In order to stay competitive in the global economy during the past 20 years, manufacturers have extended manufacturing and supply operations to low-cost sources globally, embraced innovations in automation and cost management, begun transforming themselves into lean enterprises, and served customers in emerging markets.\u00a0 Now, customer demands are changing.\u00a0 They want more flexibility, more emphasis on unique, customer-specific products or variations, more rapid delivery\/response, proximity to vendors, and consistent high quality.\u00a0 These changing demands are fostering several major trends that are creating a brighter outlook for American manufacturers.\u00a0 They include:<\/p>\n
Reshoring Initiative<\/span><\/p>\n The Reshoring Initiative<\/a> is a way to return manufacturing jobs to the U. S.\u00a0 Harry Moser, Chairman Emeritus off Agie Charmilles in 2010, founded initiative.\u00a0 The Association for Manufacturing Technology, Association for Manufacturing Excellence, National Tooling & Machining Association, Precision Metalforming Association, and the Swiss Machine Tool Society support the Initiative.<\/p>\n In June 2008, a survey by SAP and Industry Week Customer Research published showed that the top objectives of conducting business overseas were:<\/p>\n The survey showed that companies with >$1billion revenue met 58-75% of their objectives while companies with <$1 billion revenue only met 37-47% of their objectives<\/p>\n However, a survey of North American manufacturing executives released in early April by Accenture entitled \u201cManufacturing\u2019s Secret Shift<\/a>\u201d found:<\/p>\n The authors noted that software, electronics and telecom are lagging this trend.\u00a0 Software doesn\u2019t seem to be rebalancing its supply chain.\u00a0 India is the most attractive relocation due to large number of highly skilled workers at lower wage rates who speak fluent English.\u00a0 China is forecast as the hub for the Asian market for the telecom industry.\u00a0 Electronic equipment will continue to be outsourced to China. \u00a0This is compatible with number 5 of the 2011 Top 10 Supply Chain Predictions<\/a> — \u201cIn the context of taking a broader view of total cost, supply chain organizations will gain a new appreciation for shortening lead times through profitable proximity sourcing strategies.\u201d\u00a0 The reasons are:<\/p>\n A January 2010<\/a> survey by Grant Thornton of Supply Chain Solutions survey showed that sourcing is moving home slowly.\u00a0 In 2009, 20% of companies brought sourcing closer, of which 59% reshored.<\/p>\n The main reasons for reshoring are:<\/p>\n \u201cAs energy costs go up, transportation costs rise, and the distance that goods travel begins to matter,\u201d said Paul Bingham<\/a>, a trade and transportation specialist at Global Insight, a financial analysis firm in Massachusetts.\u00a0 \u201cFor low-value products that take up a lot of space, like furniture, for example, transportation costs can get quite high,\u201d said Bingham. \u201cAnd if you\u2019re not saving enough money from using low-cost labor, it makes sense to bring your production lines closer to home.\u201d<\/p>\n Thomas Murphy<\/a>, RSM McGladrey\u2019s executive vice president of manufacturing and distribution said, \u201cManufacturing will be regionalized and the countries with the raw materials will drive a lot of manufacturing investment. Energy will be a key driver of what is located where.\u201d<\/p>\n While all countries are subject to unexpected natural disasters, the 7.9 magnitude earthquake that struck the Sichuan province of China on May 12, 2008, and the 9.0 earthquake in Japan that occurred on April 7, 2011, generating a devastating tsunami and radiation exposure from damage to the Fukushima nuclear plant have exposed the problem of how vulnerable the global supply chain is to major disruptions.\u00a0 The Japanese disaster<\/a> has caused a major disruption in the supply chain, especially for automakers.\u00a0 \u201cToyota says its vehicles contain 20,000 to 3,000 parts, coming from about 600 suppliers.\u00a0 And the chain doesn\u2019t stop there.\u00a0 The 600 suppliers themselves rely on hundreds of other companies to provide raw materials and components.\u201d<\/p>\n \u201cInshoring\u201d and \u201cNearshoring\u201d<\/span><\/p>\n \u201cInshoring\u201d refers to a company from a foreign country setting up a plant in the United States, and \u201cnearshoring\u201d refers to the same type of company setting up a plant in the nearby location of Mexico. For companies from India, the reasons for this \u201creverse offshoring\u201d trend include the declining exchange rate of the Indian rupee versus the dollar, the decline in H1B visa availability, and the desire to be closer to their U.S. customer base. Other factors are the labor shortage in India for technology professionals and the tremendous upward pressure on wages.<\/p>\n For example, Wipro Technologies, India\u2019s third-largest outsourcing\u00a0company, set up an \u201cinshore\u201d<\/a> development center in Atlanta, GA, where it will work with the University of Georgia to educate and train nearly 500 employees. The Bangalore-based firm also established a \u201cnearshore\u201d location in Monterrey, Mexico.33<\/sup><\/p>\n <\/sup><\/p>\n San Diego\u2019s CONNECT organization <\/sup>has recognized the current trend of bringing operations closer to home to reduce costs and become more flexible, responsive and adaptable in the constantly changing marketplace.\u00a0 CONNECT calls it \u201cnearsourcing\u201d rather than \u201cnearshoring,\u201dand launched a new industry cluster in December 2010 for technology manufacturers to help them connect with local and regional sources for products and services.\u00a0 CONNECT is collaborating with the San Diego East County Economic Development Council to utilize the EDC\u2019s well-established www.connectory.com<\/a> database of manufacturers to facilitate the connections.\u00a0 CONNECT put on a program May 3, 2011 on \u201cNearsourcing vs. Offshore:\u00a0 What it is and What are the Initial Considerations for Technology Companies.\u201d<\/p>\n Lean Manufacturing<\/span><\/p>\n The application of lean manufacturing techniques is also helping to bring manufacturing back to the USA.\u00a0 One is example took place at General Electric\u2019s appliance plant in Kentucky.\u00a0 While doing a Kaizen event, employees came up with better way to assemble the GeoSpring water heater made in China.\u00a0 General Electric\u2019s U.S. team changed the design to have a control panel that will swing open like a glove box to connect 17 electric connections instead of having to squeeze fingers through tight spaces behind the control panel as was being done in China.\u00a0 They also changed the assembly process so that the 20 lb. compressor will be attached while the GeoSpring unit is in horizontal position instead of upright position.\u00a0 The GeoSpring water heater was brought back to Kentucky plant this year, creating 400 new jobs.<\/p>\n Luke Faulstick, COO of CJO Global, recently told the TechAmerica Operations Roundtable, \u201cAny company on the lean journey should rethink offshoring.\u00a0 If you are doing the \u2018one part pull\u2019 of lean, then you don\u2019t need to offshore.\u00a0 We have reshored our PCBs to our plant in South Dakota, our textile products to our plant in North Carolina, and our implant parts to our plant in Texas.\u00a0 We have cut our inventory buffer down from 12 weeks to two weeks.\u201d<\/p>\n\n
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