The Beer Game -or- Why Apple Can’t Build iPads in the US
blog.marksweep.com
blog.marksweep.com
> The U.S. has lost that industrial base and it’s extremely difficult to get it back. It’s not about unions, jobs Americans don’t want - it’s about delay.
Considering that Foxconn is starting to make iPads in Brazil, this article is way oversimplifying things. It's mostly about labor costs and environmental aspects. The iPad is assembled in China, but most of its components are from elsewhere. The CPU is from Texas, a lot of the other chips are from Korea, etc. It could be assembled in the US without supply troubles.
http://www.macrumors.com/2012/04/05/apple-gains-certificatio...
From the linked article:
"with domestic production of the iPhone and iPad providing a means by which Apple could avoid hefty import taxes in one of the world's most populous countries. "
I don't know any of the details, but I would assume Foxconn is performing the absolute minimum level of assembly necessary to meet "domestic manufacturing" requirements. So it is in no way an effective counterexample.
Plus, Brazilians are used to long supply-chain delays (like major supermarkets in major cities running out of Diet Coke or Ruffles) in a way that Americans will not put up with. Something tells me Foxconn's Brazilian factory may not be too different.
It's absolutely a counterexample. The iPad is assembled in China, but its parts are from all over the world. Now it's also assembled in Brazil. The supply chain in China isn't critical to the iPad's assembly, just critical to the iPad's assembly at the current profit margins. Despite the hot air in the article, you could absolutely manufacture iPads in the US. Much like Brazil they would cost more, but that's not what the article was talking about, it said they can't be made anywhere else. That's bullshit, proven by Brazil.
Nothing is insurmountable with enough time and effort, but demonstrating that Brazil can easily accommodate a factory says nothing about the ability of doing the same in the USA.
China is responsible for making every iPad in the world outside of Brazil. You can't assume the same amount of risk for that scale. If a component goes bad or if demand skyrockets, you want as many responsive factories around as possible to pick up the slack or to get you new components. Why wouldn't you want to locate your supply chain in China? Only if you have a situation that looks like Brazil--high import tariffs.
The local government ends up subsidizing this process, under the claim of creating jobs, to far more than the income from the tarif.
Meanwhile your consumers are still paying more for the product, paying again for the tax breaks and you still haven't protected any local iPad competitor ;-)
edit: A famous example of this is a Ford plant in Chicago that removes seats and windows from Ford vans. There is a stiff US import tarrif on foreign trucks to protect the US truck building industry. Ford builds Transit vans (box van in US speak?) in europe but it would be too expensive to import those into the US so it imports mini-buses = box vans with seats. It then has a plant that removes the seats and windows converting them back into Transit vans to sell.
But the important thing is that high quality seat-removal jobs are kept in the US, a plant in Chicago is paid for by the tax-payers of Chicago and a great American truck building company like Ford is protected from cheap foreign competition by Ford.
I love it when people say that. I love it because I work for a company that very much does still make stuff in the US.
We just make more stuff, with fewer people.
We also make stuff in Asia, EU, Mexico. It's hard to stereotype who makes what - but generally sites in NA make the complicated, expensive widgets, Asia make the high volume not-so complicated gear, EU is a mix.
This is a huge gap that filling would reap both financial and political rewards.
On the flip side, let's say you want to manufacture a new custom processor for your ipad competitor, or turbine for your new 787 competitor. You won't get those things in China, at least not without significant involvement from US companies.
Fundamentally I don't believe that. I could just be stupid.
I see the automation that is possible in the US, the infrastructure, and you tell me that its not possible for someone to make a business out of assembling things? Sure its cheap to pull 10 dextrous laborers out of the Chinese working class and make an assembly work cell out of them, what prevents a technologically sophisticated engineer from doing the same with one robot workstation and some programming? I've had boards made and assembled in the US, that is pretty straight forward, getting a tool and die shop to make cases isn't that hard either. What I haven't seen is an infrastructure that ties together all of these small shops like the ones in China, Korea, and Malaysia do.
Disruption is our middle name, why not disrupt the world of real goods?
Here is my thesis, creating a 'small' factory in the US is hindered by the inability of that factory to find work to fill its capacity. That limits its ability to make a profit, so the bids are priced to make sense when the factory is running far below its ability to produce. That makes the costs of goods it produces 'expensive' relative to a factory which is running at or near its theoretical capacity. If we had a way of keeping those small factories pipelines of work 'full', they could charge less because they would be getting more work out of their sunk costs (equipment, facilities, power, etc). In terms of comparative advantage we gain, transportation and communication benefits to the local markets.
So tell me why that isn't possible?
Your thesis is wrong not because it can't be done, but because the competitive gains (transportation, communication) don't outweigh the gains to doing much higher value-added tasks. (Not to speak of the potential costs in having to pay higher wages, deal with environmental concerns, etc, but i'll leave those out because they're political, not fundamental.)
Let's say the US only has 10 engineers, but they're really really good. China has 50 engineers, but they're less good. (Good being a stupid shortcut to saying they have more domain expertise/resources, not Jingoism about the quality of Chinese engineers).
Now the US engineers _could_ start a factory making iPods, and they'd be just as good as the Chinese, or just a little better and sell for around the same price, with a profit $X. It's relatively low startup cost, and has relatively low barriers to entry.
Or, the US engineers could start a factory making specialized composite-material airframes for space ships, which the Chinese lack the ability to build at all (so far), with a profit of $50 * X. It's much higher startup cost, and has huge barriers to entry, so there won't be competition for years.
The US engineers can build the wings, buy iPods from the Chinese engineers, and still pocket a huge difference! Meanwhile the Chinese engineers are thrilled to build ipods, because it's the first step in learning the skills to build Rockets. (Nonsense example, but you get the idea) This is basic comparative advantage with respect to a value-added chain.
Your theory would override this IF we had unlimited engineers and a basically level playing field for production costs at the low end, but we don't for tons of reasons, mostly around regulation (which I'm not saying is a blanket bad thing).
With only so much capital, why make iPods when you could be making satellites?
Now of course this example is trivial for lots of reasons, but the general pattern has been playing out for 100 years.
As nations gain expertise and working capital, they move up the value chain and outsource what they lack the resources or environment to build cheaply. Historically this gain in ability has been accompanied by an associated gain in wages/worker protections (for lots of complex reasons), which even further propels you a nation to move up the value chain, since you only want to build the most profitable possible things that you can.
I am not an economist or a business guy - I move bits for a living. But I'll take a stab at it.
what prevents a technologically sophisticated engineer from doing the same with one robot workstation and some programming?
I think that, right now, there ain't no such automation that can deliver what you want at a price/time you'll be willing to live with.
I've seen demos of such. Give it 10 years and you'll be able to custom order anything you can design, and that is legal.
Quasi-legal items ... well that's what your basement is for.
It's that we are ever making less in the US and ever buying more made elsewhere.
iPods, sure.
But if you're talking really expensive, high-quality, hard to make stuff ... it's likely made in the US.
