December 21st, 2012

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Massachusetts Biotech Company Makes Case for Outsourcing to Americans


Vertex is building a new drug manufacturing facility on its Cambridge campus, citing the competitive advantage of insourcing its production versus sending jobs overseas in a December 14 article for the online business and technology publication, Xconomy.

In “Build It In the Back Yard: Why We Need American Manufacturing,” Brian Patrick Quinn constructs a scenario similar to what James Fallows wrote about in his recent article for The Atlantic. That is, that bringing the conceptualization of a product in closer proximity to its actual creation provides a company with greater flexibility to seize on innovative ideas, as well as have greater control in managing the supply chain. For an R&D man like Quinn, the value of being proactive in this capacity outstrips any potential cost-savings on labor that offshoring might provide.

Vertex’s new facility dovetails with Governor Deval Patrick’s $1billion life sciences initiative, a public-private collaboration introduced in 2008 with the goal of creating 250,000 biomedical jobs over a 10-year period. Quinn devotes a significant portion of his article to the multiplier effect created by a manufacturing-based economy:

Current American attitudes […] celebrate innovation in its many forms as a the centerpiece of a thriving, 21st century economy. This analysis isn’t wrong — but it is incomplete. Innovation does lead to jobs and economic activity, but not […] during the discovery of the generative good idea. Real economic benefits, like jobs and wealth creation, accrue during the scale-up, commercialization and manufacture of products that emerge from research and development.

Quinn concludes his article with a very interesting analysis of why businesses should embrace domestic manufacturing. The conventional line of thought is that the labor force is just another component of the cost-benefit analysis businesses make, he writes, and it’s America’s own fault that it cannot be competitive with other countries. Quinn calls this train of thought “misguided” and argues that it could ultimately be the undoing of the private sector:

… [W]hen China surpassed Japan as the world’s second largest economy last year, Japan didn’t disappear; it did not go the way of the Betamax or HD-DVDs… [W]hether you believe the purpose of government is to show restraint and stay out of the way of the most successful, or to show compassion and ensure opportunities for the less successful, a government with a stronger fiscal position and a healthy, employed, productive population will be better at doing its job.

In another part of the article, Quinn does mention that offshoring still has merit for “low-skill, high-volume labor” needs. But working with contract service organizations that employ people with disabilities to perform manual labor services provides the benefits of offshoring while still enabling companies like Vertex to have the innovative flexibility they seek.


Image by e-Magine Art.

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