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“Reshoring” Opportunities Abound at Del Mar Electronics & Design Show

Tuesday, April 24th, 2012

If your company is considering ”reshoring” manufacturing of some parts, assemblies, or products to the U. S., then you should attend the 18th annual Del Mar Electronics & Design Show, which will be held at the Del Mar Fairgrounds (Map) Wednesday May 2nd, 10am – 5pm and Thursday May 3rd 10am – 3pm.  Admission to the show, the seminars, and parking at the show are ALL FREE.

This is the only industrial trade show for manufacturers held annually in the San Diego region so this is the best opportunity for companies to find local and regional suppliers to “reshore” manufacturing to the U. S.

To help your company analyze the true Total Cost of Ownership to determine whether or not you should be returning manufacturing to America, I will be giving a presentation on “Returning Manufacturing to America” at 10 AM on Wednesday May 2nd.    I will be considering:

  • Hidden costs of doing business offshore that comprise a true understanding of the “Total Cost of Ownership”
  • How you can calculate these costs utilizing the Total Cost of Ownership worksheet calculator developed by Harry Moser of the Reshoring Initiative
  • Case stories reviewing some of the problems companies have experienced in outsourcing offshore
  • Reasons why some companies are choosing to “reshore” manufacturing to the U.S.

For the past 15 years, manufacturers have outsourced their manufacturing offshore in Asia, especially in China, to reduce costs to keep or increase market share.  However, the supply chain dynamics are changing, and the cost savings of outsourcing to China are eroding due to higher labor rates and shipping costs.  In the last few years, there have also been many news reports about outsourcing horror stories regarding poison or tainted Chinese products, Chinese counterfeit parts, intellectual property infringement, quality problems, and lawsuits so many companies are rethinking their decision about manufacturing in China.

In August 2011, the Boston Consulting Group’s released their first report “Made in America, Again: Why Manufacturing Will Return to the U.S.,” explaining how rising wages and other forces are steadily eroding China’s once-overwhelming cost advantage as an export platform for North America.  By around 2015, BCG concluded that when higher U.S. worker productivity, supply chain and logistical advantages, and other factors are taken fully into account, it may start to be more economical to manufacture many goods in the U.S.

Now, a new BCG report, “U.S. Manufacturing Nears the Tipping Point, Which Industries, Why, and How Much?” released on March 22, 2012 by Harold L. Sirkin, Michael Zinser, Douglas Hohner, and Justin Rose has identified “seven industry groups that account for $200 billion in goods imported from China for which rising costs in China will likely prompt manufacturing of goods consumed in the U.S. to return to the U.S.”

The report predicts that production of 10 to 30 percent of U.S. imports from China in these industries, which account for approximately 70 percent of goods that the U.S. imports from that nation, could shift to the U.S. before the end of the decade, adding $20 billion to $55 billion in output annually to the domestic economy.”  The tipping-point sectors are transportation goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics.

BCG predicts that improved U.S. competitiveness and rising costs in China will put the U.S. in a strong position to add 2 million to 3 million jobs in a range of industries and an estimated $100 billion in annual output by the end of the decade which would reduce unemployment by 1.5 to 2 percentage points, and lower the nonoil-related merchandise deficit by 25 to 35 percent.

According to a new survey which BCG conducted in late February, “More than a third of U.S.-based manufacturing executives at companies with sales greater than $1 billion are planning to bring back production to the United States from China or are considering it.”

The top factors cited as driving future decisions on production locations:  labor costs (57 percent), product quality (41 percent), ease of doing business (29 percent), and proximity to customers (28 percent).  In addition, 92 percent said they believe that labor costs in China “will continue to escalate,” and 70 percent agreed that “sourcing in China is more costly than it looks on paper.”

In the new survey, “67 percent of respondents in rubber and plastic products, 42 percent in machinery, 41 percent in electronics, 40 percent in computers, and 35 percent in fabricated metal products said they expect that their companies will reshore production from China to the U.S.”

“Not long ago, many companies regarded China as the low-cost default option for manufacturing,” observed Michael Zinser, a BCG partner who leads the firm’s manufacturing work in the Americas. “This survey shows that companies are coming to the conclusion surprisingly fast that the U.S. is becoming more competitive when the total costs of manufacturing are accounted for.”  To request a summary of the survey findings, please contact David Fondiller at fondiller.david@bcg.com.

The Del Mar show will also feature a number of other free technical seminars.  A few of the topics are:  “Using LinkedIn as a Business Development Tool,” “New Energy Storage Options for the Transportation Sector,” “Best of SolidWorks Tips and Tricks,” and “Counterfeit Electronic Components Are No Longer a Threat; They are a Reality.”  For the full seminar schedule, go to www.vts.com.  In addition, all attendees are invited to the Post Time Party, Wednesday, May 2nd, from 5 – 7pm, with free refreshments provided thanks to sponsorship by Quality Systems Integrated Systems, Luscombe Engineering, Concisys Electronic Manufacturing Services, and National Test Equipment.

My company will be exhibiting products for the companies we represent at Booths 207 – 209 in the Bing Crosby Hall, which is to the left of the main entrance to the show.   We look forward to seeing you at the show!

 

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What Could We Do Right Now to Create Jobs?

Tuesday, January 17th, 2012

There are numerous ideas and recommendations on how we could create jobs that range from the cautious to the extreme.  Most job creation programs proposed by commentators, politicians, and economists involve either increased government spending or reductions in income or employment taxes at a time of soaring budget deficits and decreased government revenue.  Other recommendations would require legislation to change policies on taxation, regulation, or trade that would be difficult to accomplish. Many of these solutions involve borrowing money or taking money from one group of citizens or a future generation to give to another.  Let’s start with what we as individuals can do from the viewpoint of entrepreneurs, business owners, employees, and consumers.

If you are an entrepreneur starting a company, find a niche product for which customers will be willing to pay more for a “Made in USA” product.   Plan to sell your product on the basis of its “distinct competitive advantage” rather than on the basis of lowest price.  Select your suppliers from American companies as this will create jobs for other Americans.

If you are the owner of an existing manufacturing company, then you could do a Total Cost of Ownership analysis for component parts that you are having made offshore to see if you could “reshore” some of all of them to be made in the United States.  Check out www.reshorenow.org for a TCO worksheet estimator to conduct your analysis.  Also, you could choose to keep R&D in the United States or bring it back to the United States if you have “offshored” it.    Every manufacturing job you keep or bring back to the United States will create an average of three to four support jobs for other Americans.  If you are a service company, you could choose to keep your customer service department in the United States or bring it back if it is “offshored.”  If enough manufacturing is “reshored” from China, we would drastically reduce our trade  $600 billion trade deficit .  We could create as many as three million manufacturing jobs, which would, in turn, create 9 – 12 million total jobs, bringing our unemployment down to 4 percent.

If you are an inventor ready to get a patent or license agreement for your product, select American companies to make parts and assemblies for your product as much as possible.  There are some electronic components that are no longer made in the U. S., so it may not be possible to source all of the component parts with American companies.  As I’ve written previously, there are many hidden costs to doing business offshore so that in the long run you may not save as much money as you expect by sourcing your product offshore.  Don’t forget about the danger of having your Intellectual Property stolen by a foreign company that will use it to make a copy-cat or counterfeit product sold at a lower price than your product.

If you are fortunate enough to have a regular, stable job, do everything in your power to contribute to the success of your company.  Do your job to the best of your ability.  Be willing to learn new job skills to increase your value to your employer.  No matter what your job, adopt the marketing mindset where you realize that everyone in a company is part of the marketing team regardless of their job function.  Every interaction that a customer or potential customer has with anyone in a company influences his or her opinion about doing business with that company.  Even though you are being paid by your employer, it’s actually your company’s customers that provide you with a job.