One just doesn't see it because the average guy sees a lot of cell phones, and iPods, but doesn't really notice manhole covers or iron-castings with millionth-of-an-inch tolerances.
Would it surprise you to learn that US manufacturing output looks like this?
If we can't agree that manufacturing started to move out of the US decades ago, was accelerated by NAFTA, and that we are a consumer of goods made elsewhere (more than others are a consumer of goods made here), then this conversation isn't going to go well.
Not only do we manufacture things, we manufacture much, much more than we used to.
See http://unstats.un.org/unsd/snaama/dnllist.asp for data.
There's nuances here to be explored in what exactly is being manufactured, and there's some other interesting ways to extract bad tidbits of news out of that data, but it is certainly the case that the data does not justify running around shouting "DOOM! DOOM!" about manufacturing qua manufacturing in the US.
Personally I'm upbeat about the future. As robots and automation continue marching forward, the US goes from having a major labor cost disadvantage relative to poor countries to having a significant educational advantage. (Not a unique advantage, Europe and Japan also have good stories here, but China is not as well off on this time frame per capita.) I don't expect the broad direction of that curve to change anytime soon.
In summary US manufacturing output is increasing and US manufacturing output exceeds that of China by about $100B, but only employs about a tenth as many workers as China.
Apple doesn't go to the factory next door and buy screws when it needs them, they need millions of screws to very specific specs and sign deals to have them made by different suppliers for years at a time.
They'll go as far as financing the new factory that is required to fulfill their monster orders. The same rules just simply do not apply.
It takes 6weeks to ship product from Corning's US factory to China.
And they could build a factory anywhere in the world. In the mean time, they can ship as fast as they need. Apple already ships from the factory nearly directly to customers in the US in a couple of days.
‘I Want a Glass Screen’
In 2007, a little over a month before the iPhone was scheduled to appear in stores, Mr. Jobs beckoned a handful of lieutenants into an office. For weeks, he had been carrying a prototype of the device in his pocket.
Mr. Jobs angrily held up his iPhone, angling it so everyone could see the dozens of tiny scratches marring its plastic screen, according to someone who attended the meeting. He then pulled his keys from his jeans.
People will carry this phone in their pocket, he said. People also carry their keys in their pocket. “I won’t sell a product that gets scratched,” he said tensely. The only solution was using unscratchable glass instead. “I want a glass screen, and I want it perfect in six weeks.” †
This is a anecdote that now seems to be repeated as fact, but I have serious doubts about it. For starters there was a six month gap between the first demo and launch, and the iPhone was demoed with the glass screen, as evidenced by this quote from David Pogue from January 9, 2007 Apple went through numerous iterations of the glass surface, trying to find one that’s not too slick or too rough, or that shows grease and fingerprints too much. ††
† http://www.nytimes.com/2012/01/22/business/apple-america-and...
†† http://bits.blogs.nytimes.com/2007/01/09/some-hands-on-time-...
http://www.ilounge.com/index.php/news/comments/apple-upgrade...
"Apple also announced that the entire top surface of the iPhone, including the 3.5-inch screen, has been upgraded from plastic to optical-quality glass for better scratch resistance and visual clarity."
I work for an APPLE/DELL/otherstuff reseller.
The decision to use sea or air freight is based on a calculation based on the size of the product and its value (and therefore the amount of capital that would float for weeks instead of being here quite fast).
Apple, with its valuable and small product is always Air Freight.
An iMac 27" is twice the value and half the size of an OptiPlex 790. So Air Freight would only make it 10% more expensive.
Apple designs with that in mind.
"What would it take to create a factory that could make an arbitrary fastener in 3 hours?"
There are things like having material stock, stamps, etc. But if you look at a screw factory one of the things that jumps out at me is that all the machinery is old old old. Which is to say, the typical fastener factory seems to have machines that were originally tooled up to make war material in the 40's and 50's.
Today, I've sintered carbide cutters, lasers, and machine tools that can repeatedly cut to a tenth. So why can't I build a factory which uses programmable tooling (aka 'soft tooling') that can produce thousands of fasteners per minute? The process can be made parallel in a very straight forward way, more production stations.
Not a YC startup, but how do we get investment in this kind of idea? Can we even? I love reading some of Elon's comments about how ossified the space manufacturing industry is, and how they created things in weeks that the 'experts' were saying would take months or even years to make. We've got Jeff Bezos pulling F-5 engines out of the Atlantic, can we get him to fund the most amazing fastening company ever? Such that any fastener in the catalog can be produced in quantities from 1000 to 1,000,000 with a process where manufacturing costs are fixed across the volume window?
If not, why not?
Before even asking about investment, you should check to see that the math actually makes it profitable to have a soft-configurable factory doing short-production runs. If you do, I think you'll find your answer about why this sort of thing doesn't exist yet (although it does, in China!)
Even though the US could reasonably produce iPads _more_ efficiently than China, it doesn't. The reason is that the US is even more efficient at supplying higher-cost services (software, finance, etc.) than China that it would be at producing iPads. Therefore, the US is better off training more of its workforce for higher-cost services than to train them to be laborers.
Could you be more specific?
Minimum wage stuff, no hostile work environment, no unsafe work environment, FMLA doesn't even apply unless you have more than 50 workers, etc.
I know most of this stuff by heart just from being in the workforce, let alone an employer (who I'd assume worked for someone else at some point in their career).
We use Chinese workers because they're cheaper than robots. These are awful, tedious, soul-destroying jobs, but they're just marginally better than backbreaking agricultural labour. Nobody deserves to do those jobs and soon nobody will have to, because we will have automated them out of existence. That's unequivocally a good thing.
2) More usually, manufacturing work is appealing because it can be an easy springboard to a more rewarding role/career. It's still true today that thousands and thousands of Americans who have started (or are starting) their career as an assembler or machine operator have had the drive to improve their skills & knowledge and move far upward in the value chain.
2) Why is clerical work any less appealing or rewarding in terms of being able to market oneself?
From what I gather, having the supply chain in China or Brazil addresses the second two problems. The advantage of China isn't just cheap labor, it's cheap, readily available labor. A change in demand (like switching the screens on the iPhone) can be met relatively easily, which partially solves the time delay problem. And the more of the supply chain you hold in one geographic location makes shipping time faster. The independence of agents issue gets addressed when Apple can coordinate the actions of each member of the supply chain better. I imagine this is, for the moment, easier in China than the US.
Where I part ways with the article is the bail-out. The US labor pool doesn't seem elastic enough to address the time-delay part of the bullwhip effect. If Foxconn suddenly had a temporary drop in demand and had to lay off thousands of laborers, it would not be a huge issue. If they need to hire them again, zip, pretty quick. Likewise if they need to request huge overtime commitments because they can't train new workers fast enough, no problem. US workers are particularly averse to uncertain job prospects, perhaps with good reason, but with the effect that scaling work (and wages) up and down is less tenable. And perhaps this is where the unions come in - the overtime payments from forcing workers to work more hours to meet demand is much more costly in a union than a non-union environment, for better or worse.
