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'Make It In America' and Insourcing: Now the 'It' Things To Do

Posted by Brandon Weaver | Wed, Feb 06, 2013 @ 10:07 AM

make it in americaOutsourcing is a term many of us are familiar with, with differing connotations. Some of you may have lost your job, or know someone who has, because of outsourcing. Others may have benefited from outsourcing work because it saved money. As with many economies, there is an ebb and flow, and outsourcing is on its way out. Make room for insourcing!

Since 2000, manufacturing companies, and especially telecommunications, have become notorious for outsourcing jobs to save money. Sure this might have worked at the time, but they lost control of the production and delivery schedule in the process. However that is changing and AEIdeas explains other reasons why insourcing is becoming the norm:

  • Oil prices are now three times higher than the year 2000, which means it is more expensive now for ships to transport goods
  • The natural gas boom in the United States means lowered costs for factories, compared to Asia where natural gas is four times as expensive
  • Chinese labor costs are five times their 2000 level, and expected to rise 18 percent per year

During an NPR interview Charles Fishman of The Atlantic magazine states, "labor is less and less of the cost of making a product." This means the argument to outsource simply to save on labor is losing weight and encouraging companies to bring its operations back to the United States.

Just as there were incentives to cut costs by outsourcing, lawmakers have pushed for 'Make It In America' products. This initiative encourages companies to make more of its products here in the United States by offering tax incentives, ultimately putting more Americans back to work.

Insourcing and Make It In America may be the most prevalent with Ford, considering it is one of the largest manufacturing companies in the United States and they established the assembly line many factories have adopted. AOL Autos reports Ford is adopting more of an insourcing operation and Make It In America by investing $6.2 billion into domestic manufacturing plants. In turn, this saves approximately 3,240 existing jobs while simultaneously creating an additional 12,000 jobs by the year 2015.

Advocates of insourcing also say the strategy brings higher quality workers and eliminates shipping and energy costs. What company wouldn't want that? A critical emphasis for Ford's expansion is to make its factories more flexible so they can produce varying types of vehicles. In the past, certain vehicle models were designated for specific plants, not so much anymore. Here's why:

  • Increasing gas prices and changing consumer tastes have encouraged more plant diversity
  • It helps Ford and other U.S. auto brands be more competitive with other automakers, specifically Japanese brands that already operated on a more flexible scale
  • Retooling manufacturing plants creates more job security because workers do not have to depend on the success of one model to keep their job

Not to be lost in all of this discussion is the importance of a "Made in America" stamp on products. We all want to see the economy improve, buying more domestic products is a small step in the road to recovery.

Has your company experienced outsourcing or insourcing? As more insourcing occurs, people may be more prone to purchase "Made In America" products over imported products. We encourage you to share what your business is doing below and what you think the future holds for insourcing.

 

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Topics: Auto Dealerships

Written by Brandon Weaver