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What is the Progress on Rebuilding American Manufacturing to Create Prosperity

Tuesday, August 6th, 2024

People have forgotten that there are only three ways to create tangible wealth — mine it, grow it, or make it. Manufacturing is the term now used to describe “making it.” The problem with the current economy of the United States is that we have been outsourcing all three ways to create wealth to other countries for the past 25-30 years, primarily to China after the country was granted Most Favored Nation status in the year 2000.  

As a result, we are now dependent on other countries for the energy, food, and manufactured good we need to sustain the modern way of life, protect the health and welfare of American citizens, and provide the goods needed to protect the national security of our country.

This outsourcing caused a dramatic loss of jobs in the manufacturing industry, namely, 5.8 million high paying jobs from 2000 – 2010.

Let’s consider what progress has been made on a few of the simpler and faster to implement strategies and policies to accelerate the rebuilding process.  In my 2017 book Rebuild American Manufacturing – the key to American Prosperity, I quote recommendations made by the Information Technology& Innovation Foundation (ITIF) and the Coalition for a Prosperous America (CPA) and make many my own recommendations of what needs to be done to rebuild American manufacturing.

Two of the ITIF recommendations were: “Create a network of 25 Engineering and Manufacturing Institutes performing applied R&D across a range of advanced technologies and support the designation of at least 20 U.S. manufacturing universities.”

While the Manufacturing USA Network was formally established in 2014 when “Congress passed the Revitalize American Manufacturing and Innovation Act (RAMI Act) into law, it took three years of planning and competition to form the 16 institutes. Each of these institutes has a unique technological concentration, but is also designed to accelerate U.S. advanced manufacturing as a whole.  The April 2024 edition of Design2Part magazine provides good description of the technological advances facilitated by several of the institutes.

Another ITIF recommendation was:  Lower the effective U. S. corporate tax rate” because at that time, the United States had the highest statutory corporate tax rate at almost 39 percent (when state and federal rates are combined) of any OECD nation.”

The Tax Cuts and Jobs Act (TCJA) of 2017 “reduced the federal top corporate income tax rate from 35 percent to 21 percent, bringing the combined US federal and state rates to about the average for most other Organisation for Economic Co-operation and Development countries, and eliminated the graduated corporate rate schedule (table 1). TCJA also repealed the corporate alternative minimum tax.”  However, the TCJA expires in 2026, so Congress will need to address this issue in 2025.

The ITIF also recommended” “Better promotion of reshoring.”

Thanks to changing economic factors and supply chain disruptions caused by the COVID pandemic, the work of Harry Moser of The Reshoring Initiative to help manufacturing companies do a Total Cost of Ownership Analysis to return manufacturing to America, reshoring has dramatically accelerated in the past three years.  As the chart below shows, we have been able to reshore nearly two million manufacturing jobs (1,898,404) as shown on the chart below:

However, at this rate, it would take another 20 years to recoup the 5.8 million we lost from 2000 – 2010.  To rebuild American manufacturing in a faster way, we must focus on other policies besides reshoring.

The Coalition for a Prosperous America (CPA) released a white paper, titled, “A Competitiveness Strategy for the United States – America at a Crossroads,” in November 2015 that included an even longer list of recommendations.  As a member of CPA since 2011, I quoted all of their recommendations in my 2017 book and have written blog articles in the past several years about many of the specific strategies and policies the report included.

  • Impose offsetting tariffs to neutralize foreign government subsidies to industries and supply chains that compete with ours.
  • Counter foreign government policies that force offshoring by conditioning access to their markets on transfers of technology, research facilities and/or production to their countries, as well as compliance with export performance and domestic content.
  • Develop a national trade strategy and increase funding for U.S. trade policymaking and enforcement agencies. (blog article)
  • Combat foreign currency manipulation through a Market Access Charge (blog article)
  • Congress should strengthen and tighten procurement regulations to enforce “Buy America” for all government agencies, not just the Department of Defense. (blog article)
  • Prevent sale of strategic U.S.-owned companies to foreign-owned companies (blog article)
  • Ensure that domestic manufacturing and agriculture benefit fully from an expanded supply of low-cost US produced energy” (blog article)

President Trump took action on the tariff recommendation in January 2018 by imposing tariffs on solar panels and washing machines of 30 to 50 percent. In March 2018, he imposed tariffs on steel (25%) and aluminum (10%) from most countries. In June 2018, this was extended to the European Union, Canada, and Mexico. However, with the ratification of the United States–Mexico–Canada Agreement (USMCA), the North American trade deal set to replace the North American Free Trade Agreement (NAFTA), the tariffs on Canada and Mexico were rescinded on steel and aluminum.  Since then, Argentina, Australia, Brazil, and South Korea have successfully negotiated a permanent exemption from the steel tariffs. In addition, the Trump Administration Enforced penalties on trans-shipping of steel & aluminum.  Thankfully, the Biden administration has kept these tariffs in effect, essentially saving the U.S. steel and aluminum industries.

The Coalition for a Prosperous America (CPA) asserts that further tariffs are needed to balance trade, and on July 24, 2024, CPA “released a new economic analysis showing that a global 10% tariff on all U.S. imports would generate U.S. economic growth, increase real wages, increase employment, and raise additional revenue to lower taxes for lower- and middle-class Americans. 

Our analysis finds that a 10% tariff would stimulate domestic production and raise economic growth to produce a 5.7% increase in real income for the average American household,” said CPA Chief Economist Jeff Ferry. “Further, the $263 billion raised in tariff revenue could be used to provide tax refunds to all households with income below $1 million a year, creating a progressive tax refund.”

We have a long way to go on implementing some of the other recommended policies to rebuild American manufacturing..  How these issues should be addressed should be one of the main criteria of who to vote for in November, both for President and Congressional candidates.

Since I started writing the first edition of my previous book, Can American Manufacturing be Saved?  Why we should and how we can in 2007, I have made it my mission for the rest of my life to do as much as possible as I can to rebuild American manufacturing to create jobs and prosperity. The future of the American middle class and, more importantly, our national security depends on the choices we make and the actions we take now.

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What Would be The Benefits of the ONSHORE Act of 2023?

Wednesday, July 12th, 2023

The COVID pandemic proved that we cannot rely on imports of products needed to protect the health and welfare of Americans. Offshoring of manufacturing left the U.S. vulnerable to supply chain disruptions. We cannot defend our country if the products needed by the military and defense industry become unavailable because of being sourced offshore, especially in China. It’s time for all Americans to wake up to the dangers of being dependent on other countries for manufacturers goods, especially one that has become a threat to our country.

Strengthening domestic manufacturing capabilities, especially for industries of the future, is critical for economic and national security. We must forge a new path by rebuilding American manufacturing to win the international competition for good jobs, sustained economic growth, and rebuild a strong, secure domestic supply chain if we want to remain a free country.

I am glad to see that Congress is finally paying some attention to this need:  On June 8, 2023, Senator Mark Kelly (D-AZ), Senator JD Vance (R-OH), and Senator Tom Cotton (R-AR) introduced S.1915 – ONSHORE Act of 2023, a bipartisan bill to boost domestic manufacturing and strengthen supply chains that will help bring critical supply chains back to America by assisting communities of all sizes with the site development needed to attract manufacturing facilities. 

The joint press release states: “The U.S. faces a shortage of shovel-ready sites with the necessary infrastructure and workforce for companies to quickly begin construction on new manufacturing facilities. The ONSHORE Act creates a Critical Supply Chain Site Development Grant Program within the Economic Development Administration, which would assist communities, including small towns and tribal communities, with site development to attract manufactures from critical industries to build new facilities in their area.” 

Senator Vance stated, “As our nation takes the necessary steps to reshore critical supply chains and spur innovation, everyone in America should reap the rewards This bill would deploy capital broadly to ensure the foundations of tomorrow’s industry and growth are laid in underdeveloped regions. If enacted, it will deliver good-paying jobs, build vibrant communities, and strengthen supply chains—in Ohio and around the country.” 
 
Senator Kelly stated, “As we work to bring manufacturing supply chains for critical industries from microchips to critical minerals back to America, we have to maximize this opportunity by making sure there are enough sites with the infrastructure and workforce needed for new facilities. For a lot of small towns and tribal communities, the biggest barrier to attracting investment is the cost of getting sites ready for development. We’re working to fix that, which will boost manufacturing and create good-paying jobs in every corner of our states and the country.” 
 
