My last blog discussed the age-old question of specialization vs. adaptability. You do not need a long memory to understand just how powerful specialization can be in setting the market price for any commodity. At the start of the most recent wind energy boom, general purpose gear suppliers could get orders for reasonable quantities at prices that were marginally profitable. The moment that large, dedicated wind turbine gearbox manufacturing plants were announced those “marginally profitable” prices fell rapidly and the general purpose shop had to leave the playing field entirely.
Any discussion of “re-shoring” lost manufacturing jobs has to start with the understanding that not all of the “off shore” advantage is related to labor cost. A “legacy” shop in North America or Europe may have some current-generation equipment but much of its “tool kit” will be machines purchased over time for other projects. Some of those resources will still be “distracted” by other products. The overseas competitor is likely to have acquired his equipment with only the current product in mind. And whereas the “third world” once made due with slightly obsolete “surplus” machinery, these dedicated widget factories now have leading-edge technology.
Only in wartime can Western democracies mandate an industrial policy. World War II was won because private companies had the experience and talent on staff to change from building automobiles to manufacturing aircraft engines in a very short period of time. All indications are that any modern war would be over long before a single plant was converted. To paraphrase a recent secretary of defense — you don’t go to war with the army you want, but with the one you already have.
We have to approach the current business slump with the same attitude; your shop will not be “perfectly” equipped to become the low-cost producer of every product your sales department gets a look at. Hopefully, through a combination of skilled people, sharp pencils, and wise decision making, you will be sufficiently competitive to secure the business volume needed. Some of those “new” parts will humble you; others will open your eyes to other opportunities. Either way — you come out smarter than you went in.