In 61 years on this earth, I have never needed an oscillating multitool until now. But I’m working on a project that requires one (for cutting away a couple inches of baseboard on either side of a door, to accommodate door replacement and new casing).
So, I headed to our local Walmart. I will probably only use it for this project and never need it again, so I didn’t need to spend much. I found four options: a $20 multitool, a $35 model, a $45 model, and a $70 model. Different brands, different power levels, probably different quality levels, but they would definitely all meet my needs for this simple one-time project.
So, I decided to buy the cheapest one that wasn’t made in China.
Checked the sides or bottoms of each box, and – you guessed it – they’re all made in China.
So, I bought the one for 20 bucks. Chairman Xi can’t kill as many people with $20 as he can with $70, anyway. It’s the best I could do.
We have all been there, haven’t we?
We hear of the demise of American manufacturing, and it we know in our hearts that it’s not quite true. America still makes cars and trucks, kitchen appliances and sump pumps. We still print books here, grow food here, and make machinery here.
Your refrigerator, your car, and the construction materials of which your house was made are probably all still made here. That’s an enormous amount of manufacturing. So it’s not true to say “it’s all gone.”
But it IS true to say that American manufacturing is handicapped, that it’s limping along, fully capable in some areas, but endangered to the point of extinction in others.
There are plenty of reasons for this; conservatives and libertarians have been shouting the message from the rooftops for generations.
Our tax burden, our regulatory structure, our litigation environment, all act as government-run brakes on the manufacturing sector. We have cities, counties, even whole states that make it so hard for a business to operate, it simply has to move or close down.
Many other countries, especially in Asia, don’t have this problem; they are more welcoming to the manufacturing sector than our own governments are.
But it’s not all government’s fault either. Our schools have downgraded or eliminated shop class; over the past half century we’ve told people who might have flourished in the trades that they should go to college. This has left us with an oversupply of political science majors and a shortage of assembly line workers.
And often worse yet, it has left us with people who would only take the assembly line job if they start out with the pay of a foreman or plant manager. Some unions would rather shut down a business than allow their members to be paid an entry level wage for an entry level job.
Again, other countries, especially in Asia, don’t have this problem.
Economists will tell you that in the history of the world, as the world gets more global, it has always been thus. Some countries will find that they are more efficient at manufacturing some things, others will discover expertise in making others. Just as water finds its own level, so too will different countries rise to proficiency in different industries.
But that doesn’t mean that we, as a nation, should ever give up any industry completely. Due to risks of war, earthquake, typhoon, or transportation crisis, we could easily lose any foreign supply point overnight. This is a national security risk that hardly any politicians even dare to mention.
What if we were to go to war tomorrow with the primary source of everything we buy, and everything we make? Regardless of the valor and training of our military, we would lose immediately. A nation cannot ramp up for wartime production if there is nothing left to ramp up.
And while that sounds like an exaggeration, again, it is not.
Let’s return to the oscillating tools I was looking for at the start. I listed all the options available at my local discounter, but we know that if I needed a better model, one that I use all the time, I could have gone to a carpentry supply shop and purchased much more expensive American-made products. For now.
The problem we have isn’t just the finished goods we import, where we can see the country of origin on the side of the box.
Our real problem is with the finished goods we make here in the United States, because most of them, truth be told, are dependent on components from China as well.
To use the most common of American-made products, consider the humble washing machine. It’s manufactured here, of steel sheet and steel drums, a printed circuit board and dials for control, hoses for the water and power cord for the electricity, and two more critical elements: the agitator motor and water pump.
Even if this product is made across the street from us, we can’t take delivery of that working washing machine unless every single element is available for the factory to assemble. And if you open up that American-made washing machine and look closely, you’re sure to find that at least one of those critical internal components – the motor, water pump, and control panel – maybe even all of them, were imported from China.
Over the past forty years, American factories have moved the sourcing of these critical components – from injection-molded plastic parts to small subassemblies like motors and power supplies – almost entirely to China. American manufacturers of such goods, especially electronics, have shrunken or given up the ghost entirely.
But if we go to war with China, or even if we don’t, but if war breaks out between China and her neighbors – most likely Taiwan, Philippines, South Korea and Japan – the transpacific commercial shipping lanes will be interrupted, for months at least, most likely for years.
And as we learned in 2021, there doesn’t even need to be a war in Asia for our supply lines to become horrendous:
We have grown accustomed to three-to-six weeks intermodal transit times from Asia, and when there’s too much cargo, it clogs our seaports and rail hubs, doubling or even trebling those transit times. Because of these bottleneck points, our manufacturing sector can be hobbled as thoroughly by an economic boom as well as by a wartime disruption.
