Comment by Claire Reilly

A feature printed in the December 2012 issue of the American journal Atlantic Magazine, reprinted today in The Australian Financial Review, has shed light on the issues and complexities around sending manufacturing offshore, with a close study of American appliance manufacturer, GE.

In his in-depth analysis of the twentieth century trend of offshoring appliance production, author Charles Fishman argues that the movement has now come full circle and that manufacturing jobs are coming back home from China – resulting in significant improvements in the US.

Significantly, Fishman draws the link between the offshoring of jobs and factory production lines, and the loss of innovation and, in some cases, increases in costs that a company sees.

“It happens slowly,” he writes in the feature-length article. “When you first send the toaster or the water heater to an overseas factory, you know how it’s made. You were just making it – yesterday, last month, last quarter.

“But as products change, as technologies evolve, as years pass, as you change factories to chase lower labour costs, the gap between the people imagining the products and the people making them becomes as wide as the Pacific.

“The offshoring rush of the past decade or more – one of the signature economic events of our times – may have been a mistake.”

While Australia is thousands of miles from America and General Electric’s factories in Kentucky, the article raises pressing issues that our local industry faces. With fewer products being made in Australia, and more and more retailers looking offshore to source their own house-brand products – an issue that has drawn the ire of at least two Australian small appliances brands – the Australian appliance industry is no doubt asking its own questions about the benefits and detriments of sending production overseas.

For brands that are assessing their own manufacture processes, for retailers interested to know what difference offshore manufacturing makes to the roll-out of products into stores or for anyone in the industry looking for insights into how our appliances and electronics are made, this is compulsory reading.

The full article can be found on the online archives of Atlantic Magazine at The Atlantic website ("The Insourcing Boom", by Charles Fishman). Alternatively, the article can be found reprinted in full in the Friday 1 February edition of The Australian Financial Review on the opening page of the Re|View lift-out (retitled as "Offshoring Comes Home"). It’s definitely worth a look.