Why Reshore American Manufacturing, and How to Do It!

Why Reshore American Manufacturing, and How to Do It!

The danger of force majeure interruptions of complex international supply chains is well known, and the 2020 coronavirus outbreak has highlighted this risk even further. Threats by the Chinese government to disrupt supply chains intentionally by curtailing exports of rare earths and now lifesaving pharmaceutical products underscores further the need to reshore American manufacturing capability. In addition, a decline in manufacturing supremacy has always been a leading indicator of a decline in national affluence and military power, and the symptoms are already apparent in the prevalence of low-wage jobs in what is supposedly the wealthiest nation on earth.

The benefits of reshoring manufacturing include not only higher wages for American workers, but also higher profits for American investors and lower prices for American consumers. Achievement of these objectives requires business leaders to overcome the fallacy that low wages, whether at home or abroad, enable low prices and high profits. The counterintuitive truth is that low wages are often symptomatic of excessively high prices and low profits. This is because, just as inventory is an ideal hiding place for poor quality, low wages conceal enormous wastes of labor. The American industrialist Harrington Emerson phrased this very clearly more than 100 years ago in The Twelve Principles of Efficiency: "…we violently resist a demand for a 10 per cent increase in wages, but we tolerate a 50 per cent inefficiency in the worker." People like Frank Gilbreth and Henry Ford proved that these inefficiencies can easily be 90% or even higher, and can also usually be removed without much capital investment.

Although the Industrial Revolution began largely in the United Kingdom, the United States developed the engineering and management methods, including what is now known as the Toyota production system (Toyota adapted it from Henry Ford's system), that allow employers to pay high wages, make enormous profits, and lower prices simultaneously. This is not theory but proven fact, as demonstrated by the Ford Motor Company along with overwhelming U.S. production during the Second World War. Nothing other than the mistaken perception that cheap labor conveys some kind of business advantage prevents us from using the same methods to reshore our manufacturing capability, put Americans into high-wage jobs, and end our dependence on unreliable and sometimes hostile foreign sources.

Join this session by expert speaker Bill Levinson where he will discuss about the lessons from history, enormous risks and benefits from loss of manufacturing capability and manufacturing supremacy respectively. He will depict how cheap labor is not at all cheap, and can often conceal enormous inefficiencies, and we therefore do not need to rely on low-wage domestic, much less foreign, labor to run our factories.

Webinar Objectives

The United States has labored under the dangerous and mistaken assumption that we can run a "service economy" in upscale office buildings and similar venues while we offshore "dirty factory work" to low-wage countries. 500 years of economic and military history show this to be a formula for national suicide. Factories and not offices create tangible wealth, and the Internet makes it easy to offshore those upscale "knowledge worker" jobs to other countries. The disruption of complex international supply chains by the coronavirus outbreak is an overwhelming wake-up call to reshore manufacturing capability, and quickly.

The good news is that the management and engineering techniques necessary to achieve this were, in fact, invented in the United States. Benjamin Franklin laid down the underlying principles of what we now call lean manufacturing, which Henry Ford developed more than a century later into one of the world's greatest and most profitable enterprises. Ford's payment of high wages created the American middle class and also gave us the 40 hour workweek. The principles are so simple that Ford, who did not complete high school, could lay them out very clearly in books that were understandable by ordinary workers. Nothing has happened to change those principles so we can take them right off the shelf to achieve similar results today. The webinar by industry veteran William A. Levinson will show how cheap labor is not at all cheap, and can often conceal enormous inefficiencies, and we therefore do not need to rely on low-wage domestic, much less foreign, labor to run our factories.

Webinar Agenda

• Manufacturing displaced agriculture several hundred years ago as the foundation of national affluence and military power. Loss of manufacturing capability is a universal leading indicator of national decline.
• Force majeure interruption of complex international supply chains has always been a major risk. The United States need not and must not tolerate any country's overt threats to cut off supplies of rare earths (2019) and pharmaceutical products (2020).
• Low wages are often symptomatic of low profits and excessively high prices because they can cover up enormous inefficiencies. This was proven by Henry Ford and other American industrialists long ago.
• American industrialists such as Frederick Winslow Taylor and Frank Gilbreth focused on motion inefficiency, but there is an upper limit on how much work a person can do with even the most efficient methods. There is, on the other hand, no theoretical upper limit on what can be done with improved technology, which brings in the issue of opportunity costs. This is the money we don't make because we don't (for example) use a cotton harvesting machine that can do the work of 50 manual laborers instead of manual laborers who use even the best motion-efficient method of doing the job by hand.
• The success of the Ford Motor Company during the first part of the 20th century, followed by overwhelming American production during the Second World War, prove unequivocally that the goal of reshoring American manufacturing is a SMART  (Specific, Measurable, Achievable, Realistic, and Timely) goal.