Senator Cotton stated, “We cannot rely on other countries like China for our essential technologies. The technologies of tomorrow should be tested, researched, and made in America. This legislation will help make the necessary investments in our communities to make that possible.”

So far, the OSHORE ACT has received enthusiastic support from the International Economic Development Council (IEDC), the Global Business Alliance, the Greater Phoenix Economic Council, the Arizona Commerce Authority, and JobsOhio..

Nathan Ohle, President & CEO of IEDC said, “The ONSHORE Act will provide communities with essential resources to aid in attracting supply chain manufacturers. Economic developers across the U.S. will welcome this new initiative and IEDC urges the swift passage and implementation of the ONSHORE Act.”

Nancy McLernon, president & CEO of the Global business Alliance, said, “Site readiness is a critical consideration for international companies planning major investments in the United States… and urges all Senators to support this measure and other policies that make it easier to invest in America.”  

Chris Camacho, President & CEO of the Greater Phoenix Economic Council said, “The availability of shovel-ready sites with the necessary infrastructure and skilled workforce is a crucial factor in attracting companies to invest in Greater Phoenix and bolster U.S. supply chains. This program ensures that strategic mega sites and regionally impactful locations are properly prepared for new industrial investment. With enhanced site-readiness, the United States will be better equipped to compete globally, foster the growth of critical industries, and ensure the production of essential products domestically.”

Sandra Watson President & CEO, Arizona Commerce Authority, said, “We applaud Senator Kelly for leading on this important legislation. This ONSHORE Act will significantly strengthen U.S. competitiveness for new manufacturing opportunities, bringing more jobs and investments to Arizona.”

J.P. Nauseef, JobsOhio president and CEO, said, “I applaud the introduction of the ONSHORE Act, which will help Ohio and the rest of the United States more fully capitalize on this generational opportunity by expanding the number of sites that are ready to support major development projects.”

I can see that basic infrastructure, such as road access or water and power utility hookups, is an important factor affecting where a new manufacturing facility is built, but there are so many abandoned manufacturing sites throughout the country that I question the need for the Economic Development Agency’s Critical Supply Chain Site Development Grant Program. There are also large retail stores, such as former K-Mart stores, that could be converted to manufacturing sites by remodeling and changing zoning. The redevelopment of these sites would provide good opportunities to revive the industrial base of states hard hit by offshoring, such as Michigan, Ohio, and North and South Carolina.

In my opinion, there is a greater need for a new type of Small Business Innovation grant program to fund establishing manufacturing plants to manufacture components and systems that are no longer made in the U.S. because of being offshored to China and other Asian countries.  This type of grant would also provide new industrial investment, including in rural and tribal communities, and regions with high unemployment.  These companies would help position the U.S. to compete against adversaries like China, boost domestic manufacturing, and build resilient supply chains. 

Priority for receiving such a grant should be given to proposals that would manufacture critical components and systems needed by our military and defense industrial base.  Semiconductors and batteries are not the only critical products that need to be onshored/reshored.  Components such as capacitors, resistors, inductors, transformers, connectors, and flex circuits also need to be returned to being made in the USA.

This kind of investment will better position the U.S. to compete against international competitors like China and the European Union and ensure more critical products are made in America.  

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It’s the supply chain … stupid!

Tuesday, April 4th, 2023

Ever since the COVID pandemic started three years ago, we have suffered from disruptions in supply chains for many products used in our daily lives as well as products and components needed for our consumer products, industrial, and defense industries.  Why?  Because we stopped making things in the USA. We outsourced everything from household goods to high tech products, as well as pharmaceuticals and medical devices. First, it was to friendly countries like the Philippines, Puerto Rico, and Taiwan, and then it became predominantly China after they entered the World Trade Organization in 2001.

The shortages of semiconductors, has made news headlines for the past two years. Semiconductors are used in everything from consumer products such as cell phones, computers, and TVs as well autos, trucks, airplanes, boats, ships, drones, and space vehicles.  There is hardly any product that doesn’t have a semiconductor in it these days, even refrigerators and washing machines. Many other electronic and electro-mechanical components are also no longer made in the USA.

Our domestic innovation capacity is contingent on a robust and diversified industrial base. Our loss of manufacturing capabilities has led to a loss in innovation capacity. When manufacturing heads offshore, innovation follows. We currently lack the ecosystem of innovation, skills, and production facilities to have the secure and resilient supply chains required for economic security. As a result, we are no longer self-sufficient in producing the products we depend on for our modern way of life.    

Even worse, we are no longer self-sufficient in producing the goods and systems needed to defend our country.  Our national security and freedom as an independent country is at risk. This fact was confirmed in the article “From rockets to shells, Pentagon struggles to feed war machine,” from the March 25th issue of the New York Times which stated, “The United States lacks the capacity to produce the arms that the nation and its allies need at a time of heightened superpower tensions…Industry consolidation, depleted manufacturing lines and supply chain issues have combined to constrain the production of basic ammunition like artillery shells while also prompting concern about building adequate reserves of more sophisticated weapons including missiles, air defense systems and counter-artillery radar…illustrated by the shortage of solid rocket motors needed to power a broad range of precision missile systems, such as the ship-launched SM-6 missiles made by Raytheon…Other shortages slowing production include simple items such as ball bearings, a key component of certain missile guidance systems, and steel castings, used in making engines.”

There are two main ways that government can help rebuild the domestic manufacturing base:  penalize offshoring to other countries and incentivize American manufacturers to make is here or reshore their manufacturing to the USA.  The Biden Administration and Congress have reacted to this supply chain crisis within the last year by passing the following legislation:

CHIPS and Science Act of 2022 to “boost American semiconductor research, development, and production, ensuring U.S. leadership in the technology that forms the foundation of everything from automobiles to household appliances to defense systems.”

Amendment to The Federal Acquisition Regulation (FAR) Buy American Act – “This rule increases the domestic content threshold initially from 55 percent to 60 percent, then to 65 percent in calendar year 2024 and to 75 percent in calendar year 2029.”

Uyghur Forced Labor Prevention Act – This Act changes U.S. policy to establish “a rebuttable presumption that the importation of any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China.” Previous law required companies to take reasonable care to avoid products produced with forced labor. This Act requires companies to prove that products from Xinjiang province were not produced with forced labor.

While these new laws and amendments to previous laws will help ease future supply chain disruptions, the real solution to the supply chain crisis is to change the financial calculations to enable making as much as possible in the United States. The Reshoring Initiative has been working towards this goal since its founding in 2010 by promoting the use of the Total Cost of Ownership Estimator® developed by Harry Moser

According to the Reshoring Initiative 2022 Data Report, “Reshoring plus FDI have followed a strong upward trend for 13 years. The underlying trend is driven by the recognition that, in many cases, the total cost of offshoring exceeds that of sourcing domestically. There have been peaks and valleys in the trend. 2017 was driven by the 2017 tax and regulatory cuts. 2018 and 2019 declined due to the trade war. The trend resurged from 2020 to 2022 driven by companies recognizing their vulnerability to supply chain disruptions and, most recently, to geopolitical events.”

The report states, “Jobs announced in 2022 were a record breaking 364 ,000 up from 238 ,000 in 2021. The total number of jobs announced since 2010 is now nearly 1.6 million…we expect 2023 and 2024 to remain strong, continuing at approximately 350,000 job announcements per year. If the current trajectory continues, the U.S. will reduce the trade deficit, add jobs, and become safer, more self-reliant and resilient.”

We need continue to rebuild our domestic manufacturing industrial base if we are going to achieve the goals of Industry Reimagined 2030 to have 50,000 more world-class domestic American manufacturers and a $1 trillion GDP by 2030

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Imperial Capital Conference Highlights Vibrant Opportunity for Advanced Manufacturing Sector

Tuesday, April 26th, 2022

The non-profit Industry Reimagined 2030 was pleased to speak at the second annual Imperial Capital Advanced Manufacturing & Supply Chain Conference, held on April 13-14 in Santa Monica, CA and sponsored by Moss Adams, The Association for Manufacturing Technology, Smart Room, and Marsh.

On April 14th, presentations during breakfast were given by Kevin Frisch, Managing Director and Head of Industrial Investment Banking, Imperial Capital, Brian Ruttenbur, Institutional Research Managing Director, Imperial Capital, and Guy Knuf, Partner, Moss Adams.

