A Novel Way of Dealing With Apple Supply Shortages: Bring Component Production Back Onshore!
As anyone who closely follows procurement and supply chain management knows, production for many supply categories has moved entirely offshore in the past decade. From certain textiles to TV/monitors to computer hardware and peripherals, it's all but impossible to find domestic sources of supply. Low cost countries aren't an option for these spend areas -- they're a requirement. Even if you wanted to source locally, you couldn't. We've often debated this topic around our office, including the premium we would pay for domestically sourced products -- or products with greater domestic spend included as part of the finished product or complete bill of material -- if we could. When it comes to such things as children's toys, an area where the Chinese have consistently shown a willingness to compromise quality and safety on from lead paint to Cadmium, we'd happily pay a 100% premium if we could. And we'd buy less junk for our kids in the process (which was the way it was when we were growing up).
I think there are a lot of people in the workforce and in the home who would consider a similar argument if a domestically made and sourced premium substitute was available. Perhaps a company like Apple, which has historically created more expensive products with no differentiation -- remember the black MacBook, anyone?? -- could begin to take advantage of these sentiments by creating premium versions of their products with greater domestically sourced or manufactured components (even if the final assembly remains with an offshore contract manufacturer). If Apple were to take the lead in rebuilding a domestic supply base where it does not exist today, they would gain numerous benefits including:
- An outstanding basis for a marketing campaign
- The potential for greater control over IP in sensitive areas
- The ability to charge a material premium for select product lines (or configurations within a product line)
- The ability to reduce supply risk by hedging their bets with multiple supply options (witness the recent supply shortage LG forecasted for a component they supply for the iPad)
- Currying favor with domestic industry and government (who might be more likely to consider Apple products in the workplace)
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Unemployment has hovered near 10% for quite some time. And while there has been some downward movement, it is difficult to envision unemployment dropping to a more normal 4 - 5% any time soon, if ever. That is, unless American production becomes more cost competitive vis-a-vis China, India, Vietnam, Pakistan, etc. But can American production ever get to that cost competitive level without significantly reducing the standard of living here in the US? On the flip side, will our country even have a choice to maintain its standard of living with this economic environment and its murky prospects for future growth?
As you can see, it is a complex situation we have on our hands here. Trade is good. Trade is bad. Trade needs to be balanced to have optimum benefit. But every country is trying to achieve optimally balanced trade. And one country's optimum balance is not the optimum balance for the next country. Unfortunately, right now is not feeling very balanced in the USA.
We recently purchased a German washer/dryer (Miele) because it's the last one made with primarily Western-sourced parts and components (not because we believe in buying US or European products or brands because "it's the right thing to do" as some people believe; we voted with our total cost wallets). Over 15-20 years, it will be far cheaper to maintain this system than ripping out and replacing (or spending a fortune on new motors, PCBs, etc.) a Whirlpool or Bosch, which have essentially because Western brands with LCCS innards (trust me on this one -- I can speak from actual sourcing experience as well as the experience of an angry customer).
In general, our experience with other US and European brands for household appliances is that you can map the quality decline precisely to when China sourcing ramped up. Sure, they're fine for 2-4 years in warranty, but if they get heavy use after that, watch out. This is what gives me hope for a renaissance of domestic manufacturing and production with the proper policy incentives and alignment in place to enable it.
BTW ... we have a rental property which still has a twelve or fifteen-year old washer/dryer in it. Whirlpool I believe. What an amazing product -- it keeps working with minimal maintenance. Even with 10-15 cycles run per week, it refuses to quit. All domestically sourced / manufactured. No surprise ...
You state my frustrations quite eloquently, but it's more complex. Unfortunately, as we have ceded the base manufacturing jobs overseas, we have also ceded the support for those jobs. For example, I believe that there aren't any machine tool companies left in the US. They have located their "center of expertise" in the regions where the work is being done. For Apple to buy in the US, it's not just the matter of moving a couple of industries here, you also need all of the supporting industries, and unfortunately, Apple's not big enough to make it happen.
This is why I believe that investing in local production of green technologies, biotech, etc. is critically important. Whether we like it or not, we have ceded electronics to Asia.
You mention the German washing machine as being more Western than the "American" Whirlpool. Good research, but how many people will put that time or effort into research? Maybe the time has come for all products to have clearly marked country content labels so products can be compared in the store at the point of purchase.
Last time I ate this in China ... http://foodmuseum.typepad.com/photos/uncategorized...
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I got quite ill, remember?