Sourcing Overseas Manufacturers to Save US jobs. Huh?

It's not an oxymoron.  As a great article in, which originated from a post by Dan Harris at Chinalawblog, explains, it's the way Douglas Smith, founder and owner of SmithCNC-USA, is working to save the US manufacturing sector.  SmithCNC-USA is a North Lawrence, Ohio firm that helps midwestern manufacturers get components and raw materials abroad.  Companies starring the neccessity of self-preservation in the face are finding that the path to staying alive is by sourcing and working with factories in other countries to create a business structured for competition in the global economy. 

As I noted in a previous blog post, Made in the USA isn't Dead, Just Different, companies are not simply shifting everything away, but instead adopting a more global supply chain, wherein they retain higher value-added tasks and jobs here, and contract out low skill, low-value work to more cost competitive sources.  Other companies are outsourcing tasks for cost purposes, but retaining local production for quick response purposes to hedge against difficulties in forecasting demand. 

Like SmithCNC-USA, our clients often grow the design, engineering, sales & marketing, and administrative departments in their businesses and add jobs to these areas, by outsourcing operational duties like sourcing, some engineering tasks, manufacturing, packaging, and logistics to companies like us and our network of suppliers. 

The article describes Smith and some of the results his clients have enjoyed:

The founder and sole owner of SmithCNC-USA is Douglas Smith, a chatty
50-year-old ex-machinist with both cost-cutting and patriotic streaks.
He says he's doing his part to preserve the shrinking U.S.
manufacturing sector, which since 2000 has shed 4 million jobs, or 27%
of its workforce. (That compares with a 2.5% decline and a 2.9%
increase, respectively, for the freshly gutted construction and
financial industries.)

Smith's customers are U.S. manufacturers doing small and medium-size
production runs, either for their own end products or as contract
suppliers to other U.S. manufacturing firms. If they are lucky, they
eke out gross profit margins between 20% and 30%. That is, after paying
for labor and raw materials, they have at best 30 cents of the revenue
dollar remaining to cover overhead and depreciation on their machinery.
Smith says that by subcontracting some of the work abroad–for example,
the intake manifold in a car's air system–these contractors can add 20
points to that gross margin, and that's after paying Smith…

These companies, who might have otherwise stagnated or folded, have been able to expand and hire in existing and new areas because of their overseas manufacturing partners. 

The impacts of global supply chains are not always rosy.  The dynamics are often more complex, and involve both positive and negative consequences, with an inordinate focus by pundits on the latter.  US companies surviving, and often flourishing, in the face of competition inevitably coming from all parts of the world, is positive.