Mr. Frisch explained that Imperial Capital, LLC is a full-service investment bank offering a uniquely integrated platform of comprehensive services to middle market companies and institutional investor. He said,” We have approximately 150 employees worldwide, across 10 offices throughout the United States and Europe. Our comprehensive and integrated service platform, expertise across the global capital structure, and deep industry sector knowledge enable us to provide clients with research driven ideas, superior advisory services, and trade execution. We have a dedicated focus in Advanced Manufacturing, including additive manufacturing, robotics, automation, laser components, specialty metals, specialty chemicals, semi-conductor equipment, optics/photonics, industrial software, and subtractive manufacturing.”

He provided a brief overview of the $26.3 trillion global Advanced Manufacturing market.

The trending Industry Segments

  • Specialty Materials – new light-weight materials, nanotechnology and carbon fibers and new applications are reducing waste and increasing efficiency
  • Aerospace & Defense – Light-weighting demand for planes, rockets, spacecraft will continue to drive demand for superior materials, AM production and other break-throughs
  • Medical – This industry drives demand for superior material advances and new technologies like AM, advanced laser manufacturing as well as design software etc.
  • Optics & Photonics – This industry cuts across the Advanced Manufacturing landscape
  • MR&O demand
  • Increased Reshoring/near shoring in all sectors

Trending Manufacturing Processes

  • Faster product development and shorter product life
  • Internet of Things – data acquisition and AI-enabled features
  • Digital Factory – data integration and overall productivity increasing
  • Reshoring/next shoring
  • Mass customization in production
  • Faster product development and shorter product life
  • New technologies – 3D printing, software, robotics
  • Light-weighting material demand
  • Internet of Things
  • Reshoring/next shoring
  • New Materials – nanotechnology, carbon fibers, powders
  • Mass customization in production
  • MR&O demand

Sector Valuation and Vibrancy

Deal volume for capital markets and M&A activity hit a record high at the end of 2021, the dramatic increase in deal flow was driven by optimistic executives, cheap financing and a stock market rebound from the 2020 COVID-19 pandemic. “U.S. Private Equity deal making is expected to continue at high levels. Mega-funds are predicted to raise $250 billion in 2022, including some of the largest ever buyout funds.”

Brian Ruttenbur, Managing Director of the Institutional Research Group of Imperial Capital covered macro trends in Advanced Manufacturing that influence their security and industrial research coverage.

Demand for manufactured products is up across most end-markets and private and public valuations have remained solid. The challenge to meet demand is inflation and material price increases, a tight and expensive labor market, and overall supply chain disruption. Industry is adapting through:

  • Automation to alleviate labor shortage issues
  • Niche players filling gaps
  • Rethinking Onshoring or Nearshoring driven by advanced manufacturing technologies, logistics complexity and national health and security sourcing.
  • On-time delivery and just-in-case supply chain resilience are commanding a premium

Guy Knuf, Partner, Transaction Services, Moss Adams was the third speaker covering “The Modern Quality of Earnings (QoE).  He said the “drivers of change are:

  • More intense buy-side process
  • Increased multiples
  • Drive for efficiency
  • RWI [Reps and Warrants Insurance]
  • Credibility”

The benefits of working with a QoE provider are: “maximize value, mitigate surprises, speed (more efficient & effective), prepare management team for buy-side diligence, and credibility.”

After breakfast, the period from 9:00 – 11:50 was divided into Sector Focused Panel Discussions. The presenters in advanced manufacturing technology were:

3DEO Inc. – one of the highest volume metal 3D printing companies in the world

ADDMAN Engineering LLC – metal and polymer 3D printed parts, precision machining to make parts for aerospace and defense, space, medical, and automotive, including niobium parts for hypersonics

Humtown Products – manufacturer of conventional and 3D printed sand cores and molds for the foundry industry

Optomec, Inc. – offers a full range of Additive Manufacturing systems, including their patented Aerosol Jet Systems for printed electronics

Clinkenbeard – specialized expertise in engineering, advanced machining, fabrication and foundry tooling capabilities come together to form a unique mix of services to serve Aerospace, Defense, Heavy Truck, Power Gen and Automotive applications

HB Aerospace Holdings, LLC – provides high quality, specialized aerospace products and value-added services that includes hardware, shims, spacers, handles, brackets, and rubber products such as grommets, seals and gaskets

Tribus Aerospace Corporation – provides precision machining of complex components and assemblies primarily, but not exclusively, for “Power, Propel, Control” applications for turbine engines, auxiliary power units, motion control and flow control

Valence Surface Technologies – provides a comprehensive set of metal processing capabilities and approvals for high-value, mission-critical parts, including NDT, sot peen and blast, chemical processing, plating, painting, and spray coatings

FormAlloy Technologies, Inc. – provides 3D metal additive manufacturing using the Directed Energy Deposition process for making parts, repairing parts, and cladding existing parts

Optomec, Inc. – provides a full range of Additive Manufacturing systems, including their patented Aerosol Jet Systems for printed electronics

pureLiFi – LiFi is high speed bi-directional and fully networked light communications and pureLiFi is the world leader in Light Fidelity (LiFi) innovation

Syntec Optics – offers injection molding, diamond turning, precision machining, optical assembly and coating services for optics and photonics

I was especially delighted to be reunited with Melanie Lang, CEO of FormAlloy as I had the pleasure of being one of her company’s mentors in the CONNECT Springboard program for startup companies in 2017.  I was very proud to hear of the progress the company had made, going from a startup with only two customers in 2017 to doing over $4 million in sales last year.

Tim Shinbara Jr, Vice President & Chief Technology Officer, The Association for Manufacturing Technology, delivered the lunch keynote on “The State of U.S Manufacturing –A Macro Analysis.” He reported that manufacturing technology orders were the highest in two decades for first two months of 2022. The key market trends are higher automation, increased reshoring, and Made in America supply chain focus. The industry segments for 2022 growth are: motor vehicles, agriculture implements, metal valves, and medical equipment and supplies. AMT is predicting increasing demand for commercial aerospace and decreasing demand for defense aerospace. Deliveries are improving with suppliers at 70% capacity.

The afternoon sessions were devoted to single company presentations in two tracks. Each presentation was 25 minutes long, starting at 1:15 PM and ending at 4:15 PM

I gave my own presentation on Industry Reimagined 2030: transforming the prevailing worldview of American manufacturing from ‘inevitable decline’ to one of ‘vibrant opportunity’ brought the theme of the conference home.  The U.S. has a window of opportunity to recognize the importance of manufacturing and to revitalize our investment in plant, equipment and workforce. The common thread of all companies participating in the panels and individual company presentations was one of vibrant opportunity. We can feasibly imagine having 50,000 world class manufacturers by 2030 if the adoption of these trends and technologies crosses the chasm from early adopters to the mainstream of manufacturers.

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Reshoring of Manufacturing Increases in 2020

Wednesday, December 23rd, 2020

The United States gradually lost manufacturing jobs from the peak of 19.5 million in 1979 to 17.3 million by early 2000.  However, after China was granted Most Favored Nation status that year, the loss of manufacturing jobs in the U.S. accelerated dramatically as American manufacturers moved manufacturing offshore and cheaper Chinese goods drove U.S. manufacturers out of business. According to the Bureau of Labor Statistics, we lost 5.8 million manufacturing jobs from the middle of the year 2000 to the middle of 2010.  Fortunately, we have been slowly regaining manufacturing jobs since 2010 thanks to a great extent to the efforts of the Reshoring Initiative.

In April 2010, the Reshoring Initiative was founded by Harry Moser, retired president of GF AgieCharmilles LLC, a leading machine tool supplier in Lincolnshire, Illinois.to facilitate returning manufacturing to America from offshore by providing the right tool at the right time to with the creation of the Total Cost of OwnershipTM  worksheet calculator spreadsheet. To help companies make better sourcing decisions, the Reshoring Initiative provides the Total Cost of OwnershipTM  spreadsheet for free to help manufacturers calculate the real impact offshoring has on their bottom line. The website provides an online library of more than 7,000 articles about cases of successful reshoring.

The brief definition of TCO is an estimate of the direct and indirect costs related to the purchase of a part, sub-assembly, assembly, or product. However, a thorough TCO includes much more than the purchase price of the goods paid to the supplier. For the purchase of manufactured goods, it should also include all of the other factors associated with the purchase of the goods, such as:  geographical location, transportation alternatives, inventory costs and control, quality control, as well as reserve capacity, responsiveness, and technological depth of the vendor.

