March 22nd, 2012

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CEOs Express Regret Over Outsourcing Manufacturing and Assembly Labor


General Electric CEO Jeffrey Immelt has been rethinking the company's history of outsourcing jobs. Could a return to domestic manufacturing mean more job opportunities for people with disabilities?

A recent dispatch by Reuters correspondent Scott Malone revealed top executives from some of America’s leading manufacturers second-guessing earlier decisions by themselves and their peers to outsource labor.

According to Malone, General Electric CEO Jeffrey R. Immelt’s annual letter to shareholders said the factors in the manufacturing equation have changed in a way that makes a less compelling business case for outsourcing:

In the last generation, GE and our industrial peers began a long-term trend to outsource our supply chain to other companies… This made sense in an era when labor was expensive and material was cheap. Today, our material costs are more important. So we have to control our supply chain to achieve long-term productivity.

The phrase “controlling the supply chain” used by Immelt is one that’s quickly entering the common vernacular when discussing the trade-off between costs and quality. The labor costs of outsourcing manufacturing to overseas facilities made financial sense at one time, even if it meant less direct oversight of production. Now that wages are rising in third-world countries, it makes more sense to bring logistics jobs such as assembly and fulfillment back to American workers, especially in contract labor situations where the company is paying for work without incurring the cost burdens of full-time employees.

Boeing CEO Jim McNerney expressed the same sentiment, albeit in a more rueful tone. Malone’s article says McNerney used the phrase “lemming-like” back in February to describe how U.S. manufacturers followed each other down the international outsourcing path, only to discover upon arrival that they may have sacrificed more than they have gained. McNerney goes on to say:

We lost control in some cases over quality and service when we did that; we underestimated in some cases the value of our workers back here.

Despite these revelations, Malone says the current uptick in bringing manufacturing jobs back to Americans could be temporary. The analysts he interviews agree that “onshoring” has made gains, but the majority of work is still being done outside U.S. borders. Malone also quotes studies showing that greater investments are being made in foreign facilities than their American counterparts.

So why is there a disconnect between what industry leaders know in their hearts to be the best way to conduct business and how they are actually operating? Perhaps it is because they are not aware of the opportunity to have the best of both worlds when they hire people with disabilities to perform assembly and fulfillment duties that they have traditionally outsourced. The availability of contract labor teams offered by organizations like ATI can help manufacturers maintain greater oversight of the supply chain while also making a positive change in the employment rate for people with disabilities.


Image by Marion Doss, used under its Creative Commons license.

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