Edit: I've just now recalled that one summer, I worked for a large bread factory. They loved hiring college students in the summer because they knew that they didn't really care about staying in the union. Summer demand for baked goods skyrockets. A plant manager showed me how they were lagging behind demand by something like 2 million dollars / week (I've forgotten the exact number, but it was staggering to me). In his words "you can imagine what that does for business." But they couldn't just start hiring more workers, or scaling up the plant, because then they'd have more workers than the knew what to do with once the winter hit, when people were working 20-30 hrs/week. And this is one case where almost the entire supply process was in the US, minus wheat they might have gotten elsewhere.
Since you don't know the demand - you need a responsive, high bandwidth, system.
Having suppliers that can't respond quickly - either because they are a 2week container ship voyage away, or they take 3months to respond to quote requests, or they think they can make more money by demanding huge penalty clauses for any changes in order - all these add resistance and slow the response.
There is also a cost consideration. Once you start making a component it is costing you money until the consumer pays for it. Having to make a billion $ worth of screens/chips/cases 2 years in advance is costing that whole network of suppliers money - costs which will be passed onto the customer
Not by as much of a margin as one would think. Listen to part 3 of This American Life's retraction of the Daisey story: http://www.thisamericanlife.org/radio-archives/episode/460/r...
The conclusion is that the difference per iPad or iPhone is a small percentage of the profit. They argue that it is, in fact, the supply chain that makes the difference.
Having said that, Apple could redesign the iPhone to be easier for robot's to assemble and move manufacturing back to the US, but it's simply untenable to have Americans assemble such things at this scale in the US. But, this is where the supply chain issues show up and if they designed the iPhone to be built by robots they would as you suggest probably locate those robots in China.
Versus how much in China? The conclusion I recall was that the difference was small - so small that even if the prices were flipped, Apple would still probably opt for China because of the speed. Which, again, is because of the integrated supply chain.
But labor is such an enormously small part of any electronic device, right? Compared to the cost of buying chips or making sure that you have a plant that can turn out thousands of these things a day or being able to get strengthened glass cut exactly right within, you know, two days of this thing being due, that's what's important. Labor is almost insignificant. What is really important are supply chains and flexibility of factories.
Honestly, I think he is thinking you assemble an iPhone like you do a car with giant welders and cranes. The reality is much closer to just a table with buckets for components and a small chain of workers that knows all the steps plus some basic quality control. Because, it's mostly just joining components.
The actual chips are created by machines which can be located just about anywhere, just ask Intel. Even boards are often done by machines, because it's so hard to tell if someone did it wrong when soldering by hand. There are robots that can do these same operations, but humans add flexibly and it's easy to see if they messed up. Plus at current Chinese wages they just plane cost less.
Even for small batch runs of boards with QFP chips (which you can hand solder) you would machine all this, and I mean like 50 board runs. I've even done this in lab for 10 board proto runs. You make a solder paste stencil out of plastic to apply the paste after you get the boards back from the PCB manufacturer, place the chips and solder them in a reflow oven (or even a frying pan works if you paying attention and have an IR temp sensor).
The only bits you hand solder, even in Asian, are components that are too large or can't withstand the temperatures of machine soldering, be it wave or reflow (think full size RCA connectors on a board with many fine pitch ICs or a wall wart). This is normally a post processing step after everything else has been reflowed. Connectors of this type don't really exist in cell phones, they are all surface mount with some minimal unsoldered through hole supports.
The manual assembly that comes into play with a modern cell phone involves connecting the various PCBs with their interconnects and placing them in the proper location within the packaging and of course all the post electronics stuff.
By putting boards together I meant something much closer to this: http://www.youtube.com/watch?v=VTQXGLDXQk8 vs. http://www.ethiotube.net/video/18959/Cell-Phone-Assembly-Pla... where you can see several people using a soldering irons about 2 min 10 seconds into the video.
But, it looks like the iPhone uses screws where a lot of companies used blobs of sodder to secure things. http://www.youtube.com/watch?v=5U6HjbGCtqE Which I suspect increases their labor costs to reduce the number of assembly errors and allow them to be repaired. Of course if they did this in the US, the cost benefit equation changes and I suspect they would do more soldering because it's so fast.
PS: The point I was trying to make with Intel is once your 99.9% automated vs say 98% the laber costs stop being the major concern. Which is why Intel still builds chip factory's in the US. It's great to be close to your suppliers, but it's also valuable to be closer to your engineering team.
Intel builds their factories in the US because they are required to by law (export controls on certain high tech). I think they are allowed to build some lower tech stuff outside the US (Israel for instance).
http://en.wikipedia.org/wiki/Three-tier_(alcohol_distributio...
FTFY. Hulu restricts access pseudo-geographically using IP-based geolocation it seems.
In general, delays (i.e. lead times) and variations in orders will do that Beer game effect to any supply chain, no matter where it's located. Apple products are "made in china" because of various reasons -- comparative advantage, business cluster etc.
I'd highly recommend a good reading of systems dynamics (and business dynamics) for those looking for more info.
For those interested, two recommended books:
* "Clock Speed" by Charles Fine (MIT)
* "Business Dynamics" by John Sterman (also of MIT, and a great professor): http://goo.gl/K4OG (Amazon.com link)
Only by carefully coordinating resources can you get this to work - the same costs in the beer game apply here (making too much of the upstream resource (inventory) has an opportunity cost in you not being able to produce your own units, and not making enough of the upstream resource (backlog) results in poor teamwork and and having the other team eventually out-pace you.
Co-op RTS games sometimes have resource sharing, but I don't think I've ever seen one with a legitimate supply chain (maybe because it ends up being so difficult to coordinate).
GM / Chrysler bankruptcy != Business disappears and all suppliers go bankrupt. This is the straw-man argument of the left.
The American auto bailout was a purely political play to save the unions who supported the Democrats. With billions in hard assets and a huge intellectual property base, the auto companies would have made great investments to potential buyers. Does anyone actually believe that no one would even attempt to pick up the pieces of the auto industry, sans-unions, and try to come out ahead?
If you agree with the media/government spin, then you believe that the auto companies would have fired all employees, sold all of the manufacturing equipment and plants, and closed shop forever.
The reality is that the company could have used existing bankruptcy law to get rid of some of the union/pension overhead and return to profitability. This is exactly what American Airlines is doing right now. Only in the extreme case would they even need to sell the company.
Are you kidding?
As usual, both sides want to take credit for the positives and blame each other for the negatives. :-)
Yes it would have laid many workers but correction has to happen when wrong decisions are made and that is always better than to continue the path which nearly brought a company to its end.
It's worth noting that one needn't offset all the advantages of a cluster for production outside of it to make sense: There is no shortage of US auto manufacturing plants that are not in Detroit nor in places with anything remotely like its cluster advantage.
But for rapidly-changing products, the advantages of a cluster are compounded. If you're not changing screens and screws and implementing brand new technologies on an annual basis, being able to get a custom part ASAP is less of an advantage. But if you are changing things every single year ...
I wouldn't be surprised to see US manufacturing return. Particularly as energy (shipping) prices continue to increase, China's wage advantage dissipates and automation matures. But it's going to start with fairly mature, static and/or commodified products.