Mr. Moser’s TCO spreadsheet includes calculations for the hidden costs of doing business offshore, such as Intellectual Property theft, danger of counterfeit parts, the risk factors of political instability, natural disasters, riots, strikes, technological depth and reserve capacity of suppliers, and currency fluctuation as well as effect on innovation, product liability risk, annual wage inflation, and currency appreciation.

Previous studies have shown that about 60% of companies made the decision to offshore based on comparing wage rates, FOB prices or landed costs, while ignoring the hidden costs and risk factors. Thanks to the Reshoring Initiative’s TCO worksheet, companies are becoming familiar with the broad range of factors they had previously ignored. The reasons that thousands of other companies have given for reshoring in the Reshoring Initiatives library of cases helps companies to determine whether those reasons are applicable to them.

According to the annual report released on December 7, 2020 by the Reshoring Initiative, “The projected job announcements for 2020 is 110,000, which will bring the total to over 1 million by year’s end…The combined reshoring and foreign direct investment (FDI) announcements in 2019 totaled more than 117,000 manufacturing jobs, plus an additional 24,800 in revisions to the years 2010 through 2018…Additionally, the number of companies reporting new reshoring and FDI was at the second highest annual level in history:  1,100 companies.”

Jobs Announced, Reshoring and FDI, Cumulative 2010-2019

The report states: “Only products that have been offshored/imported can be reshored. Thus, the products least suitable for offshoring never left, such as heavy, high volume minerals, high mix/low volume items or customized automation systems.

The most active reshoring is by those that left and probably should not have done so, including machinery, transportation equipment and appliances. As the data indicates, reshoring is focused on products whose size and weight, e.g., transportation equipment, or frequency of design change/volatility of demand, e.g., some apparel, suggest that offshoring never offered great total cost savings.”

The term “FDI” means “Foreign Direct Investment” and refers to foreign companies that are investing in manufacturing plants in the U.S. to produce products closer to their major market of the U.S.  Plants established by Japanese companies such as Toyota and Nissan, and plants established by German-owned BMW are examples of foreign investment.

However, we still have a long way to go as the report states: “When measured by our trade deficit of about $500 billion/year, there are still three to four million U.S. manufacturing jobs offshore at current levels of U.S. productivity, representing a huge potential for U.S. economic growth.”

The report states, “Companies have consistently reported Positive Factors more often than Negative, probably because the companies place more value on demonstrating the wisdom of their current reshoring decision than on what went wrong with their earlier offshoring decision. “

The top ten positive factors that influenced a reshoring decision are:

  1. Proximity to customers/market
  2. Government Incentives
  3. Eco-system synergies/Supply chin optimization
  4. Skilled workforce availability/training
  5. Image/brand
  6. Infrastructure
  7. Impact on domestic economy
  8. Lead time/time to market
  9. Automation Technology
  10. Customer responsiveness improvement

The top ten negative factors influencing the decision to reshore are:

  1. Quality/rework/warranty
  2. Freight cost
  3. Total Cost
  4. Delivery
  5. Rising Wages
  6. Inventory
  7. Supply chain interruption/Natural disaster risk/Political instability
  8. Green considerations
  9. Intellectual Property Risk
  10. Communications

The report states that the top industries that are reshoring or benefitting from FDI are:

  • Transportation Equipment
  • Computer & Electronic Products
  • Electrical Equ8ipment, Appliances & Components
  • Chemicals
  • Plastic & Rubber Products
  • Wood & Paper Products
  • Apparel & Textiles
  • Fabricated Metal Products
  • Machinery

It’s not surprising that China ranks number one as the country from which companies are reshoring, with Mexico, Canada, India, and Japan filling out the top five.  The top countries that are investing in manufacturing sites in the U.S. are: Germany, China, Japan, Canada, and Korea. 

The authors note that “The South and Midwest continue to dominate cumulatively. The Midwest and Texas dominate reshoring and the South dominates FDI.” It was surprising to me that Michigan and New York were in the top five states for the number of jobs that were reshored, as they are not states where the cost of business is low. However, Texas ranked highest for both number of jobs announced and the highest number of companies reshoring.

The report authors state, “We believe the continued strength of the trends thru the end of 2019 is largely based on greater U.S. competitiveness due to corporate tax and regulatory cuts and increased recognition of the total cost of offshoring.”

It was interesting to note the impact of the COVID Pandemic on reshoring.  The authors report: “The COVID Pandemic has increased in interest in reshoring as “Two in three (69%) manufacturing companies are looking into bringing production to North America (compared to 54% in February).”

In addition, “Repeated surveys show that more companies, driven by the virus crisis, have decided to reshore. We expect to see the data respond to this shift in 2021. Also due to the pandemic, we are seeing U.S. reshoring outpacing FDI for the first time since 2014…The national demand to shorten and close supply chain gaps for essential products to make the U.S. less vulnerable is most likely to benefit the following industries: PPE, medical, tech, and defense. Already, 60% of cases after March mention the pandemic as a factor in reshoring decisions. Medical equipment and PPE are the first responders of new reshoring with cases already double from last year.”

In conclusion, the authors state: “The revised rate of reshoring plus FDI job announcements in 2019 was up about 2000% from 2010. The 600,000+ jobs brought back represent about 5% of U.S. manufacturing employment. The acceleration of jobs coming back combined with the decline in the rate of offshoring has resulted in a plateauing of the goods trade deficit at about $800 billion/year. The COVID crisis has revealed the U.S.’s over-dependence on imports.

This data should motivate companies to further reevaluate their sourcing and siting decisions by considering all of the cost, risk and strategic impacts flowing from those decisions. Policy makers can use the continued reshoring successes as proof that it is feasible to bring millions of jobs back.”

Government policies do have an influence on reshoring and FDI. If the next administration reverses the corporate tax and regulatory cuts, it could have an adverse effect on the reshoring trend.

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Comparing Trump’s and Biden’s Policies that Support Rebuilding American Manufacturing

Tuesday, October 20th, 2020

For those of us who support the Made in America/Buy American movement and want to rebuild American manufacturing by returning manufacturing to America through reshoring from China, it’s important to consider the policies of President Trump and former V.P. Biden in their bid to be president.  Two policies, tax rates and the cost and availability of energy, have a major effect on where a company chooses to locate their manufacturing or headquarters if they have multiple plants globally. If the corporation has a plant in a country with a lower tax rate, they may choose to shift their profits to the subsidiary in that country.  Bulgaria and the Czech Republic at 10% and Ireland at 12.5% have the lowest corporate tax rates in Europe. American manufacturers that don’t have plants in other countries face the brunt of the tax burden. Personal tax rates are also important as only 30-35% of manufacturers are C corporations; the others are LLCs, partnerships or sole proprietorships where taxes are passed through to the owner(s).

Taxes

Biden’s Tax Policies:

  • Raise the corporate tax rate to 28%.
  • Require a true minimum tax of 21% on ALL foreign earnings of United States companies located overseas (double the current rate). 
  • Impose a tax penalty on corporations that ship jobs overseas in order to sell products back to America.
  • Impose a 15% minimum tax on book income so that no corporation gets away with paying no taxes.
  • Raise the top individual income rate back to 39.6%.
  • Require those making more than $1 million to pay the same rate on investment income that they do on their wages.

Trump’s Tax Policies:

The U.S. had a corporate tax rate ranging from a low of 15% to a high of 35% until the Tax Cuts and Jobs Act (TCJA) was passed by Congress on December 20, 2017, which reduced the corporate tax rate to flat tax of 21%. TCJA also cut capital gains tax to 15 % and increased the estate tax basic exemption amount from $5 million to $10 million.

President Trump’s tax policy platform for re-election focuses largely on promoting and preserving the tax cuts of TCJA and making various tax rate reductions scheduled to expire in 2025 permanent.  Before the Republican convention, his campaign released his agenda, which included:

  • Cutting taxes “to boost take-home pay and keep jobs in America”
  • Enacting “Made in America” tax credits
  • Expanding opportunity zones
  • Enacting new tax credits “for companies that bring back jobs from China
  • Permitting 100% expensing “for essential industries like pharmaceuticals and robotics that bring their manufacturing back to the United States.”

