Home > Uncategorized > The Insourcing Boom – Charles Fishman – The Atlantic

The Insourcing Boom – Charles Fishman – The Atlantic

December 1, 2012 Leave a comment Go to comments

Even then, changes in the global economy were coming into focus that made this more than just an exercise—changes that have continued to this day.

Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.

The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home. (Natural gas now costs four times as much in Asia as it does in the U.S.)

In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18 percent a year.

American unions are changing their priorities. Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.

U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.

So much has changed that GE executives came to believe the GeoSpring could be made profitably at Appliance Park without increasing the price of the water heater. “First we said, ‘Let’s just bring it back here and build the exact same thing,’ ” says Kevin Nolan, the vice president of technology for GE Appliances.

via The Insourcing Boom – Charles Fishman – The Atlantic.

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