's supply chain evolution took place in Asia, because this was where most of the high tech products were being built.

By in-sourcing some of the manufacturing activity to the U.S., high tech companies like Lenovo and Apple are also moving some of the supply chain know-how back. As U.S. supply chains expand and mature, having an established supply chain infrastructure in the U.S. with the latest technology will also encourage longer term local sourcing of goods and labor.

This is why a robust supply chain is potentially the most valuable long-term by-product of in-sourcing now. Supply chain alternatives give options to high tech producers (like Apple) in times of natural disaster, political turmoil or any other disruptive event. The supply chain brings in diverse business partners and suppliers and links them into a network of end-to-end product manufacture. It can ultimately deliver greater economic benefits than several hundred jobs and the creation of a plant or two.

About

Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President o...

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