American Manufacturing Starting to Make Sense Again

reshoringIn the past decade, offshoring was considered an obvious business decision for companies that wanted to reduce costs and increase profits. However, this trend may soon begin to wane as many American companies, both large and small, return to the U.S.

This so called “Reshoring Movement” has been generating a large amount of buzz, especially as high profile companies such as General Electric and Apple plan to start manufacturing more products back home. This reverse course is based both in public relations and sound economic reasoning. While larger companies often leave the majority of their manufacturing abroad, they are still able to benefit from the positive publicity of selling some American-made goods. For smaller businesses, it makes clear economic sense primarily due to soaring wages in low-cost countries. For instance, the pay and benefits for the average Chinese factory worker increased by 10% a year between 2000 and 2005 and rose to 19% a year between 2005 and 2010. This increase has made offshoring only marginally cheaper, and firms still have to deal with other problems such as intellectual property theft and unwieldy supply chains.

This trend ties in nicely with the issue over consistently high US import levels and enormous trade deficits. Harry Moser, head of the Chicago-based Reshoring Initiative, states that “since the 1950s, about three million manufacturing jobs have been lost to imported goods. So to balance the deficit we’ll need to bring back three million jobs.” While “reshoring” has only brought back around 50,000 jobs in terms of offsetting trade imbalances, it is an interesting development that is worth further exploration.

Posted by: Matthew Goldberg

Sources: The Economist, MIT Technology Review, Forbes

Photo Credit: World Class Manufacturing Academy courtesy of flickr user Chrysler-Group

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Apple to start manufacturing in U.S.

appleRecently, Apple CEO Timothy Cook announced that the company plans to invest $100 million in manufacturing operations in the United States next year.

This sounds like great news for the suffering U.S. economy but whether this decision will be beneficial to the U.S. economy or if this is just part of a public relations strategy by Apple is yet to be seen. The $100 million Apple is investing in this new manufacturing transition only amounts to 1/100 of Apple’s profits from last quarter.  More and more, high-technology manufacturing is made by robots, therefore this investment wouldn’t necessarily be going to produce thousands of new jobs here in the United States. The number of employees that will be added to the payroll is a mere 200.

When comparing manufacturing costs in China versus the United States, Apple’s move makes sense. The benefits of bringing these jobs back to the U.S. is that the company will not have to deal with union demands, Chinese regulation, or disputes with other contractors. China leads with a 72 percent profit margin for production compared to the U.S. profit margin of 46.5.  Although this seems like a significant difference, 46.5 percent is still not too shabby and the long-term benefits could be worth the move. As China’s wage rates and currency rise, skilled workers grow scarcer, the United States still maintains a strong lead over the nation in terms of productivity.

With the rapid emergence of China, India, and other developing countries transitioning to “middle income nations,” the cheap-labor-for-exports model is losing ground. In the future, we will start to see companies target manufacturing in the same country where the product is marketed. Apple is also changing the view on manufacturing with a shift toward more automated manufacturing. The final assembly is the least complicated part of producing it but the company is seeking to have more of the initial components made in the U.S.

Regardless of whether this is a public relations ploy or a new economic strategy for growth, Apple is thinking ahead about manufacturing.

Posted by: Elizabeth White

Sources: Reuter’s, Bloomberg Business

Photo source: courtesy of flickr user afagen

Apple: the Most Valuable Company of all Time

Steve Jobs would be proud to see where his company is today. The one year anniversary of the cofounder’s passing was greeted with remembrance and cause for celebration; Apple has recently become the most valuable company of all time. Reaching this height is not only an apt tribute to Jobs’ lifetime of innovation but also to his building of an extraordinarily successful company that has not only survived since his passing but exceeded expectations. With stock prices rising from $500 to over $700 a share earlier this year, shares up nearly 80 percent, and the much anticipated release of the iPhone 5 under their belt, Apple has definitely had a stellar year.