The time has come to revisit this dependence, and revive America’s ability to make things ourselves – components as well as finished products.
Our purchasing agents – the buyers in America’s manufacturing community – have for decades been taught in business school “to buy from the lowest cost supplier, and China is the lowest country of them all. This is how to serve the interest of the corporation, and the stockholder.”
They are taught – brainwashed, really – to select the vendor with “the lowest piece price,” and to claim the difference as their reportable savings.
It’s true, of course, that when you compare the piece price alone, it’s difficult for any domestic vendor to compare with a Chinese competitor. The Chinese have lower taxes, outrageously lower wages, and lighter regulatory burdens than we do. On top of that, the politburo in Beijing is happy to subsidize the destruction of American manufacturing through short-term dumping programs or currency manipulation. And ocean transportation across the Pacific is so efficient, it’s often no more expensive than cross country truckload transportation for domestic purchases.
But there are things they don’t tell you in business school, things that America’s manufacturing community knows about but doesn’t report.
- Sourcing from an Asian vendor means flying your top engineers, quality managers, LEAN engineers and buyers to and from Asia all the time. Those travel budgets will make your eyes pop. And with so many key employees overseas all the time, additional staff at home is required, as well.
- Sourcing from an Asian vendor means needing to stock months’ more inventory, build in months’ more lead time into forecasting models, manage currency fluctuations. Those will make a CFO’s eyes pop, if not yours.
- Sourcing from any foreign vendor means paying import duties and transportation. The impact of these varies greatly from product to product.
- Sourcing from an Asian vendor means that whenever you under-forecast your sales, you’ll have to order expedited manufacturing and expedited shipping. Those airfreight bills are usually five times the cost of seafreight, often more.
- And everything you buy from any vendor will occasionally go wrong, requiring redoing the tooling, redoing the packaging, and usually, shipping goods back and forth for rework. That’s double the airfreight, right there. By contrast, transportation costs for expedited work with a domestic vendor is usually the same price as normal shipments, because domestic transportation is so much more quicker and more reliable.
- Shall we talk about the fact that when you outsource a product to another country, you’re basically teaching your vendor to become your next competitor? Nobody wants to talk about this one either, but it’s undeniable. We extend our patent protection to them, and teach them our trade secret methodology, “since they’re working for us.” The store shelves are strewn with the carcasses of failed American companies who have been replaced by the very Chinese vendors they once brought on to “partner” for more efficient manufacturing.
- And all that’s not even counting the much harder-to-quantify costs such as losing marketshare due to a proliferation of knockoffs and the fact that consumers won’t pay as much once they realize a product is Chinese.
If those additional costs sound like they would make outsourcing to China sound unaffordable, you’re right. But most companies just won’t count them.
These are the costs that we in the industry refer to as the “total cost of ownership,” or “TCO.” They are a critical element of the process of outsourcing, whether of small components, raw materials, or finished goods – but under standard generally accepted accounting principles, they are usually exempted from consideration. If the purchasing department brings it up, they’ll be told “No, we only look at piece price, standard inbound transportation, duties and taxes.”
Later, they may blame the engineers and buyers for all that travel, blame logistics for all that air shipping, and blame marketing or forecasting for all the expediting costs – but they’ll never admit that they should have anticipated it all when they compared suppliers in the first place.
This isn’t to say that the lowest true cost vendor will always be found in the United States; there will always be products that are so cheap to make in Asia, and so free of such extenuating circumstances as those named above, that it will only make sense to import the majority of them.
But we need to adjust our attitude about it. We need to stop assuming that American vendors are always going to be too expensive.
We need to start offering every bid to American options again, giving them a fair chance, and then bringing up all those very real cost bombs when we make the case internally to change suppliers to a safer, more logical, more convenient, more trustworthy, and more local alternative.
If American business just starts looking at the true, total cost of ownership again – as we did once, long ago – we just might see a manufacturing renaissance, here at home, once again.
Copyright 2024 John F. Di Leo
John F. Di Leo is a Chicagoland-based international transportation and trade compliance professional and consultant. A onetime Milwaukee County Republican Party chairman, he has been writing a regular column for Illinois Review since 2009. His book on vote fraud (The Tales of Little Pavel) and his political satires on the current administration (Evening Soup with Basement Joe, Volumes I, II, and III), are available in either eBook or paperback, only on Amazon.
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