Energy

Biden’s Policies:

Biden’s campaign website.states that he plans to “Move ambitiously to generate clean, American-made electricity to achieve a carbon pollution-free power sector by 2035. This will enable us to meet the existential threat of climate change while creating millions of jobs…”

His plan is for America to achieve a 100% clean energy target by means of:

  • advanced nuclear reactors, that are smaller, safer, and more efficient at half the construction cost of today’s reactors;
  • refrigeration and air conditioning using refrigerants with no global warming potential;
  • using renewables to produce carbon-free hydrogen at a lower cost than hydrogen from shale gas through innovation in technologies like next generation electrolyzers;
  • decarbonizing industrial heat needed to make steel, concrete, and chemicals and reimagining carbon-neutral construction materials
  • leveraging research in soil management, plant biologies, and agricultural techniques to remove carbon dioxide from the air and store it in the ground; and
  • capturing carbon dioxide through direct air capture systems and retrofits to existing industrial and power plant exhausts, followed by permanently sequestering it deep underground or using it to make alternative products like cement.”

Trump’s Policies:

  • Since he took office, President Trump has rolled back hundreds of environmental protections, including limits on carbon dioxide emissions from power plants and vehicles, and protections for federal waterways across the country, fulfilling a campaign promise from 2016.
  • On June 1, 2017, Trump announced the U.S. withdrawal from the Paris Climate Agreement, saying the deal disadvantaged the US “to the exclusive benefit of other countries.”
  • His administration approved oil and gas drilling in Alaska’s Arctic National Wildlife Refuge, which has been off-limits for drilling for decades.
  • President Trump supports development of all forms of energy without subsidies, including production of natural gas through fracking

Trade/Tariffs

Biden’s Policies

  • Take aggressive trade enforcement actions against China or any other country seeking to undercut American manufacturing through unfair practices, including currency manipulation, anti-competitive dumping, state-owned company abuses, or unfair subsidies.
  • Rally our allies in a coordinated effort to pressure the Chinese government and other trade abusers to follow the rules and hold them to account when they do not.
  • Confront foreign efforts to steal American intellectual property.
  • Address state-sponsored cyber espionage against American companies.
  • Apply a carbon adjustment fee against countries that are failing to meet their climate and environmental obligations to make sure that they are forced to internalize the environmental costs they’re now imposing on the rest of the world.

Trump’s Policies:

  • On January 23, 2017, Trump signed an order to withdraw from further negotiations on the Trans-Pacific Partnership.
  • On September 2, 2017, Trump instructed aides to withdraw from the U.S. trade agreement with South Korea and later renegotiated a better trade agreement.
  • On August 16, 2017, the Trump administration began renegotiating NAFTA with Canada and Mexico. NAFTA was replaced with the new United States–Mexico–Canada Agreement (USMCA), signed on November 30, 2018.
  • On January 22, 2018, Trump imposed tariffs and quotas on imported solar panels and washing machines.
  • ? On March 1, 2018, he announced a 25% tariff on steel imports and a 10% tariff on aluminum.
  • On April 3, 2018, Trump announced 25% tariffs on $50 billion in Chinese imported electronics, aerospace, and machinery.
  • On April 6, 2018, Trump announced tariffs on $100 billion more of Chinese imports.
  • On October 7, 2019 the United States and Japan signed two agreements intended to liberalize bilateral trade. The U.S.- Japan Trade Agreement (USJTA) provides for limited tariff reductions and quota expansions to improve market access.
  •  On January 15, 2020, President Trump and Vice Premier Liu H of China the US–China Phase One trade deal in Washington DC.

Buy American/Made in America

Biden’s Policies:

  • Make a $400 billion Procurement Investment in American products, materials, and services and ensure that they are shipped on U.S.-flagged cargo carriers.
  • Retool and Revitalize American Manufacturers, with a particular focus on smaller manufacturers and those owned by women and people of color, through specific incentives, additional resources, and new financing tools.
  • Make a New $300 Billion Investment in Research and Development (R&D) and Breakthrough Technologies 
  • Bring Back Critical Supply Chains to America so we aren’t dependent on China or any other country for the production of critical goods in a crisis.
  • Tighten domestic content rules to require more legitimate American content
  • Crack down on waivers to Buy American requirements by federal Agencies
  • End false advertising by companies that label products as Made in America even if they’re coming from China or elsewhere
  • Strengthen and enforce Buy America provisions
  • Update international trade rules and associated domestic regulations for Buy American

Trump’s Policies:

Trump’s campaign slogan revolves around continuing his promise to Make America Great Again. One of the ways is to rebuild American manufacturing and create higher paying jobs. He uses protectionism to defend U.S. industries from foreign competition. According to the National Association of Manufacturers (NAM), the U.S. manufacturing sector, added about 450,000 workers during the first three years of Trump’s presidency before the pandemic. Here are some of the actions he has taken as President.

President Trump’s campaign website also lists the following goals for his next term:

  • Reduce U.S. dependence on Chinese manufacturing and bring back 1 Million Manufacturing Jobs from China
  • No Federal Contracts for Companies who Outsource to China
  • Grant tax credits to companies that move manufacturing back to United States; tariffs on those that don’t.

Remember that actions speak louder than words, so be sure to compare what a candidate has done and not just what they promise to do in their campaign platform. Be sure to vote. The future of our country is at stake.

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What Has Been the Impact of COVID-19 Pandemic on U. S. Manufacturing?

Tuesday, September 15th, 2020

How much the impact of the COVID-19 Pandemic has had on manufacturing depends on the state in which a manufacturer is located and what is the industry of the manufacturer.  According to Ballotpedia, “Seven states—Arkansas, Iowa, Nebraska, North Dakota, South Dakota, Utah, and Wyoming—did not issue orders directing residents to stay at home from nonessential activities in March and April 2020 in response to the coronavirus pandemic. The 43 other states all issued orders at the state level directing residents to stay at home except for essential activities and closing businesses that each state deemed nonessential.” Only South Dakota did not require any businesses to close.

On May 8, 2020, CNBC reported that by the end of the first month of the shutdown, manufacturing had lost 1,330,000 jobs, and its supporting  industry of transportation and warehousing had lost 584,000 jobs, out of the total job loss of 20.5 million. 

Accenture reported: The automotive industry is a critical component of economic growth with extensive interconnections to upstream (e.g. steel, chemicals, textiles) and downstream industries (e.g. repair, mobility services). With nearly 8 million employed in the U.S., employment in the automotive industry has taken a big hit. The automotive industry is considered essential for the global economy and the resulting prosperity.

CNBC reported that the “Aerospace Industries Association estimates that more than 200,000 jobs in the sector are at risk. Boeing earlier this year said it would aim to cut 10% of its workforce, which stood at 160,000 as of the end of 2019. While it is hiring for its defense unit, the commercial aircraft division has been hit by hundreds of cancellations this year, and CFO Greg Smith told investors on July 29 that 19,000 employees are departing Boeing. About 6,000 had left as of the end of June…At General Electric, which makes engines for both Boeing and Airbus planes, the company is cutting a quarter of the jobs, or 13,000 people in its aviation unit, which is based in Ohio.”

An article on PWC.com commented, “On the defense side of the industry, the situation appears less dire, with demand protected by budgeted government spending and a supply chain with minimal exposure to hard-hit jurisdictions such as Asia. However, events outside the US are affecting the US defense industry, as some US military partner nations may experience challenges in military readiness and ability to maintain equipment. Additionally, some defense companies may be financially weakened, but most likely to a lesser extent compared to consumer-facing aerospace companies.”

My manufacturers sales rep agency, ElectroFab Sales, was fortunate in that all of the California companies we represent were able to stay open because they were in the supply chain of one or more of the 16 essential industries allowed to stay open by California Governor Newsome. However, our open sales orders have dropped by 50% since February. This is primarily because too many of  our customers are in the defense and military sector, and all new product development for new systems has been put on hold indefinitely. In addition, repeat orders for existing systems have dropped.

The summer newsletter of the Coalition for a Prosperous America reported: The term ‘Made in USA’ is currently tracking at an all-tie high since 2004” on Google Trends.  Zach Molti of Atlas Tool Works said that “his company’s recent sales are up roughly one-and-a-half times their usual volume.”  “Bryan Hurley, the owner of Florida-based Americraft Cookware says that his sales have been up 167% of late compared to 2019.” Greg Owns, CEO of Liberty Tabletop, the only flatware manufacturer in the U.S., reported on our Buy American Committee call last Thursday, that orders are up 200% compared to 2019.

A number of CPA member companies had retooled and repurposed their operations to respond to the COVID-19 pandemic to make PPE goods and equipment. Numerous other manufacturers all over the country did the same thing.  Even Ford and GM retooled their factories to make ventilators.