You may not realize it, but you have tremendous power as a consumer.  Even large corporations pay attention to trends in consumer buying, and there is beginning to be a trend to buy ‘Made in USA” products.  Pay attention to the country of origin labels when you shop and buy “Made in USA” products whenever possible.  Be willing to step out of your comfort zone and ask the store owner or manager to carry more “Made in USA” products.   If you buy products online, there are now a plethora of online sources dedicated to selling only “Made in USA” products.   Each time you choose to buy an American-made product, you help save or create an American job.  There is a ripple effect in that every manufacturing job creates three to ten other manufacturing jobs, depending on the industry.  If 200 million Americans bought $20 worth of American products instead of Chinese, it would reduce our trade imbalance with China by four billion dollars.  During the ABC World News series called “Made in America,” Diane Sawyer has repeatedly said, “If every American spent an extra $3.33 on U. S.-made goods, it would create almost 10,000 new jobs in this country.”

Now, let’s consider what Congress could do to create jobs.  First, Congress must enact legislation that addresses China’s currency manipulation.  Most economists believe that China’s currency is undervalued by 30-40% so their products may be cheaper than American products on that basis alone.  To address China’s currency manipulation and provide a means for American companies to petition for countervailing duties, the Senate passed S. 1619 last fall.  Even though the corresponding bill in the House, H. R. 639, had bi-partisan support with 231 co-sponsors, GOP leadership bottled up the bill in committee and prevented it from being brought up for a vote, so the session ended without action to address this serious issue.  The 112th Congress lasts two years, starting in Jan 2011 and ending December 2012, so there is the opportunity for the bill to be voted on this year.

We  voters need to pressure our elected representatives in the House to pass this bill this year so that American products can compete against Chinese imports.  It’s an obvious fact that if American companies can increase sales of their products, then they will be able to hire more workers.

Second, Congress should pass legislation allowing American corporations to “repatriate” income earned by plants in foreign countries at a reduced tax rate of 5-5.5% if the income is permanently reinvested in the United States.  This would bring nearly 1.2 billion dollars of monies back to the U. S. to be invested in R&D, plants, equipment, and hiring workers.

Third, Congress should strengthen and tighten procurement regulations to enforce “buying American” for all government agencies and not just the Department of Defense.   All federal spending should have “buy America provisions giving American workers and businesses the first opportunity at procurement contracts.  New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction.  No federal, state, or local government dollars should be spent buying materials, equipment, supplies, and workers from China.

My other recommendations for creating jobs are based on improving the competitiveness of American companies by improving the business climate of the United States so that there is less incentive for American manufacturing companies to outsource manufacturing offshore or build plants in foreign countries.  The proposed legislation would also close tax loopholes and prevent corporations from avoiding paying corporate income taxes.  They are:

  • Reduce corporate taxes to 25 percent
  • No negotiation or ratification by Congress of any new Free Trade Agreements
  • Make capital gains tax of 15 percent permanent
  • Increase and make permanent the R&D tax credit
  • Eliminate the estate tax (also called the Death Tax)
  • Improve intellectual property rights protection and increase criminal prosecution
  • Prevent sale of strategic U.S.-owned companies to foreign-owned companies
  • Enact legislation to prevent corporations from avoiding the U.S. income tax by reincorporating in a foreign country
  • Change the tax code to a “partial exemption system” to eliminate incentives for companies to move offshore by taxing all corporate income at a reasonable rate once

In this election year, it is unlikely that legislation proposing any of these recommendations would have a chance of being passed by Congress.  The problem is that no Democrat would want to allow any credit to go to a Republican, which might help them win re-election, and no Republican would want to allow any credit to go to a Democrat, which might help them win re-election.   We will need to wait until after the 2012 election before we have any hope of such legislation being considered.

Finally, the Obama administration is considering a high-level task force to manage China trade enforcement issues. Such a task force is desperately needed and long overdue.  The challenge will be to ensure that the task force has the authority to take bold steps to lower our trade deficit with China.  Holding China accountable for their compliance with terms of their membership in the World Trade Organization would be a major step in helping American manufacturers compete in the global marketplace to be able to succeed, grow and create jobs in America instead of China.

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Trends that are Changing the Future

Tuesday, December 6th, 2011

A trend is a pattern of gradual change in a condition, output, or process that moves in a certain direction over time.  There are many trends that have occurred this year, but some are changing the way we work and conduct business.   We will take a look at just a few of them that are beginning to have an impact and could dramatically impact our lies if they continue in the future.

Biomimicry:  Humans have always looked to nature for inspiration to solve problems. One of the early examples of biomimicry was the study of birds to enable human flight.  The Wright Brothers, who created and flew the first airplane in 1903, derived inspiration for their airplane from observations of pigeons in flight.

The term biomimicry was popularized by scientist and author Janine Benyus in her 1997 book Biomimicry: Innovation Inspired by Nature. Biomimicry is defined in her book as a “new science that studies nature’s models and then imitates or takes inspiration from these designs and processes to solve human problems”.  Today, biomimicry is changing the way we research, invent, design, develop, and manufacture products.

The San Diego Zoo started its biomimicry programs in 2007, and the Zoological Society of San Diego recently partnered with Point Loma Nazarene University on an economic impact report looking into the feasibility of bringing another spoke into the region’s burgeoning green economy.  The report titled Biomimicry: An Economic Game Changer and estimated that biomimicry would have a $300 billion annual impact on the US economy, plus add an additional $50 billion in environmental remediation.

“The completed report articulates a compelling case for making the San Diego region a global biomimicry hub,” said Randy M. Ataide, executive director of the Fermanian Business & Economic Institute at Point Loma Nazarene University.  “Biomimicry could represent a revolutionary change in our economy by transforming many of the ways we think about designing, producing, transporting and distributing goods and services.”

An informal alliance to transform an esoteric concept into what they hope is the beginning of a future industry cluster has formed the Biomimicry Bridge (Business, Research, Innovation, Development, Governance and Education).  A memorandum of understanding to facilitate growth of the Bridge organization has been in place since 2008 between the San Diego Zoo, the City of San Diego, CONNECT, UC San Diego, San Diego State University, Point Loma Nazarene University, and the University of San Diego.

“The key to biomimicry is the value we place on natural systems and species,” said Paula Brock, chief financial officer for the San Diego Zoo. “Biomimicry offers an opportunity to bring successful economics together with conservation. We hope this study will inspire new companies and entrepreneurs to focus upon the development of this field.”

A key finding of the report is that biomimicry holds the potential to attract sizable capital inflows, driven by the prospects of rapid growth and high rates of return, and that venture capital potentially could flow into the field at a pace at least equal to that of biotech, estimated to be about $4.5 billion in the U.S. in 2010.

The San Diego Zoo and San Diego Zoo Safari Park house nearly 8,000 animals representing 840 species, and the San Diego Zoo’s accredited botanical garden has close to 40,000 species.  Allison Alberts, chief conservation and research officer for the San Diego Zoo, said “We are poised to offer the opportunity to be a living laboratory in helping biomimicry-based businesses grow.”  She added that the inspiration that comes from studying animals and plants could also be a revenue generator for the zoo. The study determined that the zoo is the only facilities-based provider of biomimicry services in the world and a natural to drive research and commercial applications.

A range of businesses in the region already are incorporating aspects of biomimicry in the design of products or ones they have on the drawing boards, said Ruprecht von Buttlar, director of finance and commercialization programs at CONECT, which serves as a networking group for investors, entrepreneurs and high-tech and life sciences professionals.

The San Diego Zoo’s Biomimicry website features a page on the latest news, research, and development of biomimetic products, a few of which are:

GreenShield: An environmentally friendly stain-resistant fabric finish inspired by lotus leaves:

Mirasol®, a display innovation by Qualcomm, mimics the microstructure of a butterfly’s wing to generate color without pigment in their handheld display technologies:

Biomatrica has developed DNA and RNA preservation technology based on the process in nature called anhydrobiosis:

Columbia Forest Products developed PureBond by manipulating soy proteins to behave like mussel byssal threads. Is the only urea-formeldehyde (carcinogen) free plywood glue on the market:

Cloud Computing: Cloud computing has become one of the hottest buzzwords in technology and  its birth as a term can be traced “to 2006, when large companies such as Google and Amazon began using ‘cloud computing’ to describe the new paradigm in which people are increasingly accessing software, computer power, and files over the Web instead of on their desktops.  It is an expansion of what has been known as software as a service (SaaS) in which cloud computing providers deliver applications via the internet that are accessed from web browsers and desktop and mobile apps, while the business software and data are stored on servers at a remote location.

