In the December issue of The Atlantic, journalist Charles Fishman examines the “insourcing boom” — the return of manufacturing to North America.
In his Atlantic piece, Mr. Fishman examines the “rebooting” of the once stoic General Electric manufacturing facility dubbed Appliance Park in the heart of Kentucky — which until recently was dormant as jobs shifted to low-cost jurisdictions — to manufacture everything from the company’s high-end appliances to simple parts like the wire carts for dishwashers.
To Jeffrey Immelt, GE’s current CEO, the business model of “outsourcing” is outdated — an experiment attempted but now being written off as a failure.
“[Outsourcing] is quickly becoming mostly outdated as a business model for GE Appliances,” the article quotes Mr. Immelt as saying. “[I’m not rebuilding manufacturing in the U.S] because I run a charity, I do that because I think we can do it here and make more money.”
Within the the technology manufacturing sector, Apple is the most famous — if not infamous — for its relationship with the labour that manufactures its products; it’s the company that made Foxconn a household word.
In light of Apple’s highly publicized decision to ‘repatriot’ some of its manufacturing, the President of Lenovo’s North America region calls his company’s decision in October to open a US manufacturing facility a “solid business case”.
In October, Lenovo announced that it was planning to open a computer manufacturing facility in North Carolina. According to a press release, this facility would manufacture some of Lenovo’s think-branded lines of notebooks, tablets, and desktop PCs for enterprise clients and consumers.
Lenovo’s case of bringing part of its PC manufacturing to the US is different from Apple’s or General Electric’s: Lenovo is a Chinese company. In what is sure to be analyzed in the halls of academia and the pages of The Economist, the trend of “insourcing” has led to “outsourcing” from China.
Hardware Canucks had the opportunity to speak with Gerry Smith, President of Lenovo in North America, about his company’s decision to move some of its manufacturing to the United States.
Mr. Smith told Hardware Canucks that having a manufacturing facility in North America would give it an advantage in supply chain speed and flexibility.
“Our decision to invest in the US manufacturing line is based on a solid business case, and we are very confident this project will produce an attractive return on investment for our customers and shareholders,” Mr. Smith said to Hardware Canucks via email. “The potential benefits offered by the new line will provide greater speed and flexibility in our North America supply chain, which will enable Lenovo to move faster in responding to emerging market trends and customer needs, all within a very competitive cost structure.”
According to Mr. Smith, manufacturing in the U.S will allow Lenovo to quickly reconfigure their supply chain should the preference of North American consumers change; the leviathan of Lenovo’s assembly machine would better adapt to market changes being partially on the continent.
“These advantages [of manufacturing in North America] will help us continue growing faster than the rest of the PC market. Our goal is nothing less than to become the market leader in North America, and the USA manufacturing project is an important part of our strategy to achieve this objective,” he said.
Though reports from market consultancies all point to a slowdown in the PC marketplace, this is not a deterrence for Lenovo. The company thinks by placing manufacturing line in North America its new flexibility and distance to market means it can outgrow the competition.
“We believe this line will be a key resource in helping us sustain above-market growth and eventually achieve a market leadership position in North America,” said Mr. Smith. “These advantages will help us continue growing faster than the rest of the PC market.”
While Mr. Smith uses terms like “above-market” growth and “competitive cost structure” to justify Lenovo’s opening of a manufacturing facility in the United States, he, and G.E’s Jeffrey Immelt, are both facing a changing consumer base that had a preference for products assembled in North America.
Lenovo’s boss said it himself: “the line will address the strong preference or requirements of some North American customers for products assembled in-region.”