In the wake of the BP drilling rig failure in the Gulf of Mexico almost 18 months ago, costing untold billions of dollars in penalties and losses, this unfortunate incident has added to the importance of “ultimate responsibility” by the “front line” installer and ultimate user.
Added to these changing circumstances are both escalating and time consuming overseas transportation costs, plus the shrinking of direct labor costs that have actually dropped in the U.S., but quintupled in China during the last 10 years. In the case of high technology, the imbalance has even grown tighter as the cost of labor in finished goods have continued to be less important as part of the total price picture.
But what surprised me most in the Atlantic Monthly article is the fact that GE, universally derided as the “champion of outsourcing,” has taken a leadership role in reopening production facilities in the U.S.
Although dismissed by some as a public relations gesture, due to CEO Jeff Immelt’s previous collaboration as the White House chief of non-existing domestic job creation, the GE “insourcing turnaround is primarily due to the rapid need for constant product innovation, and the shift to “just-in-time” inventory control. This is made almost impossible by today’s multi-month delivery time and the volume of purchases necessary from abroad to achieve a satisfactory cost preference. Other major American multi-nationals are indicating a similar predisposition.
When viewing America’s 2013 domestic production expansion through the prism of “insourcing” rapidity, trade deficit shrinkage. and setting new export records, especially in energy, heavy machinery, military equipment, technology and agriculture, guarded optimism has entered the picture. But it still leaves in doubt economic direction, so heavily colored with questionable politico-economic leadership emanating from Washington, D.C.