Five months after the COVID-19 shutdowns began, manufacturing is bouncing back faster than everyone expedted. The September 1st Manufacturing ISM® Report On Business®  issued  by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee showed that “The August PMI® registered 56 percent, up 1.8 percentage points from the July reading of 54.2 percent. This figure indicates expansion in the overall economy for the fourth month in a row after a contraction in April, which ended a period of 131 consecutive months of growth. The New Orders Index registered 67.6 percent, an increase of 6.1 percentage points from the July reading of 61.5 percent.  U.S. manufacturing activity came back strong and exceeded expectations for August, expanding at the fastest rate in almost two years.”

However, “…(1) commercial aerospace equipment companies, (2) office furniture and commercial office building subsuppliers and (3) companies operating in the oil and gas markets — as well as their supporting supply bases — are and will continue to be impacted due to low demand. These companies represent approximately 20 percent of manufacturing output. This situation will likely continue at least through the end of the year,” says Fiore.”

In an article on Manufacturing.net, Melvin Bosso, a principal with Myrtle Consulting Group, stated, “Reshoring is also an example of a dynamic that had started long before COVID-19 and will continue far beyond the emotional reaction to the catastrophic effects of the crisis.” He said, there are “four major clusters of reasons why a company makes a decision on how to deploy their supply chains: Costs, Service, Technology and Risk…most organizations have had to rethink their understanding of the fourth cluster – Risk…. All supply chains that run with a just-in-time inventory strategy had to deal with a shortage risk when China, and more broadly Asia, locked down. All essential industries are coming out of the crisis thinking about alternatives. Many are working, or will be working, to find ways to change their exposure.”

Harry Moser, Founder and President of the Reshoring Initiative® recently stated, “COVID has caused companies to reevaluate their supply chains. Often, shorter is better. By 4Q20 we expect to be helping 50 to 100 companies either buy smarter or sell smarter against imports. In most cases, we are providing this support through MEPs (Manufacturing Extension Partnerships) which exist in every state.”

We need to take advantage of this wake-up call to the risk of global supply chains, particularly our reliance on China, to create incentive plans to bring back manufacturing segments that are considered critical for national sustainability. Now is the time to reshore key industries from China to reduce the risk of future supply chain disruptions due to unforeseen events.  American consumers want to buy more “Made in USA” products.  Our government needs to use domestic manufacturing as part of its plan to build up strategic resilience in the aftermath of the current crisis.  It’s time for Congress to support reshoring with the right trade, tax, and currency policies to facilitate making the reshoring trend permanent.

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Who Are My Heroes? Part Two

Tuesday, April 28th, 2020

My additional heroes are people with whom I connected after my first book, Can American Manufacturing be Saved? Why we should and how we can was published in 2009. We shared a focus on doing what we could to save and rebuild American manufacturing. Again, they are presented alphabetically, not chronologically.

Greg Autry, Ph.D., is “an educator, writer and technology entrepreneur. He researches and publishes on space commerce, entrepreneurship, technology innovation and trade policy. He is an Assistant Professor of Clinical Entrepreneurship with the Lloyd Greif Center for Entrepreneurial Studies in the Marshall School of Business at the University of Southern California, where he teaches entrepreneurship and technology commercialization courses.” I met Greg when he was a doctoral candidate at the Merage School of Business at UC Irvine, before he became Senior Economist for the non-partisan, non-profit organization. Coalition for a Prosperous America,  We were also fellow board members of the non-profit American Jobs Alliance for five years. Dr. Autry is the co-author of the book Death by China and a producer on the documentary film, Death by China, (directed by Peter Navarro). His opinion articles have been published in major news outlets including the San Francisco Chronicle, LA Times, Washington Times, Wall Street Journal, and SpaceNews. He was a regular contributor to Huffington Post and is now a regular contributor to Forbes. He is currently on the advisory board of the Coalition for a Prosperous America.

Den Black is President of the non-partisan, non-profit organization, American Jobs Alliance (AJA). He earned a BSME at Kettering University and worked as a Senior Strategist, Futurist, Innovator at Delphi Automotive Systems for 37 years.  Den invited me to join the board of AJA in 2012 after he was referred to me by Executive Director, Curtis Ellis after we met when he was on a West Coast trip. AJA is “dedicated to fostering the public’s understanding of the American System of free enterprise, a system established by the Founding Fathers of the United States to develop the domestic economy of the United States and promote the employment of Americans in diverse occupations through investment in infrastructure and promotion of key industries and technologies in the United States.” Currently AJA is promoting a window decal  “Boycott China for Jobs, Human Rights, Peace” and AJA’s affiliated website:  www.GetOutofChina.us.

Don Buckner is the Founder and CEO of MadeinAmerica.com, MadeinUSA.com, and MadeinAmerica.org. His vision started in 1998 “when he attempted to find several American-made products online, but was unable to do so. Frustrated, he took matters into his own hands, purchasing the Domain MadeintheUSA.com. The website served as a directory resource connecting patriotic consumers to more than 300,000 American-made manufacturers for several years. He also acquired the Domain MadeInAmerica.com.” After the company he founded in 1997, Vac-Tron Equipment, was acquired in 2018, he and his wife decided to invest some of their profits to hold the first Made in America trade show.  They rented the convention center in Indianapolis, IN, where the first show was held October 3-6, 2019. I met Don when I attended the show as one of the many featured panelists and speakers.  The next Made in America show will be held at the TCF convention center, Detroit, Michigan Oct. 1-4, 2020. 

Dan DiMicco, is an American businessman who is the former CEO and chairman of Nucor Steel company and is now Chairman Emeritus. Dan was appointed to the United States Manufacturing Council in 2008 by then-U.S. Commerce Secretary Carlos M. Gutierrez, and served on the board until 2011. Dan also served on the boards of the National Association of Manufacturers and the World Steel Association on the Executive Committee. He also served as a Senior Trade/Economic Advisor to the Trump Campaign and the Lead on the USTR Transition Team. He currently serves on the Board of Directors for Duke Energy Corporation and continues to represent Nucor on the US Council on Competitiveness. He is currently Chairman of the Coalition for a Prosperous America (CPA). He is the author of American Made: Why Making Things Will Return Us to Greatness, published in 2015. I had the pleasure of hearing Mr. DiMicco speak as the keynote speaker at several of the Manufacturing Summits held in California between 2013-2018, when I was the chair of the California chapter of CPA and at the Trade Conferences held by CPA in Washington, D. C. during this same time period.

Curtis Ellis was the Executive Director of the American Jobs Alliance, an independent non-profit organization promoting pro-jobs and Buy American policies, when I met him after my first book was published. He recommended me as a potential board member to Den Black of AJA. He had previously worked in Congress and on federal, state and local campaigns. For his work as a journalist, producer, writer and reporter, he has appeared on 60 Minutes, HBO, NBC, CNN, NPR and in the NY Times, San Francisco Chronicle, Chicago Tribune, TIME, Huffington Post, The Hill, and other outlets. His commentary has appeared on CNN, MSNBC and radio shows nationwide. Currently, Mr. Ellis is currently Policy Director with America First Policies. He served as senior policy advisor on the 2016 Trump-Pence campaign, was on the Presidential Transition Team, and served as special advisor to the U.S. Secretary of Labor in the International Labor Affairs Bureau in 2017.

Ian Fletcher, author of Free Trade Doesn’t Work, What Should Replace it and Why, published in 2011. When I met him, he was a Research Fellow at the U.S. Business and Industry Council. Alan Tonelson asked him to meet me when he was in southern California in the summer of 2010, not long after I started writing blog articles. When, he switched to becoming the Senior Economist of the Coalition for a Prosperous America in early 2011, he suggested I join CPA, which I did.  I immediately read his book from which I learned everything I didn’t know about the dangerous effects of our trade agreements. While he was at CPA, he and Michael Stumo (CPA CEO) edited the second edition of my book, Can American Manufacturing be Saved? – Why we should and how we can, which was published in 2012 by CPA. Ian was a featured speaker at several of the above- mentioned Manufacturing Summits.  He was educated at Columbia and the University of Chicago, and he lives in San Francisco. He is currently on the advisory board of the Coalition for a Prosperous America.

Rosemary Gibson is a “national authority on health care reform, Medicare, patient safety and overtreatment in medicine, as well as “an award-winning author, inspirational speaker, and advisor to organizations that advance the public’s interest in health care.”  She is the co-author of China RX, published in 2018, as well as Medicare Meltdown (2013), Battle Over Health Care (2012), Treatment Trap (2010), and Wall of Silence (2003). I met Ms. Gibson when she was a featured speaker at the Made in America trade show in October 2019. With the outbreak of the COVID-19 pandemic this year, her book is getting the full attention it deserves as an expose of the offshoring to China of pharmaceuticals, PPE, and medical devices.

