Editor's Page -- Putting Offshore Outsourcing In Perspective

May 1, 2004
U.S. companies succeed when they focus on innovating for their customers. Period.

Sometimes the answers to the most difficult questions, and the solutions to the most intractable problems, are right in front of our eyes, and we don't acknowledge them. Instead we come up with reasons why a particular solution won't work for us because, well, we're different. We're a union shop, and they're not. We make custom products, and they mass produce. We don't make high-technology products, and they do. But every now and then a strategy captures our (or perhaps more precisely Wall Street's) imagination. It's the strategy that becomes universally accepted and sweeps across the manufacturing landscape leaving, for a time, all other strategies in its wake.

That's why I love to find and tell the stories of companies that embrace and effectively deploy the best practices that others say will never work, and of those companies that challenge conventional wisdom and win. These companies aren't, as some might argue, the exceptions that prove the "rules" that have declared certain industries "dead" in the U.S., or that particular products must be made by companies in low-cost countries, or that U.S. manufacturers can't overcome the high costs of manufacturing in their home country. They are the examples of what U.S. manufacturers can become when they are focused on one goal: innovating new management and manufacturing processes, and new products and technologies that better meet their customers' needs. In the context of the recent surge in offshore outsourcing, it's been particularly interesting to identify companies that have developed strategies where manufacturing in the U.S. provides a competitive advantage -- or at least overcomes an apparent disadvantage.

Consider the story of Engineered Machine Products (EMP) whose story, "Silicon Valley Thinking," is told in this issue. EMP, Escanaba, Mich., makes diesel engine components such as water and oil pumps -- products that most people associate with America's manufacturing past. The leaders of EMP applied the Silicon Valley innovation imperative to the world of engine parts and discovered a world of opportunity -- an entire line of products that hadn't been updated in decades. In other words, EMP leaders looked at the same old business that their competitors did and saw how they could reinvent the products by applying the latest technology to provide the higher efficiency, more environmentally friendly products that their customers needed at prices their customers were willing to pay. Their competitors saw the low-technology past. EMP's new approach has enabled the company to grow every year of the past decade, while growing market share in one product category from 5% to 65% in five years.

This story is only the latest of a number of stories IndustryWeek has published demonstrating that companies can successfully manufacture in the U.S. The stories of hundreds if not thousands of others remain to be told. When these stories are considered in the context of the current concern about low-cost, off-shore competition, it's hard not to conclude that offshoring is like any of the management trends that have come before it. It is neither the evil plan hatched by "Benedict Arnold CEOs" to disenfranchise the U.S. manufacturing worker, nor is it the cost-cutting panacea that many adherents might believe it is. It's an effective strategy in many situations; it's not so good in others.

That isn't to say that we shouldn't be debating other pertinent aspects of offshoring's effect on the larger economy. There are many valid points of contention that U.S. business executives, public policy leaders and citizens must resolve.

As for whether either offshoring or U.S.-based manufacturing will work best for your company, let this be a reminder that the best strategies are as unique and numerous as there are companies in this world. The only way to make the right decision is by focusing with laser-like precision on the strategies that will help you innovate the products that your customers need.

Patricia Panchak is IW's editor-in-chief. She is based in Cleveland.

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