Bolt helps teams build physical products. Manufacturing is a big part of what we provide assistance with, so you can imagine we are asked a deluge of questions about manufacturing on a daily basis. One of the most common is “can we make X part here in the US?” The answer is always yes, but at least with products we typically work with, it rarely makes sense. Here’s why.
The Value of US Manufacturing
Before getting into why we should continue making things overseas, it’s important to understand manufacturing in the US. Most people believe that sometime between Henry Ford’s Model T and the production of Apple’s first iPhone, we just shipped off all of our manufacturing jobs to mainland China. Not only do we still have big manufacturing industries, we actually still manufacture more good than any other country in the world (based on value). But the kinds of manufacturing we do is very different than what most people think of when the image of a factory pops up.
Since the founding of this country, we’ve been innovators. From the start of the American Industrial Revolution through most of the 20th century, we created much of the world’s manufacturing technology. We had to. You couldn’t develop products without developing the manufacturing processes to enable you to build them at any kind of significant scale. So it’s only natural that we did most of the world’s manufacturing.
But as our focus on innovation began to shift away from creating consumer goods (to aerospace, biotech, computers and finance), we stopped innovating with manufacturing of these consumer goods. We got really good at developing products (and having them manufactured elsewhere). And we became great at manufacturing high-tech products. When you need to build a faster jet engine or a stronger hip replacement, you have to also invent the manufacturing process. But when it comes to consumer goods, manufacturing has become commoditized.
And Why It’s Not Coming Back
Most people think that we make things in Asia because it’s cheaper. They believe any company looking to manufacturing something goes straight to Shenzhen or Hong Kong because labor costs so much lower. Price is definitely a factor, but it’s rarely the driver of factory selection.
One of the key drivers of building any product is parts. Consumer products that we typically work with have a few kinds of components: a PCB (circuit board), a handful of electrical components, usually a few pieces of injection molded plastic, sometimes a piece of metal or two, and maybe a few screws to hold everything together. Getting all of these pieces to the factory at the right time in the right quantity, verified for quality and at the price you expect/need is overwhelmingly complex for first-time hardware entrepreneurs. It seems trivial but often winds up providing a major point of failure for startups. Successful manufacturing is nearly impossible without successful supply chain management.
Because places like Hong Kong and Shenzhen produce so many consumer goods (particularity electronics), they have developed something critical for manufacturing success: supply chain elasticity. SCE means that if there’s a problem with a resistor I ordered, I can get 100K new ones extremely quickly from someone else. If my mold tool develops a cooling issue, there are literally hundreds of people that can fix the problem in a few mile radius of the factory. This means I can keep the factory running and make my shipping deadline. It can easily be the difference between success and failure in the marketplace.
Supply Chain Elasticity is not something the US will ever be able to compete with and so we won’t be making the world’s iPhones anytime soon. But this is okay. We continue create overwhelming value. We still design and develop the world’s best products. We still manufacture the really interesting ones, and we still have innovation sewn into our DNA. I’ll take that over making millions of pieces of plastic any day.