What's gone isn't coming back until it's cheaper to build it in the US. That's what moved it to China in the first place, and that's what will move it from China.
Yes and no. Yes, at a high level that's true. But you seem to be making an assumption that human labor costs will remain an important component and that the "it" being manufactured will remain constant.
Consider that automation may not even be cheaper on a 'net screws turned per hour' basis than cheap humans. But quality and consistency matters. Speed of line changes matters. Speed of retraining matters. And, further, current designs are limited to what can be assembled cheaply (that is: reasonably quickly/safely/accurately) by two human hands and ten human fingers, with a human attached (who hopefully doesn't require slow or expensive tools/safety equipment/etc).
Automation removes those concerns entirely. Caustic compounds could be mixed on the spot, fixation technologies that are infeasible for human dexterity are possible, multiple steps could be completed in parallel, etc.
So keep in mind that while it may be sufficiently cheaper to have, say, Brazilians turning screws than Chinese, such that iPads could some day be cheaper to build in Brazil - it's entirely likely that before that happens, robots will be building newer iPad designs, more cheaply than could ever be feasibly constructed by humans even at a zero wage.
I was thinking that feature bloat is a consequence of this sort of thing happening (applications start out missing features, eventually features start getting added, and they keep getting added to the point where users don't want them anymore), but I'm not certain the mechanics leading up to feature bloat are the identical to what happens in the beer game.
Also, unless your developers are so misanthropic that putting them in front of a client might just cause wars to break out, most of this chain can be circumvented by involving all parts of the chain in requirements gathering. The key part of the beer game is that none of the parties can talk to any party that's more than one link away from them.
Finally, and this is myself being a nitpicky bastard, but the operations manager will almost never have direct contact with a client. They will be the ones that work with the developers, the leads, product managers, and suppliers to make sure that the product can actually be made with the given budget, and that every step of the production chain is working correctly. They will also work with marketing and sales to make sure that the projected demand will be met, and that the product actually gets out to the clients. A better position would be sales people, because they are generally the only point of contact users have with the manufacturer.
In any case you guys should concentrate in the 30% (or so) of the price that goes into parts and components, almost all made by Korean and Taiwanese companies.
Besides most of those components are already made using highly-automated processes because humans lack the precision needed to manufacture at such small scales.
Not saying it would be easy, just that it isn't impossible, and 30% is a much better deal than 1%.
That it's not cost effective to do so now doesn't mean that this will always be the case. The US has high import taxes on lots of stuff, if they raised them on electronics we would have US made iPads in a flash (not that I'm saying this is the right approach).
I think Apple's "tell us all the details about your cost structure and we'll talk business" approach to their suppliers combined with their enormous cash reserve and history of pre-paying for parts (and even factories) should enable them to make their devices pretty much anywhere.
Fender does this--they offer you the choice of a Chinese, Mexican, Japanese, or American made guitar and just price accordingly. I would pay more for an iPhone that I knew was made in America. I'm sure I'm not the only one. Other examples: Whole Foods, Trader Joe's, Annie's Homegrown (BNNY).
My Les Paul was made in Canada. I do not believe that Canadians are unable to produce as high a quality guitar as US Americans, but they are, I believe, not allowed to.
The difference in cost between an American Les Paul and its equivalent US model is approximately $250-300. The difference in quality is less. The smart money, among most guitarists, is to buy the non-US version, take it to a decent luthier, and give them $75-100 to bring it up to par which, in my experience, actually leaves you with a better guitar than the Memphis version (excluding the much more expensive customs.)
Regardless, many consider the US version to be the best of the bunch, and are generally happy to pay the premium.
The major difference of course is in the fit and finish. You have to enforce a quality difference that is, effectively, arbitrary. In Apple's case, that means deliberately reducing a lesser-quality product for the non-US products, which seems contrary to their 'ship perfection' mentality.
It might work, it might not, but the key is in distinguishing between the product versions in some way. Perhaps this could be accomplished with a slightly different feature set, or maybe the 'white' iphone could be reserved for US manufacture, I dunno, but I honestly have a hard time imagining that there is a significant population of consumers willing to pay for the "Made in the USA" version, if only because the "Made in the USA" version of other products have not performed up to expectations.
The point of the article is to illustrate that wages are not the only problem. Chaotic effects in multi-tier supply chains are also a real problem.
I would pay more for an iPhone that I knew was made in America. I'm sure I'm not the only one.
You are certainly a minority. I don't think most people value nationalism at $65.
Personally, I'd rather have the jobs go to the people who need them most, rather than to people who are superficially "like me". But while assigning a $0 value to nationalism is probably a minority view, I suspect the majority view is far closer to $0 than to $65.
What you're talking about sounds like Ayn Rand's objectivism--basing your argument 100% on cost. I think you're wrong about this--Whole Foods, Trader Joe's, Red Wing Shoes, and local coop growth shows that people do care where they get their products from when given a choice.
Also, please stop making assumptions about me: rather than to people who are superficially "like me".
Where did I say this and where do you come off being so vitriolic? Personally I come to HN for an intellectual discussion and don't appreciate your condescending attitude, or mischaracterization of my comments, or lack of intellectual integrity, or your argument by fallacy. You responded to your own strawman argument because it was easier than responding to what I actually said. You argue like a bully--if I disagree with you I am 'nationalistic and superficial'? That seems like an elevated discussion.
Maybe I'm naive but I think food and instruments show a lot more characteristics of the craft worker than electronics.
[1]http://www.strat-talk.com/forum/stratocaster-discussion-foru...
Analysing things based on cost is something economists do for lots of good analytical reasons, not necessarily because of some philosophical bent. Customers' preferences between various brands and perceived value systems can be turned into costs through pricing experiments.
"Superficially 'like me'", as the word "me" indicates, was not an assumption about you, and nor was it describing you as superficial (that looks like quite a misreading on your part from where I stand). Rather, it is an implicit criticism of nationalism, of the idea that people of one's nationality deserve better employment terms for some intrinsic reason (i.e. they are better) than people lucky or unlucky enough to be born under a different flag.
You, sir, have apparently never tried to sell something to a person older than 65.
He's not talking a mere matter of paying an extra $65 for "Made in USA" markings, he's talking the USA model of iPhone 5 costing ~$200 more and introduction/production being chronically behind the China version for months. "Lesseehere...I can buy this now for $X, or I can wait to buy the exact same thing (save for different markings) 6 weeks from now for $X+20%." Those Fremont factories won't be open long.
And somehow methinks Fender's supply chain isn't as fast & complex as Apple's.
And that, as they say, is the rest of the story [of how the global supply chain got Asia-heavy, causing eventual movement of manufacturing & logistics to the region, too]. It hasn't just been labor costs -- not at all; it's that unless there are extenuating circumstances (e.g. Brazilian import tariffs) there is almost always more savings to be had via supply chain refinement than via direct labor cost reduction.
Frankly I have no time for flag-waving 'Buy American' and for that matter 'Buy British' favouritism. I've seen the poverty in rural China first hand, industrialisation over there has it's rough edges that need to be addressed, but if we care about world poverty then that means cutting all the jingoistic claptrap and 'allowing' them to earn a better living.