This type of data center environment allows companies to get their applications up and running faster, with easier manageability and less maintenance, and enables IT to more rapidly adjust IT resources (such as servers, storage, and networking) to meet fluctuating and unpredictable business demand.

Cloud computing is all the rage. “It’s become the phrase du jour,” says Gartner senior analyst Ben Pring, echoing many of his peers. The problem is that (as with Web 2.0) everyone seems to have a different definition.

On the Hyland blog, Glenn Gibson offers a simpler definition:  “The Cloud” is a term used to describe a wide range of technologies, which are accessible through high-speed connections to the internet and private networks.

Cloud computing is at an early stage, with a growing number of providers large and small delivering a variety of cloud-based services, from full-blown applications to storage services to spam filtering.  Today, for the most part, IT must plug into cloud-based services individually, but cloud computing aggregators and integrators are already emerging.

Cloud computing is a long-running trend with a far-out horizon.  This year, TechAmerica San Diego added the new category of SaaS/Cloud for the first time at the 2011 High Tech Awards held on October 28th.    Four companies were finalists, and the winner, ServiceNow develops and delivers a comprehensive suite of cloud-based services for enterprise IT management. For a single low subscription price, ServiceNow customers have access to nearly 20 native applications built on a common, extensible platform. ServiceNow supports all common ITIL processes including incident, problem, change, request fulfillment, service level management and others.  The three other finalists were:  Kyriba, Syntricity Inc., and The Active Network.

Cloud computing is also changing the way manufacturing companies can become ISO Certified at a price affordable for companies as small as less than 25 employees and under $1.5 million in sales.   ION Quality Systems provides an innovative Quality Management System designed to revolutionize businesses. Their customizable management tools, experience, and exemplary customer service make them a partner in quality assurance. They can prepare you to get your AS9100, ISO 9001:2008 or other certification more efficiently, economically, and effectively than a traditional quality system in as little as 90 days.

However, there are concerns about the cyber security of cloud computing, and the June issue of National Defense magazine featured an article on “Cloud Computing Trend Sparks Compliance Concerns.”   Because the Obama administration has focused on cloud computing for future information technology needs, there is concern that “data stored in the cloud must always be accessible from any location, thereby increasing hacker vulnerability and the need ? without degrading fast encryption and decryption ? for robust measures to deflect security breaches.” This same cyber security concern was the focus of a symposium on “CLOUD.GOV?

The Promise, Limits, and Reality” held by the San Diego chapter of the National Defense Industry Association on October 11-13, 2011.

Social Media:  Social networking is not new; social networks have been around for far longer than people have been online. Everyone has belonged to social networks, and they still participate in social networks whether they know it or not.  What is new is social media that provides online social networking.  In addition to the more popular, Facebook, LinkedIn, and Twitter, there are Foursquare, Yelp, Groupon, and Living Social.   The BLÜ Group – Advertising & Marketing has published a free social media guide to help businesses of all sizes, particularly small and mid-sized businesses, connect with customers and potential customers, stay engaged with them, and ultimately grow their bottom line.

LinkedIn, Facebook and Twitter:  Most of us have been adding to our social media network to expand business opportunities, express opinions, and keep connected with people who change from one job to another.  Now, it is literally changing the way people conduct business, and view customers’ opinions and product ideas.  .

In the September 2011 issue of Industry Week, the article “Fueling Auto R&D with Social Media,” reported that Kia Motors Corporation  “decided to modify the seat design for their 2012 Optima as a result of a groundswell of complaints from consumers and automotive writers percolating on the Internet.”  Kia uses business intelligence software to monitor online comments about it vehicles and determined that it was bigger problem than they realized and needed to be fixed before the next major change in the model in a few years.

Ford also pays close attention to what people say about its products on social media such as Facebook and Twitter, and elsewhere on the internet.  Nissan Motor Company is also trying to grow it fan base on social media sites such as Facebook and Twitter to leverage the maximum impact when it launches new models.  Nissan is also using social media as a research tool.  In August 2011, Nissan invited its more than 300,000 Facebook fans to suggest names for a new optional interior package for the Nissan Cube.  Eric Marx of Nissan said using social media to make ”real business decisions it absolutely the future. “  A cottage industry is emerging to aggregate the vast amount of online comments into actionable data.  Nielsen Online’s BuzzMetrics software promises to deliver consumer insights and real-time market intelligence, and WiseWindow’s MOBI (Mass Opinion Business Intelligence) software to predict consumer purchasing intent and behavior.

According to one of my friends that owns a staffing agency, LinkedIn is actually changing the way people seek and are being recruited for jobs.  Having a good LinkedIn profile can mean the difference between being hired or not.

Recruiters are searching the LinkedIn database to find candidates for specific positions.  They can use the free, “Advanced People Search” function available to all LinkedIn members. They can search members and activities within specific LinkedIn groups, and many others are using a paid service called LinkedIn Recruiter that provides significantly more search functionality.

In addition, similar to the way job seekers sign up for “job alerts” to get notified via email whenever a new job gets posted that meets a certain set of criteria, recruiters can also sign up for candidate alerts to notify them of new candidates who fit their requirements.

Unemployed people and those seeking better jobs need to learn how to optimize their LinkedIn profile to align with this process of job search and recruiting.  According to Marci Reynolds, CEO of J2B Marketing, a “Job Seeker 2 Business,”™ there are many things a job seeker can do to optimize their profile to help ensure that they “show up in the appropriate search results, show up higher than other candidates (LinkedIn SEO), and stand out among the search results. Some of her tips are:

  • Your profile should be 100% “complete,” per LinkedIn standards
  • Include a detailed work history, with clear job titles and well written job descriptions that describe both your responsibilities and your key accomplishments
  • Make sure your “industry” selection is tied to the job you want, not the job you had.
  • Make sure you have some recommendations from your connections
  • Use a professional, flattering profile photo that looks like you already have the role you’re seeking
  • Use a headline to effectively market your skills and abilities. Your LinkedIn headline is like your personal tagline

Klout: If you’re new to Twitter and haven’t heard of Klout, you will soon. Klout is the gold standard for measuring your influence on Twitter.  Klout uses several measurements to come up with a Klout Score for each and every Twitter user.

The Klout Score measures influence based on your ability to drive action. Every time you create content or engage you influence others. The Klout Score uses data from social networks in order to measure:

  • True Reach: the number of people you influence. When you post a message, these people tend to respond or share it.
  • Amplification: how much you influence people. When you post a message, how many people respond to it or spread it further? If people often act upon your content you have a high Amplification score.
  • Network Impact: the influence of the people in your True Reach. How often do top Influencers share and respond to your content? When they do so, they are increasing your Network score.

Klout assigns a number between 0 and 100 to represent how influential you are on Twitter.  This number may seem arbitrary, but it’s important for several reasons.

Firstly, Klout is a much better measurement of how “well” you’re doing on Twitter than your follower count. Not all followers may really be interested in what you have to say, so using this to measure your Twitter success is not a great strategy.  Klout uses a robust suite of different measurements – which includes engaged follower count – to come to one single Klout Score.

Secondly, Klout is important because it’s the standard measurement for influence in social media, and knowing your Klout score shows that you know a thing or two about tweeting.

Thirdly, focusing on increasing your Klout score will make you a better tweeter.  Klout emphasizes things like getting retweets and using @mentions to engage with your community. So if you change your Twitter strategy to try and increase your score, you will likely end up tweeting more frequently, replying to more users, and sharing more retweetable tweets.

There are several other contenders for influence measurement on Twitter, but Klout is the most talked-about, well-known influence measure out there, so it’s a good idea to familiarize yourself with it so you can join in the conversation.

Reshoring: Reshoring simply means returning manufacturing to America from offshore.

To help accelerate this trend, there is a new initiative with a plan to efficiently reduce our imports, increase our “net exports” and regain manufacturing jobs in a non-protectionist manner.  The Reshoring Initiative was founded by Harry Moser, retired president of GF Agie Charmilles LLC, a leading machine tool supplier in Lincolnshire, Illinois.  The Initiative shows how outsourcing within the United States can reduce a company’s Total Cost of Ownership (TCO) of purchased parts and tooling and offer a host of other benefits while bringing U.S. manufacturing jobs home.