Apple came out victorious in other ways as well. The company has experienced impressive success under the reins of former COO-turned-CEO Tom Cook, beating out Microsoft who previously held the MVP title with $618.09 billion in 1999 market value. After winning a high profile suit against competitor Samsung, Apple has successfully defended its turf. From this exclusive creativity comes one of Apple’s newest ideas, the “iPad mini”, which is currently in the production stage. Ultimately, Apple is now peerless in its market. As of the morning of October 7th, Apple is valued at $652.59 on NASDAQ.

In spite of the general positivity of the year, Apple has faced several obstacles. The infamous Maps app debacle led many to question if, had Steve Jobs still been in charge, this poor-made product would have been released. This leads to further questions of the company’s long term longevity without charismatic Steve Jobs at the helm. Will the ideas continue to flow, the execution remain world-class, and the signature sleekness of an Apple product stay strong for the company? Or will post-Jobs era technologies become diluted away from the Apple dream? CEO Tim Cook argues for the former in his letter commemorating his predecessor’s passing:

“No company has ever inspired such creativity or set such high standards for itself. Our values originated from Steve and his spirit will forever be the foundation of Apple. We share the great privilege and responsibility of carrying his legacy into the future.” –Tim Cook

While we can’t predict the future of the market (even with Apple’s amazing products) one thing is certain: Apple is the world’s most valuable company in history, and it has set a very high bar for peers to match.

Posted by Sophia Higgins

Sources: CNN, Forbes, Reuters, Apple Intelligence

Photo credit: Apple 2 Apple @ Lori Greig’s photostream courtesy of Flickr user Lori Greig

What the Apple-Samsung Case May Mean for Innovation & Competitiveness

In a case that has garnered much attention by the media, Apple claimed that Samsung had infringed on several patents on the iPhone and iPad.The San Jose jury unanimously agreed with Apple in its verdict. However, a similar case in South Korea found that Samsung infringed only one Apple patent while Apple infringed two Samsung patents.

More important than the $1 billion that Samsung must pay to Apple for its infringements (which is a mere 1.5 percent of Samsung’s annual revenue) is the message Apple conveyed to companies with regard to basic design elements in electronic devices.    The case of Apple versus Samsung is just the first of several claims by Apple of patent infringements by other companies.  Most threatening is the message sent to device makers who use Google’s Android operating system.  Apple has surprisingly chosen not to sue Google likely because it is much easier to make a case for monetary damage against companies like Samsung that sell hardware to consumers versus a company like Google, which doesn’t charge device makers for its software.

The impact this case will have on future competition is yet to be seen, as some lawyers argue that Apple isn’t the only company that can come up with innovative designs-and its court victory could encourage more innovation by competitors.  However, others argue that this verdict could stifle innovation as it may force device makers to slow or abandon product development in fear of breaching Apple’s intellectual property resulting in less smartphones and tablets on the market and higher production costs and prices for consumers.

Samsung stated, “It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners or technology that is being improved every day by Samsung and other companies.”

Perhaps this case, which is one of the largest patent damages verdict on record, will encourage others to, “think outside the box” (no pun intended) and develop more unique designs in the future.

 

Posted by: Elizabeth White

Sources: The NY Times, The Wall Street Journal & CIO Journal

Photo Credit: apple-samsung Courtesy of Flickr user diTii

Small Business and Innovation

Large corporations, Apple and Google are the first to come to mind, often get the lion’s share of attention for innovation.  While that may be deservedly so, it doesn’t mean that small businesses aren’t doing their own fair share of innovating.

Chris Thoen the Managing Director of Proctor and Gamble’s office of Global Open Innovation, described ways in which it can be advantageous for a large corporation to work with a smaller counterpart in pursuing innovative practices or strategies.  Smaller businesses can be more flexible and are less bound to established practices which can lead to more risk-taking.  Some even argue that small businesses are innovating, but are merely not fully aware of their innovations.

The federal government also plays a role in small business innovation through the Small Business Innovation Research program, which administers grants to small businesses through eleven different federal departments.  Whether public or private sector, the ability to innovate successfully will be an essential task for small business throughout the 21st century.

Posted by: Rachel Barker

Sources: Blogging Innovation, Forbes, Innosight

Photo Credit: Cardiff ecotaxi courtesy of flickr user maisora