By Kevin Meyer
Interesting article from an unusual source on bicycle manufacturing returning to the United States from "low cost" overseas countries. It gets some of the overall trends right, but some of the drivers wrong. Most of the other articles in this rag focus on the same tired mantra of creating "justice" by taking from the rich and the "profiteers" and giving to the poor to eventually make everyone poor, instead of teaching the poor how to become self-sufficient and rich. A rather bizarre illusion of "justice", but I digress.
But the factors that favour manufacturing in Asia are changing and the trade imbalance is about to shift again, says Jay Townley, a prominent industry analyst and 52-year veteran of the bicycle industry based near Madison, Wisconsin. Rising oil costs over the long term are making overseas shipping less economical. And US retailers now want faster turnaround. For these reasons, Townley predicts large-scale bike manufacturing will return to the US ‘in a bigger way’ sometime within the next three years.
Yes oil prices and faster turnaround are two primary drivers creating the movement of manufacturing back to the U.S., among many others.
The rising cost of running cars, an increasing focus on climate change and the emergence of a recent ‘buy American’ sentiment stemming from the global financial crisis could create a much larger US market for bikes. In addition, a shift by US manufacturers to mass-produced, low-to mid-range bicycles designed for everyday use should help them compete with the ‘China Price’ – the low price-tags for which Chinese goods are famous.
More competitive local manufacturing costs will also help. Bike factories have become fully automated. They employ significantly fewer people who require only a basic level of training. As a result, labour has become a small slice of the total production costs.
Yep, there we go again. Even more incredible that a journal with this political slant wouldn't even comment on the fallacy of automation vs. human "cost" and potential. They missed a big point, probably because they were too focused on the evils of profit.
As we've said many times over the past few years, labor is rarely a significant cost if you look at true operational costs... and those don't just include labor, material, and overhead. The most significant cost is unnecessary complexity and waste. Automation will often just automate waste... making you very efficient at doing nothing of value. You may recall when I visited one of the most efficient manufacturing operations in the world, Toyota's Kyushu operations that manufactures several Lexus models, automation is only used for processes that are potentially unsafe or too physically strenuous. And that's in a very high labor cost country.
Bingo... sort of. Sort of in that the larger point on customization is correct but in misusing "mass-produced" the author demonstrates considerable lack of understanding of modern manufacturing.
So let's dissect the story into the real relevant parts, which will could give North American manufacturing some hope (unless you're Cannondale and just now moving overseas... d'oh!).
- Rising oil cost is increasing the cost of shipping from so-called "low cost" countries
- The reality, and extra cost, of complex overseas supply chains is coming face-to-face with the desire for faster turnaround
- "Mass production" is coming face-to-face with the desire for and value in mass-customization
- Be extremely careful of automation. First lean your processes, then you'll probably realize that far less automation is needed. If any.
Hopefully some companies will take advantage of this opportunity, create jobs, and yes (horrors!) profit and wealth, before they also get snookered into accepting a bailout.