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July 6, 2010

The manufacturing future - O'Reilly Radar

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via radar.oreilly.com

Should we be rebuilding our capacity in the U.S. for making things?

Posted by Dale Dougherty

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almost 2 years ago RickBullotta (Twitter) responded:

Mountain_20biker_normal

Interesting perspective, and one I mostly agree with (separation of brand owner + other aspects of the supply network). However, the reality varies by mfg segment (making biopharmaceuticals is way different than making iPhones which is different than baking bread, etc.). Also, the implications go well beyond economics - to national security, IP ownership and other issues. Virtual manufacturing will indeed enable more long tail products to come to market, but "traditional" manufacturing will exist in its current form for quite a while.

The disintermediation of the supply chain can also increase risks to the brand owner, who holds the major liability in the event of a product recall or safety issue, and lacking uniform product safety. Lastly, there's a reason things can be produced more cheaply in a society with a different view on health and human safety, environmental considerations, and so on. Lacking a level playing field, we will always see short term, quarter-to-quarter pressures influence micro decision making at the expense of the macro implications.

There is also zero reason why this growth needs to occur solely in emerging/emergent/low labor cost economies. Application of automation, energy and transportation costs, IP issues, local workforce expertise, and other factors come into play.

Take a look at the last few months of trade balance figures - who has the most favorable balance? The natural answer is China, and that would be incorrect. Actually, it is Germany, who has a vibrant manufacturing economy with many defensible, high intellectual property/specialty capabilities and a longer term view than US companies. Eventually, that will be pressured from low cost countries as well.

The lack of uniform IP, EH&S, and product safety regulations on a global basis may result in economic decisions made by brand owners that are good for their balance sheets but bad for their customers and the planet as a whole.

Bottom line is that *any* nation with a commitment to designing and building the right things, opening itself up to global markets, applying technological innovation to products, processes, equipment, and business models, and with a long term view rather than a quarter-to-quarter mindset, can prosper in the new manufacturing economy.