Industrial America makes a comeback
September 09, 2013
I grew up outside of Youngstown, Ohio, in what is affectionately – or disparagingly – referred to as the Rust Belt. For years, communities like Youngstown were given up for dead because they were industrial cities where people got their hands dirty making and moving things at work. Industrial America was old school. The future was in financial services and, of course, the Internet. No business in its right mind wanted to own infrastructure and assets when it could put its time and money into all things digital.
This may be anecdotal, but it seems as if that’s about to change. I’m not just talking about the re-shoring of some manufacturing, which appears to be real, or the fact that one of the most sophisticated distributors in the world is Amazon, the epitome of a digital company. Rather, just this week, I noticed two data points in stories in the Wall Street Journal.
One was last Wednesday’s edition that Groupon is planning a network of warehouses in North America for the physical distribution of goods. The company that became a household name pushing discount coupons wants to “rely less on its original model of emailed daily coupons for local merchants” and more on shipping products. Today, that distribution is handled by a 3PL, but Groupon wants its own physical network of facilities to improve its margins, the WSJ reports.
In another article, I learned that General Electric is planning to spin off part of its financial services division. Before the financial crisis, GE Capital was viewed as a model for other big industrial companies to move away from manufacturing and into other more profitable areas. Today, CEO Jeffrey Immelt would like “earnings from the industrial businesses to account for 65% of the company’s earnings by 2015, up from 55%,” according to the WSJ.
Here was the most interesting stat: Since 2011, when Immelt became CEO, GE’s stock is down 40%. During the same period, Honeywell and United Technologies shares were up 125% and 200% respectively – two big industrial conglomerates that kept to their knitting rather than venture into banking and entertainment.
When major companies like GE – and emerging companies like Groupon – focus their efforts on manufacturing and physical distribution rather than making their money from moving money or digital distribution, that’s a good thing for our industry.
Subscribe to Logistics Management magazine
entire logistics operation. Start your FREE subscription today!