Remanufacturing America's Factory Sector

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But it will still be much more than wages paid in developing nations. There will have to be other reasons to put these jobs back in America. There are.

Legal environment is one consideration. Recently there have been news stories about Farouk Systems, which makes a popular hair iron based on ceramic heating technology. It is moving its manufacturing from China to a new $23 million, 500,000-sq.-ft. facility in Houston, where it envisions 1,200 to 4,000 new jobs. Assemblers will be paid about $8 per hour. Labor in China is cheaper, but Farouk was spending $500,000 each month to fight counterfeits and it wanted more control over manufacturing and distribution.

Political Risk Is Key

Delivery time and expense are important, too. Mellish & Murray is a fourth-generation, family-owned metal-fabricating firm in Chicago that is enjoying success because of the speed at which it can deliver a high-quality product and respond to a customer's needs for small changes. Farouk also noted that by relocating, it will also be much closer to its primary market. And Emerson Electric (EMR) is reportedly moving production of appliance motors to the U.S. and Mexico from Asia.

Another factor, of course, is political risk. These are not stable times. Physical risk and corruption are issues that affect the cost of overseas manufacturing that would not be issues if manufacturing were done within U.S. borders.

Let's assume, for the sake of moving the innovation process forward, that the factors for manufacturing in America are improving while those favoring overseas manufacturing are declining. What could ultimately tilt a CEO to reopen a shuttered U.S. facility? Subsidies.

Upstate New York Wins

Over the past couple of decades, as manufacturing capacity moved steadily abroad, cities, states, and the federal government developed any number of subsidies designed to encourage the growth of the service sector to take its place. So the idea of underwriting employers isn't new. But its emphasis on manufacturing would be.

Upstate New York recently beat out Dresden, Germany, for a new plant being built by the German microchip maker Global Foundries. New York provided about $1.2 billion in incentives to land the 1,400 jobs and $88 million annual payroll. There will be another 5,000 indirect jobs with an additional $290 million in pay.

Those indirect jobs are important. But it is the manufacturing facility that provides the core. Take it away and the indirect jobs disappear. Somehow the U.S. let itself be deluded into thinking that it didn't need the core—another of the lessons of the Great Recession.

A National Conversation

As I look around the country it is clear that the conversation about the remanufacturing is getting under way. What's needed now is to make it a truly national conversation. That could be done by gathering together in one place leaders who would be stakeholders in the rebirth of manufacturing—corporate leaders, labor leaders, experts in channels of distribution, energy, political risk, and others who collectively could put together a document clearly describing the roadblocks to remanufacturing in the nation and strategies for overcoming them.

The U.S. economy needs a strong manufacturing base. We've largely lost it. The turbulence of the global economy has brought this nation the opportunity to rebuild the sector. It would be innovation on a grand scale.

Thomas D. Kuczmarski is founder and president of Kuczmarski & Associates, an innovation consultancy based in Chicago. The author of five books, Kuczmarski has also taught product and service innovation at Northwestern University's Kellogg Graduate School of Management for 29 years.

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