There are legitimate cases where buying locally makes sense, especially in the case of regional foods or traditionally crafted goods. I'm all for preserving traditional ways of life if it makes sense, but I don't think iPhone assembly line production falls in that category.
The US, Britain and the western world in general has grown rich exporting goods and services to the rest of the world and importing cheap commodities and goods. Fair trade benefits both sides of the bargain. It's time to set aside protectionism and recognise it for the pernicious imperialism and borderline racism it really is.
I think the GP meant modern protectionism in the sense of "Buy American/British/etc" movements.
Aren't those modern "buy British" or "buy American" movements voluntary? Might there not be good reasons for supporting those who are economically tied to you by culture and legal jurisdiction?
Most of the movements are voluntary for now, but not all: http://en.wikipedia.org/wiki/American_Recovery_and_Reinvestm...
> Might there not be good reasons for supporting those who are economically tied to you by culture and legal jurisdiction?
Yes and no. But if the support takes the form of a bail-out, you're just wasting your money while delaying the inevitable and making the eventual crash much more painful. If you instead let industries fizzle out over time, it's much easier for something to appear to take it's place.
The original top-level article that this thread is about made what seemed to be a reasoned point at the end about the bailout of the auto-industry, and I am simply asking mseebach whether he disagrees with it, since he made reference to bailouts.
Why on earth would that get downvoted?
> A straw man is a component of an argument and is an informal fallacy based on misrepresentation of an opponent's position.
It seems to me that you are misrepresenting your opponent's position.
My question adds context that changes the weight of the parent's assertions. What I wrote isn't even an argument, so it can't be a straw man.
If that's not your intention, don't ask the question in negative form. In this case:
> Do you think that decades of isolationist Maoism had more influence on the rural poverty in China than US and British protectionism?
or even better:
> On another note, do you think that decades of isolationist Maoism had more influence on the rural poverty in China than US and British protectionism?
This is where you are wrong. By phrasing it in the negative form I am implicitly asserting that I think that what follows is not my interlocutors opinion.
So, no straw man.
You're flat out wrong, and it's clear that you don't understand what a strawman is. It is more than just 'misrepresenting' your opponent's argument, which in any case I didn't do.
A straw man is where you present a weakened form of your opponent's argument in order to more easily defeat it.
https://en.wikipedia.org/wiki/Straw_man
As you have now acknowledged, I did not present any form of my opponent's argument at any time, let alone argue against it. What I did was to ask a question to put his statements into context.
This sentence implies that your opponent's position is: "US and British protectionism didn't have more influence on the rural poverty in China than decades of isolationist Maoism." Perhaps you are not a native English speaker and didn't know the implications of using a negative form question. Regardless, you were attempting to use this misrepresented position to win an argument as you later demonstrated in the thread.
All conditions are met to qualify your comment as a straw man fallacy.
The rest of the thread doesn't show me attempting to win any argument. I suggest rereading that too.
Whichever way my interlocutor responded to my question would neither invalidate his own position, nor 'win' an argument for me.
You are mistaking this form of discussion for a straw man because you are seeing things in black and white, when instead the question was intended to provide context.
Sometimes people ask provocative questions in order to better understand where other people are coming from. Dialog consists of more than just direct argument. Not every exchange is about gaining rhetorical advantage.
If you try playing back the comments in your head as if they are being spoken by a collegial group involved in a discussion, you'll see what I mean.
Your judgement is incorrect because you have misidentified the nature of the conversation. You are imagining there to be an argument where instead there is actually a discussion.
And on this note, do you really think it's helpful to throw comments like "straw man" into conversations you aren't constructively participating in?
You are right, thanks for correcting me, I'm a bit tired. Luckily, it was just an example and not central to my point. The key point here is that this way of formulating a question attributes an opinion to your opponent that he may or may not have. Fixed it: "Decades of isolationist Maoism didn't have more influence on the rural poverty in China than US and British protectionism."
> The rest of the thread doesn't show me attempting to win any argument. I suggest rereading that too.
At this point, there's nothing I can do but question your intellectual honesty. The least I can say is that you come across as someone who disagrees with your interlocutor's opinion. If you are not willing to admit that, I will call this conversation over.
> And on this note, do you really think it's helpful to throw comments like "straw man" into conversations you aren't constructively participating in?
Yes. Fallacies are subtle and it's important to highlight them.
I don't think that the relatively emotive statement that the interlocutor made paints a particularly complete picture. That's why I asked the question. I don't know enough of his opinion to disagree with it or not because he didn't answer.
If you reread what my interlocutor wrote you'll see that he introduces a number of different ideas which don't add up to a single coherent argument to agree or disagree with.
Typically when someone presents me with this sort of communication and I find it interesting, I don't consider it an argument. Instead I try to find out more.
You say 'all you can do is to question my intellectual honesty', but if you really thought I tried to win an argument using a strawman, you would be able to point out where I did that and yet you can't.
If you won't acknowledge the possibility that you have perceived an argument in what was actually a discussion, then I have to, in return, question your intellectual honesty.
It's counterproductive to the cause of rooting out fallacies to make drive-by comments out of context.
Surely since there are two different periods here is it not sensible to suggest that the two are not directly comparable in effect, although both have contributed to the history of the country.
One important question in this could well be whether imperial attitudes by the uk and us might partially be responsible for the development of maoism in the first place, and on reflection it seems more than obvious that they must be to at least some degree.
Also, if protectionism, which is notably bidirectional, isn't the root cause of rural poverty in China, do we have any reason for believing that unilaterally abandoning it would alleviate the poverty?
There was a reason the sun didn't set on the British Empire.
God doesn't trust the British in the dark.
[edit] and it is very difficult to separate war from protectionism as they are all on a sliding scale of policy.
Why isn't protectionism just part of the terms that nations negotiate when they trade?
And when China tried to ban British Opium, we were very annoyed indeed.
Short of eliminating national borders, I don't see how this would go away.
The idea that protectionism is a major factor in war has long been around;
Frederic Bastiat - "When goods don’t cross borders, soldiers will" (possibly not him, but commonly attributed)
Carl von Clausewitz - "War is a mere continuation of politics by other means"
Henry Kissinger - "if protectionism grows in America or if China comes to be seen as a long-term adversary, a self-fulfilling prophecy may blight the prospects of global order."
Francis Sayre - "The policy of excessive protectionism is like a habit-forming drug. Nations once indulging in it go on from excess to excess; and the appetite increases. But the end of unrestrained indulgence is disaster. Economic nationalism and protectionism spell disaster for the world as well as for the nation...Men will fight before they starve. Uneconomic trade barriers forge the thunderbolts of war."
Sorry for the appeal to authority in using these quotes, but the simple fact is that even if you tried to create a protectionist policy that avoided associations with war wherever possible, the people who implemented it would still see it in military terms as a link between the two has been a fairly common consensus on most sides of the debate for a very long time.
Having said that, these quotes are good to see.