Harry Moser said, “Reshoring breaks out of the waiting-for-policy-decisions problem, the economic zero-sum-game and the increases in consumer prices and assures that the pie grows to the advantage of all Americans.  Reshoring also focuses on the manufacturing sector that has suffered so many job losses for decades and the Small-to-Medium Enterprises (SMEs) that offer the best potential for job growth.”

The Initiative documents the benefits of sourcing in the United States for large manufacturers and helps suppliers convince their U.S. customers to source local.  Archstone Consulting’s 2009 survey showed that 60% of manufacturers use “rudimentary total cost models” and ignore 20% of the cost of offshoring.   If a manufacturer is not accounting for 20% of their costs to offshore, offshoring may not be the most economical decision.  In tough economic times and stiff global competition, no company can afford this.  To help companies make better sourcing decisions the Reshoring Initiative provides:

  • A free Total Cost of Ownership (TCO) software that helps manufacturers calculate the real offshoring impact on their P&L
  • Publicity to drive the reshoring trend
  • Access to NTMA/PMA Contract Manufacturing Purchasing Fairs to help manufacturers find competitive U.S. sources.

Manufacturing companies can reshore to:

  • Reduce pipeline and surge inventory impacts on Just-in-time operations
  • Improve the quality and consistency of products
  • Cluster manufacturing near R&D facilities, enhancing innovation
  • Reduce Intellectual Property and regulatory compliance risk
  • Reduce Total Cost of Ownership (TCO)

The Initiative has received increasing visibility and influence: recognition by Industry Week magazine through inducting Harry Moser into its 2010 Manufacturing Hall of Fame, inclusion of the TCO concept in Cong. Wolf’s (R VA) “Bring Jobs Back to America Act” (H.R.516); numerous webinars; dozens of industry articles; presentations in major industry and government policy conferences in Chicago and Washington, DC; and coverage by CBS, CNBC, WSJ, USA Today and the Lean Nation radio show.

The Initiative is succeeding in changing OEMs’ behavior. Companies have committed to reshore after reading Initiative articles.  Fifty-seven representatives from large manufacturers and 113 custom U.S. manufacturers attended the May 12, 2011 NTMA/PMA Contract Manufacturing Purchasing Fair, where OEMs found competitive domestic suppliers to manufacture parts and tooling.  Sixty-four percent of the OEMs brought back to the U. S. at least some work that was currently offshored.

Of all the trends mentioned above, the Reshoring Initiative has the potential to provide the most benefit for America as a whole by reducing our trade deficit and providing increased job opportunities jobs for the millions of unemployed.   Let’s embrace these present trends to create a better future!

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The Future of American Manufacturing – Part Two What is the future Outlook?

Tuesday, May 10th, 2011

In order to stay competitive in the global economy during the past 20 years, manufacturers have extended manufacturing and supply operations to low-cost sources globally, embraced innovations in automation and cost management, begun transforming themselves into lean enterprises, and served customers in emerging markets.  Now, customer demands are changing.  They want more flexibility, more emphasis on unique, customer-specific products or variations, more rapid delivery/response, proximity to vendors, and consistent high quality.  These changing demands are fostering several major trends that are creating a brighter outlook for American manufacturers.  They include:

Reshoring Initiative

The Reshoring Initiative is a way to return manufacturing jobs to the U. S.  Harry Moser, Chairman Emeritus off Agie Charmilles in 2010, founded initiative.  The Association for Manufacturing Technology, Association for Manufacturing Excellence, National Tooling & Machining Association, Precision Metalforming Association, and the Swiss Machine Tool Society support the Initiative.

In June 2008, a survey by SAP and Industry Week Customer Research published showed that the top objectives of conducting business overseas were:

  • Increase overall market share
  • Increase profitability
  • Reduce Costs
  • Provide a superior customer experience
  • Increase overall revenue

The survey showed that companies with >$1billion revenue met 58-75% of their objectives while companies with <$1 billion revenue only met 37-47% of their objectives

However, a survey of North American manufacturing executives released in early April by Accenture entitled “Manufacturing’s Secret Shift” found:

  • 61% are considering shifting from offshore to closer to centers of demand
  • 59% intend to pursue new supply options
  • 67% proximity to customers markets top factor
  • 57% noted increased cost of logistics & transportation costs

The authors noted that software, electronics and telecom are lagging this trend.  Software doesn’t seem to be rebalancing its supply chain.  India is the most attractive relocation due to large number of highly skilled workers at lower wage rates who speak fluent English.  China is forecast as the hub for the Asian market for the telecom industry.  Electronic equipment will continue to be outsourced to China.  This is compatible with number 5 of the 2011 Top 10 Supply Chain Predictions — “In the context of taking a broader view of total cost, supply chain organizations will gain a new appreciation for shortening lead times through profitable proximity sourcing strategies.”  The reasons are:

  • Improve overall service levels
  • Retain key customers
  • Focus on the “costs” of long lead times
  • More balanced approach to global sourcing

A January 2010 survey by Grant Thornton of Supply Chain Solutions survey showed that sourcing is moving home slowly.  In 2009, 20% of companies brought sourcing closer, of which 59% reshored.

The main reasons for reshoring are:

  • Component/material prices increasing
  • Rising labor rates in China – 15-20% year over year
  • Transportation costs increasing
  • Political instability
  • Exchange rate variables as U. S. dollar continues to drop
  • Disruption from natural disasters

“As energy costs go up, transportation costs rise, and the distance that goods travel begins to matter,” said Paul Bingham, a trade and transportation specialist at Global Insight, a financial analysis firm in Massachusetts.  “For low-value products that take up a lot of space, like furniture, for example, transportation costs can get quite high,” said Bingham. “And if you’re not saving enough money from using low-cost labor, it makes sense to bring your production lines closer to home.”

Thomas Murphy, RSM McGladrey’s executive vice president of manufacturing and distribution said, “Manufacturing will be regionalized and the countries with the raw materials will drive a lot of manufacturing investment. Energy will be a key driver of what is located where.”

While all countries are subject to unexpected natural disasters, the 7.9 magnitude earthquake that struck the Sichuan province of China on May 12, 2008, and the 9.0 earthquake in Japan that occurred on April 7, 2011, generating a devastating tsunami and radiation exposure from damage to the Fukushima nuclear plant have exposed the problem of how vulnerable the global supply chain is to major disruptions.  The Japanese disaster has caused a major disruption in the supply chain, especially for automakers.  “Toyota says its vehicles contain 20,000 to 3,000 parts, coming from about 600 suppliers.  And the chain doesn’t stop there.  The 600 suppliers themselves rely on hundreds of other companies to provide raw materials and components.”

“Inshoring” and “Nearshoring”

“Inshoring” refers to a company from a foreign country setting up a plant in the United States, and “nearshoring” refers to the same type of company setting up a plant in the nearby location of Mexico. For companies from India, the reasons for this “reverse offshoring” trend include the declining exchange rate of the Indian rupee versus the dollar, the decline in H1B visa availability, and the desire to be closer to their U.S. customer base. Other factors are the labor shortage in India for technology professionals and the tremendous upward pressure on wages.

For example, Wipro Technologies, India’s third-largest outsourcing company, set up an “inshore” development center in Atlanta, GA, where it will work with the University of Georgia to educate and train nearly 500 employees. The Bangalore-based firm also established a “nearshore” location in Monterrey, Mexico.33

San Diego’s CONNECT organization has recognized the current trend of bringing operations closer to home to reduce costs and become more flexible, responsive and adaptable in the constantly changing marketplace.  CONNECT calls it “nearsourcing” rather than “nearshoring,”and launched a new industry cluster in December 2010 for technology manufacturers to help them connect with local and regional sources for products and services.  CONNECT is collaborating with the San Diego East County Economic Development Council to utilize the EDC’s well-established www.connectory.com database of manufacturers to facilitate the connections.  CONNECT put on a program May 3, 2011 on “Nearsourcing vs. Offshore:  What it is and What are the Initial Considerations for Technology Companies.”

