The Wall Street Journal yesterday had an article on a Texas-based maker of hand-held appliances is moving its manufacturing from China to Houston (Coming Home: Appliance Maker Drops China to Produce in Texas, Aug 24). The key quote here is:
The move flies in the face of conventional wisdom, which says gadgets like this are best made in a low-cost country. But, he says, outsourcing has led to a loss of control over manufacturing and distribution.
If one reads a little longer, however, one finds that the product in question is a line of hair irons, but not the kind that you might pick up at a discount store for 30 bucks or so. Rather, these are premium product that sells for $130 to $170. It is not clear that labor costs (as opposed to premium materials) is the main driver of costs for such a product and that every decision needs to be driven by finding the lowest labor cost. Moving to the US, investing in more automation, and redesigning the product will (according to the article) mean that manufacturing cost will go up by only $2.50. Throw in any savings in inventory and logistics costs, this does not seem too much to swallow. (For a counter argument on why higher tech products should be going to China while lower tech products should be done “near shore” see – or hear – this recent article on Public Radio’s Market Place: Companies rethinking the supply chain, Aug 10.)