Manufacturing Returns to the USA
In the March 2012 HBR, Jeffrey Immelt, CEO of GE, talks about bringing manufacturing back to America. “Today at GE we are outsourcing less and producing more in the U.S. We created more than 7,000 jobs in 2010 and 2011.”
GE, like many other companies, have found the offshoring manufacturing isn’t always the boon it was thought to be. In Choosing the United States, authors Michael E. Porter and Jan W. Rikin show that the initial costs of outsourcing are high and the expected benefit declines rapidly by year four. There are many “hidden costs” of offshoring including many indirect costs like the lessened ability to respond to shifts in demand and loss of intellectual property.
At GE, teams in Louisville, Kentucky took a 25-year-old dishwasher line and, using a Lean approach, achieved these amazing results:
- Improved labor efficiency by 30%
- Reduced inventory by 60%
- Reduced cycle time by 68%
- Reduced space required by 80%
Smaller factory + less inventory = faster manufacturing and lower costs. That’s a recipe for the successful return of manufacturing to the U.S.
GE is working to reduce cycle time on a refrigerator line from nine hours to less than half.
Immelt says: “We need to believe that we can design, develop and produce here in the United States; that we can do it effectively and efficiently; and that we can win. We need the confidence and the mind-set that we can outperform anyone.”
What jobs could you create by “onshoring” manufacturing using a Lean factory? What markets could you dominate by being better, faster and cheaper than anyone anywhere?