savingusmanufacturing.com

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.

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 21^st 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.