Lean Manufacturing

The application of lean manufacturing techniques is also helping to bring manufacturing back to the USA.  One is example took place at General Electric’s appliance plant in Kentucky.  While doing a Kaizen event, employees came up with better way to assemble the GeoSpring water heater made in China.  General Electric’s U.S. team changed the design to have a control panel that will swing open like a glove box to connect 17 electric connections instead of having to squeeze fingers through tight spaces behind the control panel as was being done in China.  They also changed the assembly process so that the 20 lb. compressor will be attached while the GeoSpring unit is in horizontal position instead of upright position.  The GeoSpring water heater was brought back to Kentucky plant this year, creating 400 new jobs.

Luke Faulstick, COO of CJO Global, recently told the TechAmerica Operations Roundtable, “Any company on the lean journey should rethink offshoring.  If you are doing the ‘one part pull’ of lean, then you don’t need to offshore.  We have reshored our PCBs to our plant in South Dakota, our textile products to our plant in North Carolina, and our implant parts to our plant in Texas.  We have cut our inventory buffer down from 12 weeks to two weeks.”

A report titled “What’s your plan for 2025?” released by Accenture in October 2010, identified the winning manufacturing attributes for the next 15 years as being:

  • Customized products/services to serve customer’s unique, specific needs and priorities
  • Global locations to balance regional demand with regional supply
  • Supply chain flexibility to support diverse channel and customer needs
  • Agility on shop floor and beyond
  • Negotiate and “partner” for scarce resources

This same report stated that the top challenges for manufacturers would be:

  • Production skills, workforce availability
  • Transportation costs
  • Supply base and supply base access
  • Capital Required
  • Employment related issues
  • Local/government content requirements
  • Government incentives
  • ·         Local taxes

The Accenture report concluded that the following capabilities are needed to rebalance manufacturing within the United States vs. outsourcing offshore:

  • Accurate Total Cost of Ownership analysis of options
  • Comprehensive manufacturing and supply strategy
  • Skills and knowledge of staff
  • Ability to increase supplier capability and capacity
  • Changing internal mindset for longer-term total cost view
  • Improved understanding of local market capabilities

Finally, the future of American manufacturing holds much promise as new technologies provide opportunities.  Just a few of the new technologies to be further developed are:

  • Nanotechnology
  • Biomimicry
  • Bio fuels
  • New processes for PCB industry
  • New trends in rapid prototyping
  • Electro forming

Each month, I see examples of the inventiveness, ingenuity, and entrepreneurial spirit of Americans at the San Diego Inventors Forum.  Our SDIF steering committee is helping these entrepreneurs and inventors find sources for their new products in the United States.  This provides me with the best hope for the revival of American technology-based manufacturing and services for the future.

Posted in General, Outsourcing, Reshoring | No Comments »

The Importance and Promise of American Manufacturing

Tuesday, April 12th, 2011

At a time when most economic news articles are on the negative side, it’s refreshing to read a report that corroborates the “why” portion of my book, Can American Manufacturing be saved?  Why we should and how we can.  Last week, the Center for American Progress released a report titled, “The Importance and Promise of American Manufacturing, Why It Matters if We Make It in America and Where We Stand Today,” co-authored by Michael Ettlinger and Kate Gordon.   The 41 page report is filled with interesting charts and graphs and can be downloaded at www.americanprogress.org.   The Center for American Progress is a nonpartisan research and educational institute dedicated to promoting a strong, just and free America that ensures opportunity for all.

The authors echo what I have been saying – “Manufacturing is critically important to the American economy.  For generations, the strength of our country rested on the power of our factory floors—both the machines and the men and women who worked them.  We need manufacturing to continue to be bedrock of strength for generations to come … The strength or weakness of American manufacturing carries implications for the entire economy, our national security, and the well-being of all Americans.”

The Executive Summary states that supplying our own needs through a strong domestic manufacturing sector protects us from international economic and political disruptions, but most importantly our national security where the risk of a weak manufacturing capability is obvious.   Over reliance on imports and high manufacturing trade deficits make us vulnerable to everything from exchange rate fluctuations to trade embargoes to natural disasters.   The authors conclude that American manufacturing is not too far gone to save, and  that while manufacturing in the United States is under threat, and faces serious challenges, it is by no means a mere relic of the past.  It is a vibrant, large sector of our economy—even if sometimes it’s hard to see that as manufacturing jobs are lost, as factories close, and as sections of the country deindustrialize.

The purpose of the report is to examine where the United States remains competitive in manufacturing at home and abroad.   The authors began by detailing why manufacturing remains so important to our economy, our society, our national security, and our ability to remain the world’s science and innovation leader in the 21st century.  Then it looks at our domestic manufacturing base and our top manufacturing export sectors to gauge where U.S. manufacturing remains competitive.  The report does not outline a manufacturing policy agenda.

The authors state that the health and future of manufacturing in the United States matters, representing 12 percent of the U.S. economy, and put that in perspective by commenting that when the United States recently lost less than 4 percent of its gross domestic product, or national income, the result was labeled the “Great Recession.”  They note that “the manufacturing sector also boasts an outsized importance that is understated by even that 12 percent.”  While the United States will never again dominate world manufacturing the way it did in the decades immediately following World War II and no country is likely to ever do so again, manufacturing is, can, and should remain an important part of our economic future.

The report states that one key reason manufacturing is so important is its position as the cornerstone of the success of many other economically important activities.  This role has been the subject of a longstanding debate as to whether the United States should hold onto its manufacturing sector or instead become a ‘postindustrial’ society.”  This debate started in the 1980s when Japanese goods started flooding the U.S. market.  Some economists argued then that America should move beyond competition for manufacturing jobs and adopt a new economic growth pattern based on service jobs in knowledge-based industries.  These economists argued that just as the United States shifted away from agriculture and into industry, so should it shift from industry into services as the primary source of economic activity for the future.

The authors point out that a strong manufacturing sector does not come at the cost of a strong service sector—each manufacturing job actually supports multiple jobs in other sectors.  “As economists Stephen Cohen and John Zysman wrote in the late 1980s, the manufacturing sector does not just include the group of employees who work  n the factory floor. Instead, the manufacturing sector has “direct linkages” to high-level service jobs throughout the economy: product and process engineering, design, operations and maintenance, transportation, testing, and lab work, as well as sector-specific payroll, accounting, and legal work.”

As an example, they note that motor vehicle manufacturing now creates 8.6 indirect jobs for each direct job. Computer manufacturing creates 5.6 indirect jobs and steel product manufacturing creates 10.3 indirect jobs for each direct job (Authors’ calculation of Bureau of Labor Statistics, “Employment Requirements Matrix: Chain-Weighted Real Domestic Employment Requirements Table, 2008.” Downloaded March 2, 2011)

They conclude that when shop floor manufacturing jobs depart, other jobs go with them—and with those jobs go the ability to create and innovate.  Declines in the U.S. manufacturing sector mean declines in our nation’s overall “industrial commons”—a set of related industries and activities including those in the highly prized knowledge-based economy.  According to Harvard economist Gary Pisano, when manufacturing moves overseas so does this industrial commons, meaning that we lose not only production prowess but also the process innovation that comes from collocating research and development, design, engineering, and manufacturing.

“In addition to undermining the ability of the United States to manufacture high tech products, the erosion of the industrial commons has seriously damaged the country’s ability to invent new ones,” writes Pisano in a recent Harvard Business Journal online debate.  With the loss of the commons and the jobs comes a decline in U.S. workforce skills and the ability to invent and innovate that can only come from the hands-on experience of working in an industry.  The upshot: If we lose our ability to make things, we may well lose our ability to invent them.  (Robert H. Hayes, “Outsourcing Is High Tech’s Subprime-Mortgage Fiasco,” Harvard Business Review, October 7, 2009,  http://blogs.hbr.org/hbr/restoring-american-competitiveness/2009/10/outsourcing-is-high-techs-subprime.html.)

