William J. Holstein makes the case for returning manufacturing to America in the latest issue of CEO Magazine. He focuses on two main reasons: China is no longer cheap, and long supply chains are too slow. In a way, Holstein provides current examples of large technology companies coming to grips with an even bigger trend than outsourcing.
Mass customization is a vision from the 1990s that manufacturers can deliver on today given two decades of improvements in business methods and supporting technologies.
Under mass customization, the idea is to combine the cost effectiveness of mass production with the customer focus of custom product configuration. The key business methods are those classed as Lean Production and they are supported by ERP capabilities such as a product configurator on the front end, integrated paperless production manufacturing execution in the plant and kanban replenishment through the supply chain. An American manufacturer using the mass customization strategy held competitive advantage over China (even when they were still cheap – ed.) for high margin products where customers demand a variety of options for fast delivery.
As China’s consumer class expands the American manufacturer can then replicate the same manufacturing strategy and capture high margin markets in China. This fulfills another 1990s vision of product localization, where the customizations available in each market reflect the demands of local customers.