You can't, so there is no straw man.
That's not the full reason that they did it though. It's because they were making vehicles for our military. If our country started relying solely on foreign countries for our military, they could disable our ability to replenish or grow our ground fleets.
But, even that is not far enough down the rabbit hole. There are enough non-government owned vehicles in the U.S. to more than make up for the lack of vehicles they would have lost, even if every other country simultaneously decided that we were the enemy, our military could use the country's existing resources (assuming we were ok with that).
And moreover, we are already reliant on other countries for our military and the running of our country. The only "advantage" of a government that pumps everyone's tax money into a select number of private companies, directly or indirectly, is that "survival of the fittest" is damaged. The "disaster" is delayed- the inevitable damage grows greater. It is the economical equivalent of forestry agencies that protected forests from forest fires, when forests naturally managed themselves via fires started by lightning strikes, such that large fires would inevitably start and be uncontrollable. Large bailouts can cause incredibly bad things to happen.
So, the question is, why did they do it? Band-aids and politics. It was not long-term thinking. And that is the story of our government. For the most part, no one is willing to make the political sacrifice for long-term gain. What we need now is for someone to help make government stable and predictable again, and to reduce the amount of red-tape it takes for U.S.-based businesses to succeed. But, it is going to take a disaster for that to happen- a disaster that will be much worse because of bailouts and other shenanigans. But, as for now, we will live in the growing forests our forest rangers protect for us.
Yes, it won't bring "manufacturing jobs", but it will bring a lot of capital into the country, and will also spur new type of jobs and businesses in relation to that, or it would make it a lot easier for US entrepreneurs to mass-produce their products just from a prototype.
That's the sort of thing politicians should be encouraging - not try to bring back blue-collar jobs.
"Low inertia" means that the affected area can support a higher rate of change than a "high inertia" system.
This affects all facets of business, from the supply chain to labor.
I have to disagree with the protection of highly unionized systems. They are bad, bad, bad for the economy and for the survival of the affected industry. Not only do unions burden business with unreasonable rules and wages, they also create a very high inertia labor force. Making any change falls on a range from impossible to very difficult. In sharp contrast to this, a low inertial non-union labor force is far more flexible.
Let's face it, workers in the US have grown comfortable with their reality and don't want to change. I'm sure this is what it looked like when buggy whips and horse-drawn carriages started to loose market share. A low inertia system would allow the entire enterprise to pivot quickly, make adjustments and try to evolve into whatever might be the new wining paradigm. Not so when you have a highly regulated, highly taxed and unionized framework to contend with.
Aichi is only 2000 square miles in area[1], and Toyota's supply chain is concentrated on its Eastern half. It takes less than 1 hour by car (or more relevantly, by truck) to travel between all of the major players in the supply chain (Aisin, Toyota Industries, Denso, etc). Of course, all of Japan's manufacturing is in Jeopardy with increased manufacturing costs and the strong yen (which are analogous to what HN posters here have discussed as distinct Chinese advantages over US manufacturing).
Another place that I suspect has a similar centralized, flexible manufacturing ecosystem: Germany's auto industry (with the granddaddy of all industrial suppliers, Bosch, situated right in the middle of it all).
The barriers to US companies become higher. You've got to get the machines. You then need people to run those machines. Those people will consider themselves to be skilled or semi-skilled, and require high wages. You need to run the machines 24hours, thus you need 3 shifts per day; two of those shifts will require higher wages than the day shift.
I doubt that huge volume manufacturing is going back to the US anytime soon.
If we assume raw materials are bought on the global market (so same price in the US and China), then the only cost variables are labor and shipping to market. Once Robotics drives the difference in labor costs below the difference in shipping costs robots in the US makes more sense than laborers in China. There is an inflection point even if you assume the use of robotics in China.
No benefits from China holding large reserves of raw materials (eg rare earth metals)?
No benefits from Chinese dock workers getting paid a lot less than US dockworker? (See also transport from docks to factories; from factories to docks; from docks to markets.)
However, there are some very good reasons for not automating everything. Manual intervention at the process level is extremely important for the NPI process and any time an ECO is being introduced for mass manufacturing. Generally speaking, too, you don't want to have a bunch of expensive capital equipment sitting idle just to handle occasional overflow, either.
It could take three weeks of round-the-clock work to reprogram an assembly line of robots to perform a task a different way, to work out all the problems with a new process.
If you have people it only takes a ten minute demonstration and everyone's going to do it the new way.
Advances in machine vision have made the automated assembly line a lot better, but the tolerances are still extremely strict compared to people.
Even if you could get cost parity in production, there's no real reason why Apple should move manufacturing back to the US, just because they started off as an American company.
(I have no idea when or how exactly, but the "80's" seems to be around the time of the "Japanese Electronic Invasion")
In other words, for a "new" company like Apple, starting out with all their new iDevices, it simply made sense for them to go where the supply was?
It's kind of like Apple "piggybacked" and exploited all the gains made by the Sonys, Sharps & Casios of the world, and beat them at their own game.
I think if we move beyond the analogies of cars and other consumerables, and focus on what Apple is really doing, which is essentially Consumer Tech, then it simply makes sense for them to be where the guy that makes those fancy LCD screens is at?
Sure cheap labor helps, but is cheap partially due to the currency difference.
Despite anecdotal stories, The US still makes up 20% of world manufacturing and retains its spot as the global leader. http://en.wikipedia.org/wiki/Economy_of_the_United_States
The colocation theory (the theory which the author is talking about) is a good thoery to explain silicon valley though.
If you want to run a tech company, you want it to be colacated near your supply chain (engineers), and other service providers. This is probably a big reason why Silicon Valley has remained dominant despite so many other cities trying.
Shenzhen can also produce that supply chain, but they are no more capable than a lot of American cities.
What Shenzhen has that America doesn't are cheap labor, and a devalued currency.
Silicon Valley is different primarily because there is no other city with the concentration of brilliant engineers vs others. NYC for example probably has more computer engineers by numbers, but there are more opportunities for those engineers to make huge pay in other industries outside of startups. The fact that Silicon Valley is full of amazing engineers who are excited to work in the tech industry means that it is the best location for your startup to locate (relatively, and if you need a lot of engineers, not all startups do, some need more sales focused or science focus etc and there are better cities for those companies).
Citation needed. There's a huge number of companies making memory, displays, batteries, CPUs at scale in the midwest? Who are they currently selling their products to? I admit to being very ignorant of such firms.
What we do know is that Intel has a fab in Arizona for example and Corning's headquarters (gorilla glass) are in NY etc.
I also don't know for sure what is in each city in China. While it is public information (for the most part), finding a source to back my claim would be as possible as backing the authors claim.
The author says that the reason Apple can manufacture there more profitably is because of colocation of other industries.
I say that while colocation may be a factor, the real factor is a devalued currency which the author completely overlooks.
The expertise, density and investment levels are totally different and cannot be rapidly changed.
I'll go as far to say that a devalued currency and/or cheap labor may have been the reason the manufacturing base moved initially, but technology has advanced since that time and Shenzhen has now built up an infrastructure advantage which is much harder to counter.