The authors state that there is strong anecdotal evidence that if we cede production on a process invented in the United States then we may lose future iterations of innovation of that process.   They cite solar panels as one example.  Invented in New Jersey at Bell Laboratories in 1954, the production of solar photovoltaic panels has largely moved overseas (China is currently the world’s largest producer), and most new innovations in panel production, such as process improvements that make the panels far more powerful by altering their electrical properties, are happening outside of our nation.  (Kevin Bullis, “Solar’s Great Leap Forward,” MIT Technology Review, July/August 2010, available at http://www.technologyreview.com/energy/25565/5)

They cite a recent set of studies by Carnegie Mellon University engineering professor Erica Fuch, who examined the impact of offshoring production on technological innovation. Her key finding:  When optoelectronics companies offshored production of their original designs to, for instance, Asia, they tended to produce those initial designs cheaply and efficiently.  When these firms then began work on new and improved designs, however, they tended to lose valuable time and knowledge if their operations were off shore.  (Erica Fuchs and Randolph Kirchain, “Design for Location? The Impact of Manufacturing Offshore on Technology Competitiveness in the Optoelectronics Industry,” Management Science 56 (12) (2010):2323–2349, available at http://mansci.journal.informs.org/cgi/content/abstract/56/12/2323

They conclude that “moving manufacturing overseas impeded the companies’ ability to compete and keep at the forefront of design and production and to efficiently push forward new technologies.  These companies will follow other manufacturers who have shifted design and innovation closer to their physical operations— witness the photovoltaic manufacturing industry.”  They note that “Fuchs’s findings are critical not only to the question of why basing manufacturing in the United States matters but also to the analysis of what kinds of policies might best support the types of manufacturing that will ultimately put our nation in the best economic position.  Fuchs’s research shows that when you’re talking about the United States, manufacturing does matter, but advanced and cutting-edge manufacturing matters even more.  When such manufacturing leaves, it takes much more than the factory floor jobs—as important as those may be—it takes technology, innovation, and the next generation of products with it.”

The authors point out that offshoring and outsourcing can grow as parts of different manufacturing supply chains develop elsewhere.  U.S. companies that supply these manufacturing operations offshore find it more and more advantageous to go where their factories are, which is why industries can get slowly hollowed out as other countries become the central places of production.  “The United States risks being relegated to the periphery, which in turn would hurt our capacities at innovation and thus threaten our innovation and technology leadership.  Remaining capacity can hang on for a while but the leadership, the concentration of wisdom, and skill slips away—and once gone is hard to recapture.”

They note that whether the United States still dominates manufacturing as it once did is a different question than whether U.S. manufacturing can compete.  U.S. manufacturers are successfully making and selling their goods on a massive scale.  One reason is that we are the biggest-consuming country in the world, and “one could argue that as a result we cannot avoid being a large manufacturer.  There are enough products that are expensive or difficult enough to ship that it’s hard to avoid making them here.  There’s certainly truth to the story that some U.S. manufacturing succeeds because of this advantage.”

Part of how a business competes is being close to its customers so selling goods in a home market is nothing to be ashamed of.  However, there’s clearly more to U.S. manufacturing success than a captive market.  U.S. manufacturing is also a top exporter.  Proximity is a factor to the extent those exports are to Canada and Mexico as these two countries account for about a third of U.S. manufacturing exports.  But the United States was the third-largest exporter of manufactured goods in the world in 2009 and 2010, behind China and Germany.

The report shows that manufacturing in the U. S. covers a broad range of activities, but there are six large,  subsectors that account for the bulk of U.S. manufacturing.   The top six subsectors by value added are:

• Chemicals, including pharmaceuticals and other chemical products

• Transportation equipment, including, most prominently, automobiles and aircraft
• Food, which includes everything from steaks to potato chips
• Computer and electronic products, including semiconductors, lab equipment, and a host of other products
• Fabricated metal products, including a range of products from pre-fab sheds to I-beams
• Machinery, which includes goods such as air conditioning units and farm equipment

The report does not contain a detailed analysis of the competitiveness of U.S.-based manufacturing, but notes:

• Wage differences aren’t everything
• The overall cost differences between countries aren’t as large as they are sometimes made out to be
• Different industries care about different costs differently29
• Proximity to markets matters
• Proximity to research and management and resources also matters
• Skills matter

They conclude by stating that as “long as there is demand in the United States for manufactured goods as well as the innovators, manufacturing workers, and available capital necessary to remain competitive, manufacturing can continue to be important in the U.S. economy.  U.S. workers are nervous about taking jobs in industries that have seen declining employment.  Other countries offer enormous subsidies in a variety of ways. And we are not alone in being innovators—and have become much less welcoming to innovators from abroad who wish to live in the United States… President Obama’s focus on manufacturing and exports are welcome signs, as is the introduction of a new “Make It in America” agenda in Congress.  But this is an effort that’s going to take more than setting goals and one president’s focus…The United States needs to get into the game and find the right steps for us that will create an environment where a nation’s manufacturing sector can flourish and succeed—not just in selling here, but to the world.”  I heartily concur and have proposed many suggestions for steps to take to preserve American manufacturing in my book.

 

Posted in General, Outsourcing, Reshoring | No Comments »

ABCs ‘Made in America’ Series

Tuesday, March 8th, 2011

On Monday, February 28th, ABC began a series on the World News with Diane Sawyer called “Made in America.” John and Ana Ursy of Dallas, Texas agreed to accept the challenge of working with the ABC team of David Muir and Sharyn Alfonsi to furnish three rooms of their home exclusively with products that are made in America.  When the team examined everything that existed in these three rooms and removed all foreign-made products, the result was a virtually empty house – no beds, no tables, no chairs, no couches, no lamps.  Only the kitchen sink, a vase, a candle, and some pottery remained.

The questions posed by the team were:  Is buying American-made more expensive?  What staples are no longer manufactured in the U.S.?  And what difference would it make if everyone promised to buy more American-made products?

The results were somewhat surprising.  The kitchen was the most difficult because there are only a couple of companies still making major appliances in America:  Viking Products provided the stove, and Sub-Zero and Wolf provided the refrigerator, microwave, and oven.  They couldn’t find any coffee makers made in the U.S.; Bun-a-Matic assembled a coffee maker out of parts made offshore.  There are no TVs made in America and no light bulbs.  General Electric closed the last plant making incandescent light bulbs in the U. S. in July 2010.  The team was able to furnish the bedroom with all American-made furniture, lamps, and bedding for less money:  $1,699 compared to $1,758.   All in all, the team found more than 100 manufacturers still making various consumer goods in America, and viewers submitted names of many more.  You can view the companies on an interactive map of the USA.

When one of the ABC reporters, Sharyn Alfonsi, examined the toy box of her own child, she didn’t find any American-made toys in it, so the interactive website provides the names of some U. S. toy makers, such as Green Toys in San Francisco that makes toys from recycled milk bottles. There are six other California companies shown on the interactive map:  Pure-Rest Organics, making organic bedding in San Diego, Harveys Handbags in Santa Ana, Maglite Flashlights in Ontario, Danmer Custom Shutters in Los Angeles, Glass Darma, making handmade drinking straws in Ft. Bragg, and Sergio Lub Jewelry in Martinez.

Why does it matter if we buy American-made products?   First, our addiction to imports has helped create our high trade deficit, especially with China, where most of the consumer goods we import are manufactured.  In 1960, imported foreign goods made up just 8 percent of Americans’ purchases.  Today, nearly 60 percent of everything we buy is made overseas.  In 2010, our overall trade deficit was $97.8 billion, up from $374.9 billion in 2009 but nearly 30 percent below our highest deficit in 2008 of $698.8 billion.  Our trade deficit with China has grown from $ $83.8 billion in 2000 when China was granted Most Favored Nation status to a record high of $273 billion in 2010.

Second, American-made products create American jobs.  Each time you choose to buy an American-made product, you help save or create an American job.  There is a ripple effect in that every manufacturing job creates three to four other jobs while service jobs create only one to two other jobs.  We’ve lost 5.5 million manufacturing jobs since the year 2000, and the number of manufacturing jobs dropped below 12 million in 2010, down from a high of nearly 20 million in 1979.

You may be thinking, would what I do make a difference? American activist and author, Sonia Johnson said, “We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.”   Eleanor Roosevelt echoed this sentiment saying, “Never doubt that a small group of thoughtful, committed citizens can change world; indeed, it’s the only thing that ever has.”  Remember that our country was founded by a small group of people that did indeed change the world by forming the United States of America.

