The importance of manufacturing nearby

A story in today's Wall Street Journal (In Italy's Mills, a New Spin) on the fashion industry highlights the role of manufacturing in an intangible-intensive, innovation-driven economy.

"If we lose the Italian mills, we lose the creativity needed for fashion," says Sal Giardina, an adjunct professor of textiles at New York's Fashion Institute of Technology. "Fabrics are the common denominator of fashion. From birth to death, we are never more than three feet away from a textile product."

Much has been said about this high value-added strategy. As I have noted before, manufacturing is an intellectual capital dependent activity. A key part of that IC is the supply-chain relationship. The need to have production and design closely linked is something that a number of technology industries re-learn every few years. As the article illustrates, it is important in any industry with short product life cycles -- such as fashion.

The article also points outs the countervailing forces:

Yet consumers have been demanding cheaper clothes, and one way retailers have achieved these improvements is by pressuring apparel manufacturers to lower prices by more than 20% for each of the past two seasons. Many have done so by moving more production to China, Sri Lanka, Thailand and other low-labor-cost regions of the world.

How these two forces play out will determine the fate of many industries -- and the fate of many national economies.