I am not a trend spotter. Occasionally, though, I hear patterns in what shops are telling me that cause my ears to perk up.
Something like that has been happening lately. In the last six months or so, I’ve heard from a variety of manufacturing companies that have purchased equipment specifically to bring machining work in-house that used to be performed by a supplier. I have heard this often enough, in fact, that I wonder whether “insourcing”—in some quarters at least—may be the new in thing.
It would stand to reason. Machining work in the U.S. has migrated to higher levels of value. Manufacturing output in the U.S. has not decreased, but the lower-value work that can be performed effectively by sources far away largely has been sent that way. The work now—particularly the machining—is characterized by greater difficulty and tighter deliveries. The difficulty may result from specialty requirements peculiar to a particular industry. Fast deliveries may be needed either because inventory costs are high or the chance to get the product to market quickly is lucrative. In all these cases, outsourcing may be much less favorable than keeping the production close at hand.
World Class Technology (Molds In Miniature) seems to sense this. The molder considers an in-house mold shop essential for introducing products quickly. A different manufacturer I spoke to recently had come to a similar conclusion, deciding it couldn’t get the quality standards it needed without making machined components itself. Yet another manufacturer told me of the inventory costs it was paying to manage even some low-cost components from an external source. The company invested in machine tools to become its own JIT supplier.
Outsourcing has followed a certain curve. The 1990s brought information technology for coordinating with suppliers more efficiently. Sometime around 2000, it seemed that a critical mass of companies had discovered they could stretch these supplier relationships across oceans. Now, in some cases, the curve has come full circle. Success is ultimately found not in the production cost, but in the product. And if that product is deficient in any way—if it needs improvement or if a new model needs to get to market soon—then having production far away becomes an impediment.
I can’t say how widespread this insourcing is. In the cases I’ve heard of, though, I confess to some satisfaction as I imagine the insight these companies must have come to—the realization that machining and manufacturing are important after all.