Harry Moser founded the Reshoring Initiative in 2010 after 25 years as the North American president of GF AgieCharmilles, now GF Machining Solutions. The mission of the Reshoring Initiative is to help bring manufacturing jobs back to the U.S. using the Total Cost of Ownership Worksheet calculator he developed. Harry was inducted into the Industry Week Manufacturing Hall of Fame 2010 and was named Quality Magazine’s Quality Professional of the year for 2012…won the Jan. 2013 The Economist debate on outsourcing and offshoring, and received the Manufacturing Leadership Council’s Industry Advocacy Award in 2014. Harry and I connected in August 2010 after he read my blog article about the importance of understanding Total Cost of Ownership.  He told me I wrote about what he just started and trained me how to use his TCO worksheet, authorizing me to be a speaker on behalf of the Reshoring Initiative.  

James Sturber is the author of What if Things Were Made in America Again: How Consumers Can Rebuild the Middle Class by Buying Things Made in American Communities, published in 2017. Subsequently, he founded the Made in America again organization. After obtaining a law degree, he “devoted his career to public policy, law and entrepreneurship.  He began his career as legislative assistant to a member of the U.S. House of Representatives, focusing on matters before the Committee on Energy and Commerce.  He subsequently practiced legislative and administrative law in Washington, D.C. I met Jim at the Coalition for a Prosperous America trade conference in Washington, D. C. in 2018. When I read his book, I discovered we had some up with much of the same data in our research as my last book, Rebuild Manufacturing – the key to American Prosperity was also published in 2017. He currently co-chairs the Buy American committee for CPA of which I am a member.

Alan Uke is a San Diego businessman, entrepreneur, and community leader, who “started his company, Underwater Kinetics, 41 years ago while attending the University of California at San Diego. Uke holds over 40 patents and exports his SCUBA diving, industrial lighting, and protective case products to over 60 countries.”  He is the author of Buying America Back, A Real-Deal Blueprint for Restoring American Prosperity, published in 2012. Uke documented that in 2011, the U.S. had a trade deficit with 88 countries provides a chart showing the trade balance with every country with which the U. S. trades. When we met for lunch, I found out that he was also a member of the Coalition for a Prosperous America, so we had something else in common. “He is also Founder Emeritus/Founding Board President of the San Diego Aircraft Carrier Museum which acquired the USS Midway in June 2004.”

I would be remiss in not giving Honorable Mention to the many members of the U.S.-China Economic and Security Review Commission that was “created on October 30, 2000 by the Floyd D. Spence National Defense Authorization Act of 2001…” The primary purpose of this Commission is “to monitor, investigate, and report to Congress on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China.” Beginning in December 2002, the Commission submitted “to Congress a report, in both unclassified and classified form, regarding the national security implications and impact of the bilateral trade and economic relationship between the United States and the People’s Republic of China. The report shall include a full analysis, along with conclusions and recommendations for legislative and administrative actions, if any, of the national security implications for the United States of the trade and current balances with the People’s Republic of China in goods and services, financial transactions, and technology transfers.”  I read several of the reports as I was researching my three books, and each year, China’s unfair trading practices threats to U.S. national security, and other violations of the principles and terms of China’s membership in the World Trade Organization were well documented.  Yet, no action was taken by Congress under the administrations of President Bush or President Obama.   

I met many other people at the Made in America trade show last October, some of whom have recently joined the CPA Buy American committee. Some of these people could very well be listed in a future article on my heroes as I get to know them and their work better.  I would encourage you to join our efforts to rebuild America’s economy to create jobs and prosperity by becoming a member of CPA.

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Reshoring Critical Pharmaceuticals and Manufactured Goods Would Create Millions of Jobs

Tuesday, March 31st, 2020

It’s a pity that it took the coronavirus pandemic to wake up Americans to the dangers of our dependence on foreign sources for pharmaceuticals and health care products. Perhaps we could have saved lives if our leaders had taken heed to the warning of co-authors Rosemary Gibson and Janardan Prasad Singh in their book China RX, published in 2018. The authors exposed how the pharmaceutical industry has transferred the manufacturing of generic drugs, vital medicines and medical devices to China and other countries, which has resulted in great risk to the health of Americans as well as a substantial risk to our national security.

In their book, they quote Dr. Goodman, dean of the Milken Business School of Public Health at George Washington University, saying, “It is a matter of national security that we have the essential drugs we need…I think it is time for an examination, for some of the most critical drugs, and it’s not just drugs, medical supplies, masks are all made overseas. Do we need to think about having at least some resilient manufacturing capacity built in this country?”

Yes, we do need to return the manufacture of pharmaceuticals and medical devices to benefit the health and safety of all Americans. Additionally, there would be economic benefits. On March 17th, the Coalition for a Prosperous America released a report on the results of the investigation conducted by Steven L. Byers, PhD and Jeff Ferry of their research team into the potential economic benefits of reshoring pharmaceutical production to the U.S.  They “found that an ambitious but realistic reshoring program could create 804,000 US jobs and add $200 billion to annual GDP in the first year.”

Their investigation showed that imports of pharmaceuticals had increased “dramatically as US-based drug manufacturers moved manufacturing facilities offshore.” By 2019, “pharmaceuticals ranked third as a US import category [$74 billion], behind automobiles ($180 billion) and crude oil ($132 billion) …”

The report states” Eighty percent of all pharmaceutical imports are accounted for by the top ten countries. Seven of the top ten countries we import from are in Europe…” Ireland is number one followed by Germany, Switzerland, Italy, India, Denmark, Belgium, Canada, United Kingdom, and Japan of the top ten. “China is well behind the leaders, in 17th place, with just $1.6 billion of pharmaceutical imports last year.”

However, “the Census category of pharmaceutical imports does not include the key ingredients that go into pharmaceuticals, known as Active Pharmaceutical Ingredients (API).” In recent testimony to Congress, Rosemary Gibson, author of China RX, stated “that three antibiotics used to treat coronavirus or related infections, azithromycin, ciprofloxacin, and piperacillin/tazobactam, are all dependent on supplies of APIs from China.” Senate Finance Committee chairman Charles Grassley commented, “80 percent of Active Pharmaceutical Ingredients are produced abroad, the majority in China and India.”

Byers and Ferry “used  the REMI Policy Insight Model[1] to estimate the impact on the US economy of restoring our level of pharmaceutical imports to the level of 2010, when we imported $61.6 billion of pharmaceuticals [and] reduced chemical imports by $4.9 billion in [their] simulation, to account for the increased imports of chemical ingredients that go into pharmaceuticals.” They ran the “model over a five-year period, 2020 through 2024.”

While the creation of jobs was the highest the first year at 804,000, the subsequent years created 614,000 in 2021, 548,000 in 2022, 453,000 in 2023, and 371,000 in 2024 for a total of 2,382,000 additional jobs.

Pharmaceutical and medicine manufacturing jobs pay a median income of $74,890, which is “47 percent higher than the median for all private-sector employees.”

The authors comment that “The economic benefits of reshoring US pharmaceutical production are thus substantial. They are also strategic; in that they would reduce US dependence on potentially hostile countries like China. In times of pandemic, there is also a non-zero risk that even friendly nations will prioritize their own citizens over exports. At the very least, the US needs a comprehensive audit of its dependence on individual nations and companies for pharmaceuticals, APIs, and any other key inputs.”

They conclude that “The US has become increasingly dependent on imports of foreign produced pharmaceutical and other health care products as well as the ingredients that go into their production. As a result, the supply chain is highly susceptible to interruption which would put significant pressure on our healthcare system…The benefits of reshoring pharmaceutical and ingredient production are large in terms of national security, patient safety, and economic welfare.”

On Friday, March 27th, the Trump Administration announced it would use the Defense Production Act, to compel General Motors to make more ventilators quicker than the company had planned to produce..

In an article in the Washington Post on March 28th, Joshua Gotbaum wrote: “Under the Defense Production Act, the federal government can, like a traffic cop, direct that inventories be allocated where they are needed most urgently. That’s what FEMA does during floods and hurricanes…The DPA also allows government to move its orders to the front of the line. The Defense Department does this regularly, but the act can be used for more than defense…The government can also use the act to order, and then pay for, expanded production, with new products or new plant capacity. “  

He recommended “The administration needs to act quickly, the DPA using all of its authority to procure not just ventilators but also test kits, masks and other equipment for health-care workers and covid-19 victims.” Mr. Gotbaum speaks from experience as he administered some Defense Production Act authorities as assistant secretary of defense in the 1990s and is currently a guest scholar in the Brookings Institution’s Economic Studies Program.

