Manufacturing domestically allows control over supply chain

December 20, 2012

U.S. manufacturers who remain on the fence regarding the continuing cost effectiveness of overseas production could take a lesson from the Duchess of Cambridge, according to the BBC.

While media attention has focused on the decisions of companies such as Apple, Nike and General Electric to return some manufacturing to the U.S., companies could consider what some industry analysts have referred to as the Kate Middleton Effect.

When the Duchess wore a certain style of high-street-available clothing, which in this case was a polka dot dress, the UK manufacturer that produced the garment was inundated with orders and was unable to keep up with demand.

Operating under lean enterprise principles, the company was able to increase production on a limited scale, but it suffered from the inflexibility of an overseas supply chain. Although it could have sold thousands of units, it missed the opportunity to capitalize on the brief moment that the dress was fashionable.

According to some marketing analysts, the ability to spot trends and act on them in a timely fashion is one of the concerns facing manufacturing companies operating an overseas production line. Irrespective that the cost of labor in countries such as China or Indonesia has been rising for some time, manufacturing goods overseas seems to be losing its lustre among companies who believe that they are at the forefront of fashion.

Taking Apple as an example, the company is struggling to make its iconic products fast enough to keep up with domestic demand. When it released the iPhone 5 in September, it took pre-orders for the device that exceeded previous incarnations by nearly 20 times, eventually selling five million units in the first 3 days.

U.S. manufacturers are also considering the issue of quality management in manufacturing. An overseas production line may have been beneficial for the bottom line some years ago, but reaction speed to unexpected events such as a worker strike or extreme weather event is crucial, especially if it impacts on the ability to get goods to customers in a timely fashion.

The underlying problem for some companies is that with so many cogs in the modern supply chain, it only takes one non-domestic weakness to derail an entire line of manufactured goods.

"If you are making products where you have seen huge spikes in demand, being able to suddenly turn the wick up and make things locally maybe saves you four, five or six days," said Paul Gray, director of European TV research at NPD Displaysearch, in an interview with the BBC. "That suddenly gets important."