Gone Baby, Gone … Even From Mexico
In response to my post, Corporate Strategy and the Speed of the Supply China, several people commented on their hope that said jobs might one day return to the US and/or they posited the question of why not Mexico rather than China so that goods could be moved into the US more quickly?
If only it were that simple. See this March 3, 2008 WSJ article, US Shoe Factory Finds Supplies are Achilles Heel.
This article beautifully highlights why said jobs, industry and manufacturing left the US and ain’t never coming back. The article discussed how a man with his heart in the right place tried to bring some manufacturing back to the US from China and he set up a shoe manufacturing plant in Florida, he did all that he could to make it work, yet in the end failed.
Why did he fail?
Well, at the end of the day, Chinese labor is cheaper, lots cheaper, than American (and even Mexican) labor, and many just don’t fully understand and appreciate how cheap it is in comparison to these other places. He could just not compete. Perhaps more importantly, the infrastructure needed to make a factory tick no longer exits in the US for most products and industries (and if it does not exist here, it sure does not exist in Mexico in many cases). Note that the term “infrastructure” does not just mean roads and UPS delivery — it also means parts, service professionals for machines, the willingness of a firm’s supporting suppliers to fill smaller orders, etc.
One reason China can offer a more competitive factory “infrastructure” is due to clustering, and we will discuss this in greater detail once we are in the road in China. This is where a number of firms in the same industry set up shop together, or, entire towns in China devote their existence to the production of one product (e.g., sock city, watch city, tie city, etc.). The synergies and efficiencies offered by such clustering are hard to beat.
For a number of products and manufacturing industries … gone baby, gone.
8 comments March 13th, 2008