Webinar Highlights

•  Agriculture was once the foremost source of wealth and military power, as exemplified by feudal systems that exchanged land (or the use of land) for military service.
  • This attitude prevailed even into the 19th century, when land-owning gentry looked down on even wealthy factory owners.
• The rising importance of manufacturing was however evident long before the Industrial Revolution. A decline in manufacturing capability is a universal leading indicator of national decline and decay.
  • Lack of manufacturing capability was cited as a weakness in the Polish-Lithuanian Commonwealth, which was arguably Europe's most powerful nation in the mid-16th century. Poland exported primarily agricultural products, and imported manufactured goods. "It was essentially the same kind of trading pattern that places third-world countries at the mercy of industrialized nations today" (Zamoyski, Adam. 1987. The Polish Way, page 175).
  • Spain's and Portugal's discovery of treasure in the New World should have made them the most powerful nations on earth. Alfred Thayer Mahan's The Influence of Sea Power Upon History shows instead that their use of abundant gold and silver to buy manufactured goods from England and Holland left the latter countries with powerful manufacturing establishments, powerful navies, and also most of the gold and silver. The British bought the vineyards of Oporto from under Portugal so they could enjoy Port wine.
  • The British knew manufacturing was a good thing, so they forced their colonies to exchange raw materials for manufactured goods. This was among the causes of the War of Independence.
• The Industrial Revolution underscored the dominant role of manufacturing.
  • The economic disparity between the agrarian South and the industrialized North was a principal cause of the American Civil War. Industrialization of the South would have probably abolished slavery peacefully by making it uneconomical. 
  • The Ford Motor Company made the United States the wealthiest and most powerful nation on earth by the early 20th century. This was despite the strength of the United Kingdom's, Germany's, and France's industries because Ford made his workers several times as productive.
  • The United States' industrial output exceeded that of all the other belligerents in the Second World War, Allies and Axis put together, by 1944. 
• Supply chain disruption by force majeure has always been a major risk. This risk becomes greater when parts of the supply chain are offshore.
  • China threatened in 2019 to intentionally curtail exports of the rare earths that go into electric vehicles and other high-tech products.
  • China threatened in 2020 to cause the deaths of countless Americans by cutting off pharmaceutical exports.
  • Concession of manufacturing capability (the foundation of military power) to a hostile foreign government is therefore poor judgment, and threats to intentionally disrupt our supply chains are intolerable.
• The reshoring of American manufacturing capability is however a SMART (Specific, Measurable, Achievable, Realistic, and Timely) goal. All we must do is overcome the mistaken belief that cheap labor means low prices and high profits, when it is in fact often symptomatic of the opposite.
  • Greek myths (or science fiction stories) of Aristotle's time featured what we would now call robots, or mechanical workers. Aristotle predicted accurately that such machines would make slavery, and by implication low-wage labor, obsolete.
  • Numerous case studies prove that cheap labor is often nothing more than a hiding place for massive inefficiencies, just as inventory is a hiding place for poor quality. 
  • American motion efficiency principles, as described by Frederick Winslow Taylor and Frank Gilbreth, were developed explicitly in response to the menace of cheap offshore labor more than 100 years ago.
  • Henry Ford added the principle of opportunity costs, i.e. unrealized gains due to failure to use the best available tools and equipment. These costs can easily be on the order of 2000 percent (i.e. 20-fold) or even more. 
  • The above issue carries over into the United States where migrant farm workers are paid less than minimum wage ($11,000 a year) to walk and bend over to harvest crops even though proven superior methods are available.
  • None of this is theory. The United States did it twice before, when Henry Ford propelled our country into the world's foremost position and then when we met the Axis' dictators with totally overwhelming mass production of war-related material. Nothing aside from mistaken beliefs about cheap labor prevent us from doing it again.

Who Should Attend

All people with responsibility for strategic decision-making