Speed can reindustrialize United States

 Speed Can Reindustrialize America Reviving manufacturing doesn't require a planned economy, just a better business model.

Manufacturing and the US Economy

The US manufacturing sector represents approximately 10% of GDP (~$3 trillion), positioning the US as the second-largest manufacturing country in the world. Despite this scale, the sector is often misperceived as a failure, leading to calls for blunt government-directed policies. The core issue is that while the US excels at high-volume manufacturing, it performs poorly in low-volume manufacturing, specifically in producing custom parts with short lead times.

The root cause of this malaise is the high cost of "white collar" labor in the US; these high wages create substantial soft costs that are difficult to spread across few units in low-volume production. Paradoxically, these same high wages generate massive demand for short lead time parts. New end-to-end digitized manufacturers are emerging to solve this by eliminating soft costs and shortening lead times through instant quoting and production-integrated software. This superior value structure will likely lead to industry consolidation into larger, highly productive firms, with AI serving as a major accelerant.

Understanding the Manufacturing Industry Today

Manufacturing existence is driven by three main forces:

1. Specialization: The complexity of human desires and the infinite knowledge required means no single region can dominate all production.
2. Economies/Diseconomies of Scale: Most manufacturing eventually hits diseconomies of scale, making it more rational to distribute facilities to minimize transportation and other costs. Only products with very low shipping costs and diminishing returns to scale, like computer chips or phones, move toward global production.
3. The Gravity Model: Economic transactions decrease rapidly with distance. Consequently, most products are produced near buyers, with richer countries substituting capital for labor due to higher labor costs.

US Manufacturing's Hollowness

US manufacturing is currently tilted toward high-volume, static, and bulky products. Domestic production is strongest in items characterized by:

• High Transportation Costs: Such as sand, cement, cars, and dishwashers.
• Need for Speed to Market: Time-sensitive or perishable items.
• High Volume for Fixed Cost Absorption: Allowing setup and tooling costs to be spread over many units.
• Long Product Lifecycles: Where static designs allow for long-term automation investment.
• Technological Complexity: Leading-edge products like stealth fighters, commercial aircraft, and gas turbines.
• Amenability to Automation: Processes like chemical processing that are easier to mechanize.

The Structure of the US Manufacturing Industry

The industry is organized into layers:

• Commodities: Raw materials like steel or plastic produced in gargantuan, capital-intensive facilities; the US is largely self-sufficient in these high-volume basics.
• Intermediates: The "missing middle" consisting of diverse parts like sheet metal, hoses, and clips. This sector contains most of the value-added but is characterized by small, often analog firms with long lead times.
• Final Products: Integrators who design and organize production; while many parts are imported, most final products by value are assembled in the US.

Case Study: Robot Density in China vs. the US

The rising density of robots in China compared to the US is often misunderstood. Robot arms are labor-shifting, not labor-replacing. They reduce hourly labor but increase the demand for high-cost skilled labor for programming and maintenance. Because the US has a surplus of low-paid hourly workers and a shortage of high-skill workers, this trade-off is often uneconomical. In contrast, China has a surplus of underemployed STEM graduates and faces labor restrictions ("Hukou") for hourly workers, making robots a more attractive investment.

Finding Dynamism in Low-Volume Manufacturing

Modern US firms face increasing fixed costs due to scale, specialization, and high-end labor. To remain productive, firms must either increase volume or reduce time. For startups and firms on the technological frontier, ultra-short lead times are critical because the fixed costs accrued during waiting periods often dwarf the actual price of a part.

Speed Sells and Eliminating Soft Costs

Traditional US manufacturing is often slower than Chinese competitors who mass human resources to create speed. End-to-end digitization can eliminate "dead time" (quoting, emails, queues) by removing humans from the procurement loop, reducing lead times from months to days.

In low-volume orders, the "idiot index" is often enormous—the material cost might be only a few percent, while human labor for quoting and billing accounts for the rest. Software can solve this by autogenerating CAM instructions, billing, and shipping labels. Companies like SendCutSend have proven this model, reaching over $100 million in sales by offering instant quotes and delivery in days.

Factors for Competitive US Manufacturing

• End-to-End Digitization: Eliminates soft costs and increases equipment utilization from a typical 10-20% to nearly 100%.
• Lightning Logistics: Modern parcel delivery and future autonomous carriers expand the sales footprint of digitized shops.
• Collapsing Tooling Lead Time: New processes like laser cutting, 3D printing, and roboforming replace expensive, slow "hard tooling" (molds/dies), allowing for faster prototyping and shorter product cycles.

Competition and Strategy

Digitized firms follow a pattern of gaining competitive advantages through low marginal costs and high fixed cost absorption. This forces consolidation, as manual shops cannot coordinate tightly enough to offer the instant quotes customers now expect. While general SaaS solutions often fail in manufacturing due to the high precision and non-generalizable nature of the work, building proprietary software for a single firm that scales is highly valuable.

Policy and National Security

Policy should prioritize minimizing high-end labor misallocation. Tariffs can hurt demand for intermediates and end-manufacturers, while industrial policies like the CHIPS Act often consume massive amounts of technical talent for potentially obsolete methods. For raw materials with small markets like rare earths, stockpiles are more efficient than forced domestic production. Regulatory speed bumps, such as long approval times for drones or aircraft, also stifle productivity and must be addressed.

National security requires technological supremacy and cycle time rather than just mass production. Historical lessons from the Korean War show that having a massive manufacturing base is a net negative without the technological edge. The US already has the raw capacity for mass production (e.g., steel for thousands of ships), but the true constraint is the talent needed to equip and operate a modern force.

The Future of US Manufacturing

By reducing soft costs and lead times, hardware entrepreneurs can iterate faster, similar to how AWS enabled software startups. This shift toward speed and flexibility will allow the US to remain at the center of the global innovation network and effectively address competition from China.

Appendix: Notable Digitized Firms The author lists several companies embodying these principles, including:

• SendCutSend / Osh Cut (Sheet metal)
• Forge Automation (CNC machining)
• Blitz Panel (Electrical panels)
• Digital Metal (Cast metal with 3D printed molds)
• Machina (Roboforming)
• Hadrian (Digitized defense machining)