Here are suggestions of what each one of us can do:  First, look at the country of origin labels of goods when you go shopping.  Most imported goods are required to have these labels.  Many manufacturers have tried to get the Federal Trade Commission (FTC) to relax the rules determining what’s “Made in USA.”  After two years of public hearings, studies, and reports, in December 1997, the FTC reaffirmed:  A product will be considered Made in U.S.A. if “all or virtually all made in the Unites States” only where “all significant parts and processing that go into the product are of U. S. origin.”

Buy the “Made in U.S.A.” even if it costs more than the imported product.  It is a small sacrifice to make to insure the well being of your fellow Americans.  The price difference you pay for “Made in USA” products keeps other Americans working.  If the product you are looking for is no longer made in America, then avoid countries such as China that has the goal of becoming the world’s “super power” in the 21st Century by winning either an economic war or a military war with the U. S.  When you take our trade deficits with China into consideration, it would not be an exaggeration to say that American consumers have paid for the bulk of China’s military buildup.  American service men and women could one day face weapons mostly paid for by American consumers. Instead, patronize impoverished countries such as Bangladesh or Nicaragua, which have no military ambitions.

In addition, you would be reducing your “carbon footprint” by buying a product made in America instead of a product that is made offshore that will use a great deal of fossil fuel just to ship it to the United States.

If you have a “Made in USA” appliance that needs repair and all the new ones are imported, try to get it repaired.  If it can’t be fixed, and it is a small appliance that you can live without, then don’t buy a new one.  We Americans buy many things that we really don’t need just because they are so cheap.  If a product that you are considering purchasing is an import, ask yourself, “Do I really need this?”  If you don’t need it, then don’t buy it.

If you are willing to step out of your comfort zone, ask to speak to the department or store manager of your favorite store.  Tell the person that you have been a regular customer for x amount of time, but if they want to keep you as a customer, they need to start carrying some (or more) “Made in USA.” products.  If you buy products on line or from catalogs, you could contact these companies via email with a similar message.   Your contacting a company does have an effect because there is a rule of thumb in sales and marketing that one reported customer complaint equals 100 unreported complaints.

Buying American has been made even easier by a new guide to buying American – “How Americans Can Buy American:  The Power of Consumer Patriotism” first released in March 2008 and updated in 2010.  Author Roger Simmermaker says, “Supporting American companies leads to a more independent America.  Ownership equals control, and control equals independence.  We cannot claim to be an independent country or control our own destiny if our manufacturing base is under foreign ownership or foreign control.  A nation that cannot supply its own needs is not an independent nation.  If we are to claim independence from the rest of the world and truly be a sovereign nation, we must begin supplying our own needs once again.”

According to Simmermaker, “buying American” is not just about buying “Made in USA.”  “Buying American, in the purest sense of the term, means we would buy an American-made product, made by an American-owned company, with as high a domestic parts content within that product as possible…’American-made’ is good. ‘Buying American’ is much better!”

One of our greatest statesmen, Thomas Jefferson, stated, “I have come to a resolution myself, as I hope every good citizen will, never again to purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may” (pg. 9 of Simmermaker’s book).

Simmermaker has made it easy by listing companies and their nation of ownership and view his list of American owned companies at his website: www.howtobuyamerican.com.    In addition here are some other websites.

www.buyamericanmart.com

www.madeinusa.org

www.americansworking.com

www.shopunionmade.org

www.MadeInUSAForever.com

As American consumers, you now have more American choices so you can live safely and have more peace of mind.  It’s high time to stop sending China our American dollars while they send us all of their tainted, hazardous, and disposable products.  If 200 million Americans refused to buy just $20 each of Chinese goods, that’s would be a four billion dollar trade imbalance resolved in our favor – fast!  In the ABC World News program, Diane Sawyer said, “if every American spent an extra $3.33 on U. S. -made goods, it would create almost 10,000 new jobs in this country.”   The ABC World News series “Made in America” continues with a look at the garment industry the week of March 7th.

Manufacturing jobs are the foundation of our middle class, and we are losing our middle class in state after state.  From December 2000 to December 2010, 22 states have lost a third or more of their manufacturing jobs.  Massachusetts, New York, and Ohio have lost 38 percent of their manufacturing jobs, New Jersey 39 percent, North Carolina 42 percent, Rhode Island 44 percent, and Michigan 48 percent.

We cannot afford to export our wealth by buying imports from China and finance our more than 10 years of deficits by borrowing an average of $1.553 billion every day.  We cannot lose our manufacturing base and be able to remain the world’s “superpower.”  In fact, we may not be able to maintain our freedom as a country because it takes considerable wealth to protect our freedom.

Remember, the company you save or the job you save by your actions may be your own.  More importantly, you can play a role as an individual in saving our country’s sovereignty by following the suggestions in this article.

Posted in Outsourcing, Reshoring, Trade Policy | 3 Comments »

Bringing Back Jobs from Offshore to Revive American Manufacturing

Tuesday, March 1st, 2011

There have been many recommendations of how to revive American manufacturing and create the jobs Americans need, but most job creation programs proposed by commentators, politicians and economists involve either increased government spending or reductions in employment or income taxes at a time of soaring budget deficits and decreased government revenue.  Other recommendations would require legislation to change policies on taxation, regulation, or trade that would be difficult to accomplish.  Many of these solutions involve borrowing money now, largely from China, or taking money from one group of citizens or a future generation to give to another.  Other programs call for Chinese currency revaluation or tariffs, which would help the manufacturing industry, but would increase consumer prices.

In contrast, the move to bring back manufacturing production to the United States, called Reshoring, has grown increasingly popular over the last few years.  Reshoring brings jobs directly back from offshore, often from the LLCCs (Low Labor Cost Countries) that have grown so rapidly over the last decades at the expense of American workers, American manufacturing companies, and the overall U.S. economy.  Higher transportation and fuel costs, escalating wage rates in developing countries like China, and serious, sometimes life threatening, quality problems with products made in China are providing added impetus to this trend.

Reshoring breaks out of the waiting-for-policy-decisions problem, the economic zero-sum-game and the increases in consumer prices and assures that the pie grows to the advantage of all Americans.  Reshoring also focuses on the manufacturing sector that has suffered so many job losses for decades and the Small-to-Medium Enterprises (SMEs) that offer the best potential for job growth.

To help accelerate this trend, there is a new initiative with a plan to efficiently reduce our imports, increase our “net exports” and regain manufacturing jobs in a non-protectionist manner.  The Reshoring Initiative was founded by Harry Moser, retired president of Agie Chamille LLC, a leading machine tool supplier in Lincolnshire, Illinois.  The Initiative shows how outsourcing within the United States can reduce a company’s Total Cost of Ownership (TCO) of purchased parts and tooling and offer a host of other benefits while bringing U.S. manufacturing jobs home.

The Initiative documents the benefits of sourcing in the United States for large manufacturers and helps suppliers convince their U.S. customers to source local.  Archstone Consulting’s 2009 survey showed that 60% of manufacturers use “rudimentary total cost models” and ignore 20% of the cost of offshoring.   If a manufacturer is not accounting for 20% of their costs to offshore, offshoring may not be the most economical decision.  In tough economic times and stiff global competition, no company can afford this.  To help companies make better sourcing decisions the Reshoring Initiative provides:

  • A free Total Cost of Ownership (TCO) software that helps manufacturers calculate the real offshoring impact on their P&L
  • Publicity to drive the reshoring trend
  • An online Library of 98 articles about successful Reshorings
  • Access to NTMA/PMA Contract Manufacturing Purchasing Fairs to help manufacturers find competitive U.S. sources.

