Monday, February 20, 2012
Apple, Zappos, and US Manufacturing Competitiveness
I'm sure many will talk about the iPhone article and the issues with Chinese labor unrest and rising costs, so I will keep it brief. I just saw an upcoming ABC exclusive interview about Foxconn and Apple's dealings with the company, and thought it might be interesting to check out. This link just includes a snippet of the full interview (believe it will air Wednesday, Thursday in Australia, and will probably be able to find it on ABC's website), and I just thought it was interesting that the problem is still very apparent (suicide nets???!!!). Includes the fact that Apple has paid for the largest independent audit of its suppliers in history.
I also found the article "Time to Rethink Offshoring" very interesting and pertinent as the US is constantly talking about trying to find ways to increase manufacturing. The idea that transportation costs (including rising oil costs), as well as the transportation logjam (studied in the subsequent article "The Threat of Global Gridlock") will force companies to begin producing items closer to their sales location is interesting. Indeed, it has already begun as many companies are "insourcing" or "reshoring" already. Coleman Co., a large outdoor/camping product manufacturer, has begun making some of its products in Kansas, rather than in China, due to rising labor costs. Other companies have followed suit.
In the same article (http://www.utsandiego.com/news/2012/feb/19/tp-manufacturing-jobs-find-their-way-back-to-the/), a study by Boston Consulting Group is referenced, projecting that the manufacturing industry will regenerate 2-3 million jobs, about half of which were lost since manufacturing in the US peaked in 1999. The report also estimates that labor costs, which in China were just 72 cents an hour in 2000, will rise to $6.31 by 2015. While still far less expensive than the US, the gap is narrowing, and combined with other increasing costs (transportation), may continue to make insourcing more appealing to American manufacturers.
The Zappos article was interesting in the many ways that the company has adjusted its supply chain due to changing demand and logistics. It was striking that after just 6-8 weeks, the company was already sure that the partnership with UPS was destined to fail. Zappos continues to be a leader in innovation and experimentation, as evidenced by its recent Emerging Designer Program (http://business.transworld.net/86978/news/zappos-launches-emerging-designer-program/). The company will feature a new designer on its site each month in order to support up-and-coming fashion designers. With the empowered corporate culture identified in the case study, it is no surprise that the program was developed internally by Zappos employees.