The Supply Chain metaphor is not wearing well.  The idea fit well a few decades ago when companies were vertically integrated, had local suppliers and served home markets.  Now it seems to look more like a relic of another century.  Companies that once proudly claimed to make things have found it far more profitable to outsource manufacturing and redeploy their earnings towards product development and marketing.  As Apple, Cisco, Nike and others have found it is all about developing IP and their brands. 

The reason for this is that shareholders will no longer tolerate the rate of return generated from plant and capital equipment investments.  A few million dollars can buy you a shiny state of the art chip shooter or a brand new product capable of making tens of millions of dollars.  That is why manufacturing is really moving “offshore”.  Actually, it is moving to any shore where low rates of return are tolerated to build new factories to employ people and win market share.  Contract Manufacturing, for example,  is a brutal business with single digit margins rivaling grocery stores yet the capital investments required to complete at a global level are staggering. So why do they do it?  This is the real  life version of joke about “making it up on volume”… If the economy is good, the market is strong, their customers products are hot, and the supply chain liabilities manageable then it is possible to make some money.   Otherwise it is a ”challenging business” to be in as they say. 

Now that we have unwound Brand owner manufacturing it is very unlikely it will ever go back to the way it was.  Critical manufacturing skills once lost are gone for good.  My father was a time study engineer who loved figuring out how to do things with less effort.  His colleagues were highly skilled (and well paid) engineers, designers, technicians and mechanics that could make anything and keep it running forever.  Now after decades of layoffs, plant closings, and “technology transfers” to low wage countries the skills have disappeared.  

The hope for a new Green Economy built around jobs is getting a lot of airplay from the Obama administration and several US companies that see huge market opportunities and there is a lot of merit to the concept of manufacturing things again that the world will want.  More efficient jet engines, wind turbines, water distillation equipment, carbon capture infrastructure are all part of the mix.  They represent technology core competencies we have and are not the kind of things Contract Manufacturers will shove offshore to save a few pennies.  The problem however is where will the skilled human resources come from?  Sounds like a good problem to have when your running nearly ten percent unemployment.  The Green Economy cannot come soon enough for them.