Manufacturing companies can reshore to:

  • Reduce pipeline and surge inventory impacts on Just-in-time operations
  • Improve the quality and consistency of products
  • Cluster manufacturing near R&D facilities, enhancing innovation
  • Reduce Intellectual Property and regulatory compliance risk
  • Reduce total Cost of Ownership (TCO)

The Initiative has received increasing visibility and influence: recognition by Industry Week magazine via its 2010 Manufacturing Hall of Fame, inclusion of the TCO concept in Cong. Wolf’s (R VA) “Bring Jobs Back to America Act” (H.R.516); numerous webinars; dozens of industry articles; presentations in major industry and government policy conferences in Chicago and Washington, DC; and coverage by CBS, CNBC, WSJ, USATODAY and the Lean Nation radio show.

The Initiative is succeeding in changing OEMs’ behavior. Companies have committed to reshore after reading Initiative articles.  Fifty-seven representatives from large manufacturers and 113 custom U.S. manufacturers attended the May 12, 2010 NTMA/PMA Contract Manufacturing Purchasing Fair, where OEMs found competitive domestic suppliers to manufacture parts and tooling.  Sixty-four percent of the OEMs brought back to the U. S. at least some work that was currently offshored.

On the February 4, 2011, the Illinois Reshoring Initiative announced its program to apply the principles of the national Reshoring Initiative to revitalize Illinois manufacturing by reshoring to bring back many of the most desirable jobs that have been lost to decades of offshoring.  This industry-led initiative will utilize an integrated, measurable, five-step program to help large manufacturers and their local suppliers recognize the total P & L impact of offshoring and the benefits that both will obtain from reshoring.   The program features keynote speakers, Peter M. Perez, Deputy Assistant Secretary for Manufacturing, U. S. Department of Commerce’s International Trade Administration, and Harry Moser, founder of the national Reshoring Initiative.

Mr. Moser commented, “In the past manufacturing conferences have presented good ideas but offered few tools and no follow-up.  The Illinois Reshoring Initiative’s year-long program provides the TCO Estimator free to attendees and has 5 integrated steps that will assure that the good ideas are implemented and the results measured.”  The Illinois Reshoring Initiative Conference will be held 7:45 AM to 11 AM, March 16, 2011 at Wojcik Center, Harper College, Palatine, IL 60067.  To register for the conference go to http://illinoisreshore.eventbrite.com/.

The Reshoring Initiative www.reshorenow.org is supported by: the Association for Manufacturing Technology (AMT) www.amtonline.org; Sescoi, , www.sescoi.com/ ; GF AgieCharmilles, www.gfac.com/us; the Association for Manufacturing Excellence (AME)  www.AME.org,; the National Tooling and Machining Association (NTMA) www.ntma.org and by the Swiss Machine Tool Society (SMTS) www.smts.org . Additional information on the NTMA/PMA Purchasing Fairs can be found at www.purchasingfair.com.

 

Posted in Reshoring | 1 Comment »

Could the U. S. Become Top Exporter Again?

Tuesday, February 1st, 2011

Many would say this is an impossible goal since the U. S. lost its top ranking to Germany in 1992, and China replaced Germany as the top exporter in 2009.  I say it’s possible if American companies get back to what made them great in the first place – unique, innovative products made to high quality standards by a well-trained workforce.

For nearly 60 years, American manufacturing dominated the globe.  The United States led the world in innovation.  American companies like Ford, Boeing, Maytag, IBM, and Levi became household names.  American manufacturing became synonymous with quality and ingenuity.

Of these companies, Maytag was bought by Whirlpool, IBM sold off its PC business to Chinese company Lenovo, and Levis are now made in China just like every other brand of jeans manufactured.

When I drive around with my granddaughter, we play a game to see who can see the most “slug bugs” (VW Beatles).  They are easy to spot, even in oncoming traffic, because they have such a distinctive look compared to other cars.  Nearly every other car looks like peas in a pod – you can’t tell what automaker they are until you see the logo.

The unique appearance and features of a VW Beatle are examples of what those of us in marketing and sales call Differential Competitive Advantage (DCA).   Other examples of DCA thrusts are:  wide selection, customization, convenience, speed of service or product delivery, innovative cutting edge technology, fills a wide range of needs or a special need, specialized know-how, and lowest price.

There are no marketing rules that apply to every type of company, and there are no quick fixes or “magic pills” that will work for every company.  There is no such thing as a sustainable competitive advantage – it will change over time.  However, the universal law of marketing is “What’s in it For Me (WIFM) so that the DCA of your product has to answer that question.

To be successful at exporting, American companies need to have an innovative product that fills a market need in other countries.  They need to know their potential markets, know each possible way to reach that market with a persuasive message and use marketing methods that produce the maximum leverage with minimum effort.

For years now, I’ve been hearing that American companies had to outsource manufacturing offshore to remain competitive.  To me, this means that these companies gave up on marketing their products using their differential competitive advantage (DCA) and were down to competing on the price level.

German companies don’t compete on price; they compete on the perceived benefits of their reputation for high quality, precision-engineered products.  Germany’s average manufacturing wage is higher than the United States, the highest of all the European Union countries.  They have strong unions that offer more benefits and vacation time than any American companies or unions.  Germany was able to keep its position as the top exporting country for 17 years belying the argument of American companies that high union wages drove them to offshore manufacturing to be competitive.   It’s even less of an argument in my territory because only a handful of companies are unionized.

I believe that there is also an intangible factor in Germany’s success in exporting – the pride company owners have in their country and their products.  German company owners want to be successful as German companies, not global companies.  My research revealed that the majority of German companies are privately owned, not publicly traded.  This gives them the leeway of following their own measure of success instead of being responsible to their stockholders for the next quarter’s earnings.

Too many American based companies refer to themselves as global companies instead of American companies.  These companies are “globalist international companies” because they no longer have loyalty to the United States.  Their loyalty is to their bottom line, their stockholders, and their future bonuses, and they will do whatever it takes to make their bottom line look good even if it causes harm to themselves and their country in the long run.

American companies need to get back to producing their products in America.  If the majority of the components, parts, and assemblies in a product are being made offshore, is it really an American product?   Will companies who source offshore be able to produce their products if their overseas supply chain was disrupted to the point that they couldn’t get parts?

Do companies who outsource really understand the Total Cost of Ownership (TCO) of comparing the cost of sourcing parts and assemblies domestically rather than offshore?  Do they recognize the hidden costs of doing business offshore?  If not, the Reshoring Initiative of the National Tooling and Machining Association (NTMA) can provide a useful worksheet to calculate TCO.

There is no question that outsourcing offshore will continue for the foreseeable future, especially for the multinational companies that have products to sell within the countries in which they set up manufacturing operations.  Manufacturing products locally for consumption within a foreign country will be crucial to profitability as transportation costs continue to increase.

American manufacturers must be willing to continuously invest in their products to improve performance quality, and cost, but they must also be willing to improve the skills of their workers to be more competitive in the global market. Germany and Switzerland lead the world in their apprenticeship and workforce training.  Apprenticeship programs have virtually disappeared from American industry, and we must rebuild them to follow the example of Germany and Switzerland to train the skilled workforce needed for the 21st Century in the United States.

There is no lack of American ingenuity and creativeness.  The monthly meetings of the San Diego Innovators Forum are filled to standing room only with men and women who want to learn how to successfully convert their innovative ideas into products for the global marketplace.  Those of us on the steering committee are trying to help them to produce an American product, sourced in the United States instead of sourced offshore.

In his second annual message to Congress, December 1, 1862, President Abraham Lincoln said, “The dogmas of the quiet past are inadequate to the stormy present.  The occasion is piled high with difficulty, and we must rise – with the occasion.  As our case is new, so we much think anew, and act anew.  We must disenthrall ourselves, and then we shall save our country.”

We must arise to the occasion of our economy in crisis by thinking and acting anew to restore our manufacturing industry as the world leader.  American companies need to rejoin Team USA by making innovative, high quality products in the United States that can be exported to fit an unfilled niche in other companies.  Of course, no American company could succeed through exporting only; they need to have sufficient domestic customers also.  American consumers need to “connect the dots” to wake up and realize that buying cheap goods in China doesn’t create American jobs.  Buying cheap imports rather than buying “Made in USA” products is a big factor in our high unemployment rate.  We Americans need to be more like the Germans and be willing to pay a little more to buy products made in our own country.  By doing this, we can regain our position as the world’s top exporter and “Win the Future” as President Obama encouraged us to do in his State of the Union Address last week.

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