Do you have a source for that? Foxconn has greater than 1 million employees. I don't think there is any company with a labor force of that scale in the US, or anywhere else in the world. And, per the article at the top of this thread, the bigger issue is the supply chain. If iPhones were made in the Midwest, they would still be importing glass, simple hardware, and thousands of other parts that are still made in China.
I suppose it's the non-hourly-wage assembly-line jobs that come with manufacturing that are desirable, but how many of those jobs would be created by making the huge investment to build factories and supply chains here in the U.S.? A non-zero number, but is there a more efficient way of creating career-for-life support-a-family type jobs in the U.S.?
The US middle class exists (or existed) in no small part precisely because of factory work. Many people have spent their entire lives in factories making a good living, some still do, more would if the jobs were available.
Automation is the obvious argument against long-term viability, but most factory jobs have never been automated, and probably won't be for years yet -- they've just moved.
And don't assume everybody can work in an office, nor assume everyone wants to. My father, who actually does work in an office, has for years, and is well respected in his job, would rather be building houses.
I'm working class, I come from a pit village in N. England, my father was a miner, my family were miners or steelworkers.
I now have a PhD in physics and work in aerospace, but I'm still working class! And for most of my life (certainly my academic career!) I was poorer than most working class people with union jobs on assembly lines.
In the US upper vs middle vs working class is related to income and lifestyle. If you're a coal miner who somehow makes 80k/year (i just made that up, who knows if it exists) you'd be firmly middle class in popular discourse the US, despite the fact that you're in a working class job.
Similarly one auto-plant can pay union workers 70k (middle class) and non-union 30k (working class, or at least on the line) for the same job.
I think in the UK it's more delineated by job and upbringing than income, right?
Note that I'm just speaking out usage by normal people/media, those words (although usually avoided in favor of income deciles) can be given specific definitions in academic research.
Working on oil rig and earning 4x as much as a school teacher still makes that a working class job, the teacher is middle class. The rig manager is working class, the geologist is middle class.
But ultimately it's a personal identity thing. You can be a member of the royal family making furniture or a working class lad making avionics software!
Our economy has been transitioning from a goods/manufacturing-based one to a service-based economy for years. The question in my mind is whether or not this is sustainable in the sense of being able to provide decent, livable wages for the vast majority of the US population in a globalized economy. My gut is that isn't - at some point we need to make something real, not just sell each other services while a (relatively) small elite design things that are then made overseas.
The other thing to realize is that manufacturing carries with it a lot more than just assembly line jobs. Factories need some managers, but perhaps more importantly, they also need skilled technicians and engineers to optimize processes, troubleshoot problems, work on complicated assemblies, etc. I think it's reflecting a bit of an elite bias to say that "Factory work just doesn't seem like a viable long-term career"
I don't have numbers to back this up, but I think in general it would be a good thing for America as a whole, and for the American middle class in particular, if we began to move back toward being a country of "makers" rather than a country of "service providers."
http://research.stlouisfed.org/fred2/series/IPMAN http://research.stlouisfed.org/fred2/series/INDPRO
From the data I've seen from a few Google searches, U.S. industrial manufacturing output keeps going up (with hiccups in recessions), but employment in manufacturing is going down due to increases in efficiency and automation.
Also, I think it's weird to put this dividing line between service providers and makers. I design and program websites for a living, which most people would call a service. But couldn't you also say that I "manufacture" websites? A cook at McDonald's manufactures burgers. A writer a newspaper manufactures articles.
There are tons of openings in the US for plumbers, and (i believe, not sure post housing boom) also electricians, welders, pipe-fitters, etc.
The problem is that these are all jobs that require a few years of training, which the US system isn't very well set up for. The factory thing is an easy-out because we have this huge base of people who have basically no skills and we want (need) to absorb them into the economy as fast as possible, and without investing tons of money to train them. Even if we had this money, and the capacity to train them, dropping an extra 100k nurses (or whatever) into the system at once probably wouldn't be a good thing either.
This is a long term problem that we probably won't solve until we hit the point that we're educating enough people in the right things that competition for unskilled jobs hits more or less equilibrium.
Automation is also making the skill/demand curve look more step-like I believe, where your value stays near zero up until you cross the "better than a machine could do" threshold, instead of scaling in some more smooth way. That makes it harder to get training on the job by just taking low-end jobs and moving up.
From what I've read about welding (e.g. http://www.nytimes.com/2009/06/24/business/24jobs.html?pagew...), highly skilled, experienced welders are very much in demand. But, since low-end welds can be done by machines nowadays, there's much less demand for a welder with <10 yrs experience than there used to be. Consequently, there's no obvious path to get that first 10 years of experience.
Eventually automation might replace the bottom level of nurses and plumbers, (more so nurses than plumbers), but it will take _much_ longer.
I have some family/friends who are in that 'only high school diploma, no credentials/money/drive to go to a non-community college' trap, and one big barrier is that the training programs for Nursing Aides, Auto Tech, and even office/clerical have 1 year+ wait times. Even though they _want_ to gain these skills, they need to support themselves until they get into the program, and while they're working through it.
Even though there's great demand for the skills, and workers who want to gain them, the training pipeline just hasn't expanded yet.
Our robot needs the skills of an experienced welder in order to set it up. It is extremely difficult to get it set up correctly if you don't know how to weld, set the wire feed, set the amperage, etc. Personally, I can't weld very well, nor am I good at setting up the robot. I rely heavily on my lead welder to get the settings right for the robot, and once it is setup properly (which can be a few hours or a few days, depending on complexity) only then can a less experienced non-welder type worker run the machine. SO my lead welder does the jig design, figures out torch angles and then an outside contractor comes in and does the programming (Windows CE, on a Panasonic arm). Since we manufacture many of the same parts day to day, we only need the contractor once a month or so. Jigs are designed for quick change, with pins to set them exactly in place.
The robot is excellent at complex work, as well as "low end welds". Without a skilled and experienced welder for the setups, it is just a useless hunk of metal. You are correct if you think that a lower skilled worker can operate it on a daily basis however. The operator does not have to know how to weld at all (just how to push the emergency stop button and yell for help). The NY Times article is speaking about welders that doing some of the most difficult welds of all, and finding a person with those skills is about as rare as finding a really awesome iOS developer who is out of work. The people who can do that sort of welding are few and far between, since it has to be flawless.
Seems like having more educated people that can get higher paying jobs, which give them more disposable income and more free time, would be a much bigger win for our society than simply creating more unskilled labor jobs.
The problem is when you fall into a situation like the one we have now, where you have hundreds of thousands of people who had decent paying low skill jobs and lost them all at once (over 5+ years, but close enough in econ terms).
The right thing to say/do long term is 'we should provide adequate training to help these people maximize productivity, as it's a smart investment', but in reality you've got tons of hungry, broke voters on gov't aid, significant political pushback against the government being the one to invest the money in them, and not enough training capacity. You can't build a nursing school overnight from scratch, or triple the capacity of every state's licensing board... So you're a bit stuck, both politically and practically.