The benefits of reshoring would be even greater if we returned all critical manufactured goods to the U.S. than just returning pharmaceutical and medical products.  According to recent Reshoring Initiative data, Harry Moser, over 3,000 companies have reshored, creating about 740,000 jobs.  He estimates that if we reduce our trade deficit caused by importing more than we export by 20%, it would create one million jobs. Using the free Total Cost of Ownership Analysis calculator available at www.reshorenow.org would help more companies return manufacturing to America.

We need to ensure that we will have the critical products needed to weather future unforeseen events. In my opinion, the policies to address the Coronavirus crisis should be just the beginning of a concentrated effort to reshore all critical manufactured goods to America. Let’s use all of the potentially available policies:

  • Invoke the Defense Production Act on all critical manufactured goods
  • Impose 25% tariffs on all imported goods from China
  • Incentivize manufacturers to produce products that were offshored to China

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Lean Frontier Summit Focuses on Transformation into Lean Enterprise

Tuesday, October 9th, 2018

On September 20-21,2018, Lean Frontiers held their annual Lean Leadership Summits at the Westin Hotel on Jekyll Island.  This was my fifth year to be invited as a speaker at the conference. This year’s summit continued the combination of Lean Management,/Lean Accounting, and Lean H.R./People Development summits that was begun last year.

Co-founder Dwayne Butcher explained last that year that “It’s about time that the whole enterprise be involved in becoming a Lean company. Lean is a business model and must therefore include every part of the business, including those in Executive Leadership, Accounting, HR, Sales, Product Development, Supply Chain. We need to breakdown the silos between these departments.”

Between the keynote speakers, there were four tracks related to Lean Management/Lean Accounting, and Lean H.R./People Development.  Besides giving my own presentation, “How Reshoring and Lean are Helping Rebuild Manufacturing,” based on my new book Rebuild Manufacturing – the key to American Prosperity, I attended the keynotes and several of the sessions in the Lean Management and Lean Accounting tracks.

Lean Frontiers is not a consulting firm. Its sole focus is to provide learning opportunities to

address:  Enterprise?wide adoption of Lean and the foundational skills needed to become a Lean company.

Co-founder Jim Huntzinger, said, “The first Lean Accounting Summit was held in 2005, and out of that summit, Lean Frontiers was born.  Lean is still perceived as a program with short term results by too many, and we need to make the transition to Lean as a business model.  We need to traverse unclear territory — trust the process to go from current condition to the target position. We can use XYZ Thinking:  If we do X, then we will get Y, but if we get Z instead, then we will learn.”

Mike DeLuca of the Lean Enterprise Institute introduced a Lean Accounting A3 for attendees to provide ideas on how to achieve the aspiration of having Lean Accounting be self-sustaining within five years.

Jim announced that the Journal of Cost Management has taken an interest in the summit and has a booth in the foyer. Lean Six Sigma Master Black Belt Gary Kapanowski, who is a Guest Editor for the Journal, invited attendees to sign up to contribute articles to the magazine in the coming year as they are interested in running more stories about Lean in the magazine.

Then, he introduced the first keynote speaker, Karen Martin, author and President of the Karen Martin Group, spoke about her new book, Clarity First.  Clarity was a concept that she introduced in her book, The Outstanding Organization, wherein she looked at common patterns at companies and individual performance. She covered four areas: clarity, focus, discipline, engagement in her previous book and was asked by her readers to expand on the topic of clarity.  She discussed “what is clarity and what it is not,” saying that “it is coherence, precision, and elegance. Information needs to be complete accurate and easy to understand. Think of your target audience as your customer. The opposite of clarity is ambiguity, which complicates, slows, frustrates, increases risk, and is expensive. Ambiguity is manmade and different than lack of certainty. Strategic ambiguity can be useful for certain purposes. “

She asked: “What type are you? Clarity pursuer, clarity avoider, clarity blind” She stated, “Children have a natural curiosity but it gets stamped down when they ask why. Same thing can happen at work. Close to curiosity is humility about how you are communicating and how you are being received. We have 180+ cognitive biases that affect communication. Rushing hampers clarity; take time to be clear. Fear can be underlining lack of clarity. Fear can be biggest reason for resistance to Lean transformation.

She explained that clarity liberates purpose, priorities, process, performance, and problem solving:

Purpose – great way to get people engaged about what you do.

Priorities – defining true north.

Process – Value stream thinking is critical to defining process

Processes: documented, current, followed, consistently monitored, regularly improved; Standard work description is necessary for each task

Problem solving – CLEAR

C = clarity

L = learn

E = experiment

A= access

R = Rollout

In conclusion she recommended, “Infuse clarity into your organization…You need a scoreboard at all levels of company showing how you are doing.”

Prior to the afternoon keynote speaker, Jean Cunningham announced the awardees for the Lean Enterprise Institute’s Lean Accounting professor and student awards.  Professor Laurie Burney of Baylor University and her student, Katie Kearny of KMPG received the award for their research on Lean Accounting that will be published this fall.

Harry Moser, founder and head of the Reshoring Initiative was the afternoon keynote speaker. He spoke on “TCO/Reshoring:  Simplify your Lean Journey, Improve Employee Morale.”  Harry developed the Total Cost of Ownership (TCO) calculator that quantifies he hidden costs of doing business offshore, which is free for companies to use at www.reshorenow.org. Harry highlighted the fact that the tide turned in 2016 between offshoring and reshoring as reshoring increased by 500% and offshoring fell by 75%.  Reshoring and Foreign Direct Investment (foreign companies setting up plans in the U.S.) are responsible for an increase of nearly two million jobs in the U.S.  He reminded the audience that Lean leaders, W. Edwards Deming, John Shook, and Jim Womack all advised companies to identify the “true cost,” and that offshoring multiples the wastes to be eliminated through Lean:  overproduction, waiting transport, overprocessing, inventory, motion, and defects. He stated that among the top ten reasons for reshoring are:  “quality/rework/warranty issues, freight costs, inventory, intellectual property risk, rising wages, and communication problems.”

He said, “By understanding the advantage of producing near the consumer, and the small TCO gap instead of the large price gap, U.S. companies can justify domestic investment, process improvement, automation, training, etc., and they do not have to sacrifice quality, delivery, time-to-market, or employees to be competitive and profitable.”  He announced two awards for reshoring for 2019: the first Sewn Products Reshoring Award and the second Metalworking Reshoring Award.

In conclusion, he invited attendees to cooperate with the Reshoring Initiative by testing Made-in-USA impact on volume and price, incorporating TCO in your lean efforts, and documenting their reshoring cases.

The day ended with a Townhall Conversation on “The Lean Economy” in which panelists Jim Huntzinger, Tom Jackson, Harry Moser, and Bill Waddell discussed how Lean business and practice can be one of the most profound impacts for elevating a strong economy.

On Friday morning, Mike Wroblewski, author of Creating a Kaizen Culture and President of Dantotsu Consulting LLC, was the keynote speaker on the topic of “Leading a Lean Transformation.”  He said, “Most companies measure performance by EBITDA, which he defined as earnings before interest, taxes, depreciation and amortization. Cutting heads is the first thing management does to improve EBITDA by reducing costs. Which path are you on? Lean can be like the path to hell. You need upper management support but you also need lower level support. There are two things you can control – your effort and your attitude.”

He was taught Lean by Shifeo Shinzo from Japan in 1985 when he worked at Hill-Ron. He shared, “We did Kaizen events all week for SMED and after repeated Kaizen events, we got our die change from one hour down to 4 1/2 minutes.” He admonished, “ Kaizen needs to be your way life. It’s the culture. Lean isn’t meant to find blame faster. What do you do in the course of the day? Check email, respond to emails, make phone calls, plan, etc. How much time should you spend in Gemba? You should be spending 80% of your time in the Gemba. The standard you walk by is the standard you set for others.”

Space doesn’t permit me to highlight all the excellent breakout presentations during the summit.  If you haven’t started on your Lean journey, I recommend that you do so soon. If you are already on a Lean journey,I encourage you to put next year’s Lean Leadership Week on your calendar.

 

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