The good news is that as the economy grows/recovers, low skill jobs will eventually re-emerge, shifted to whatever sectors they're now needed in. The bad news is that there's ramp-up time for doing this, and very little political will to support the idea that the government should fund it. These people take tons of government aid, which isn't cheap, and they vote. This tends to push politicians towards more protectionist and pro-low skill job rhetoric, ceterus paribus.
I should point out that it's probably not a no-brainer to all economists and policy makers to do this at all, there's significant dispute on if/when/how the government should pick winners in individual fields.
You've hit the nail on the head. In the past when industries/jobs shifted it usually happened over a generation. People naturally retired and young people came into the workforce with more education and took jobs at the next rung up.
The current shift that happened, has happened so quickly that many people are simply left out of the job market skill wise. Hopefully young people today have watched and learned that jobs are not forever and that they have to always be pressing forward to stay current in a 'flat world' scenario.
What's more interesting is how thinkers from various political persuasions have had their opinions on the matter converge to this answer while the dominant narratives (in the US at least) stay centered on variants of no-rules early Capitalism (Republicans/Libertarians), neo-Mercantilism (China), or 1950s union-jobs-for-life (Democrats), all of which seem increasingly untenable. Watch this (starts getting really interesting around 1:00) for more:
The bullwhip effect is caused by delay and uncertainty in demand. JIT helps minimize its effects, but doesn't ensure its elimination. Coordinating your demand with retailers is one way to prevent the bullwhip effect. I'm guessing Apple has effective inventory and order coordination with their retailers.
Toyota and BMW assemble vehicles in the US from imported parts.
A CPU from intel is often fabricated in a US based factory, tested in Costa Rica, and packaged in Asia.
The issue has too many variables related to margins, tax breaks for factories, and import tariffs; to say the whole electronics supply chain is moving one direction.
As wages and living standards rise in China it is likely that some production will move to other countries and regions, which in the longterm is a good thing because it spreads the wealth.
The experiments would typically take place in the social sciences building, with each participant being put in a separate office (that was one of the reasons they were at night--so there would be offices they could borrow). We'd be given instructions on the game to be played, and the phone numbers of other offices if the game involved communication between the players, and the game would start.
Each player would start with a certain amount of game money, and when the game is over that would be converted to real money and the player kept it.
On average, if I recall correctly, players would make about $20-30 or so each in these games. That doesn't sound like a lot, but for a college student in the '80s that would be enough for several nice meals away from food service, or for 3 or 4 albums at the record store. You'd almost always get at least $10, and sometimes someone would make $75-100.
http://www.theatlantic.com/magazine/archive/2012/01/making-i...
Though it sort of agrees that supply chain is important, just frames it differently.
The reason Standard Motor still employs (expensive) low skilled US workers like Maddie is because it wants to have her seal up a part immediately after the high skilled worker (Luke) finishes his precision machining role. Workers of Luke's caliber (with knowledge of metallurgy, coding, specific machine training) aren't reliably found in the lowest labor cost countries (at the moment, Poland is getting competitive here).
If robots for Maddie's job get cheaper, or demand grows such that the factory needs to run multiple shifts, or if the factory can somehow move Luke overseas, then Maddie loses her job. If any of these things happen, but firms like Standard keep their Maddies, they get bought out by gigantic German manufacturers, or just undercut on the store shelves until no one's buying their products anymore.
btw, His book is a good intro to the way small changes effect integrated systems, particularly in business.
It's important to keep in mind that the US still makes a lot of stuff. In fact, we still make more than most: http://www.npr.org/blogs/money/2011/02/07/133561265/3-ways-o...
However, we're employing less people to do it, and those that we do employ require more education than before: http://www.npr.org/blogs/money/2012/01/13/145039131/the-tran...
(Not that this is necessarily the Dell case - I'll bet that Dell is on the hook for a certain amount if they suddenly decide to stop using a particular laptop body. It's just that when this philosophy of financial blame becomes your go-to instead of ignoring the financial abstractions and solving the underlying problem, you're begging for someone to exchange your money for false peace of mind)
You can't "solve" the bullwhip effect - you can lessen it. You can use IT, training, etc. And you can force (through market power) the consequences of it on your suppliers. Doing so doesn't mean that you're blind to the pitfalls of the practice.
None of this has anything to do with being American or Chinese.
Adding bandwidth and damping lessens the bullwhip effect so it isn't the show stopper. It's the response time to changing requirements that's the hard part. If the specifications of a screw need to change and all similar screws are produced in China, having a distributor already stocking (productionUseRate * leadTime) quantities of previously-unneeded types of screws is going to cost a lot more when leadTime includes crossing an ocean. Pretending that the distributor can solve this problem is going to (at best) cost you up front or (worse) end with a large delay as it turns out the distributor doesn't really have that many unallocated screws of the newly needed type. (Actually, connectors are a much better example than screws)
And no, nothing I've said has anything to do with nationality, but everything to do with relative age of economies, their levels of ossification, and fundamentally failing to see through abstractions to underlying realities.
It's myopic to equate GM and Chrysler with the American auto industry. My hope was that those tragically unfit companies and their corrupt unions would go bankrupt, only to have their assets swept up at fire-sale prices by a company or person willing and able to ignite a rebirth of the industry.
Sometimes you gotta clear out the brush. The old, rickety, terribly designed, onerously-high overhead, ridiculous pension brush.
I am glad unions are there to help make sure people are not overworked and have benefits, but come on guys. You shot yourself in the foot there.
You should be pleased to learn then that they don't:
* http://www.nytimes.com/2008/12/10/business/economy/10leonhar...
Let's assume that a union worker won't get an extra $15 per hour worked that current retirees are receiving. So take $15 off of their labor costs of $70 per hour (complexity through obfuscation). So that's
$55 = VALUE of actual wages and benefits EARNED by WORKING 1 hour
hours_worked_per_year = 52*40 = 2080
earnings_per_year = hours_worked_per_year * $55 = $114,400
1. Why did the factories move in the first place.
2. Why can companies like Airbus oder German car manufacturers survive - their supply chain is distributed all over the planet, with the best paid workers in Germany.
http://www.amazon.com/The-Fifth-Discipline-Practice-Organiza...
I have always been suspicious of the concept of post-industrial economies as I have always thought that they relied on a colonial logic of intellectual superiority which doesn't really exist.
The plan seemed to be that the western world is good at organising and designing stuff, and those people over there are much cheaper for doing the actual work of building this stuff for us, especially since our local labour market started getting ideas about rights and profit share and stuff.
However, the organising and designing of stuff turned out not to be quite as difficult as we had so arrogantly assumed, so all we do is get rid of out ability to make stuff by having an entire generation used to someone else doing it for them, while eventually all the white collar jobs go overseas as well.
Personally, I think that if you try being a post-industrial economy for long enough, you will end up being something much more like a pre-industrial one, but with a few rich people left, all flying around on those nifty new Chinese jetpacks.
....
Actually, after thinking about it a little more you may be more accurate than I thought, if I read your statement literally. Thankfully, the US manufacturing industry is building good enough automation software.