{"id":442,"date":"2013-05-07T19:18:56","date_gmt":"2013-05-08T02:18:56","guid":{"rendered":"http:\/\/savingusmanufacturing.com\/blog\/?p=442"},"modified":"2013-05-07T19:18:56","modified_gmt":"2013-05-08T02:18:56","slug":"is-reshoring-a-myth-or-reality","status":"publish","type":"post","link":"https:\/\/savingusmanufacturing.com\/blog\/reshoring\/is-reshoring-a-myth-or-reality\/","title":{"rendered":"Is Reshoring a Myth or Reality?"},"content":{"rendered":"<p>When I first started talking about saving America  manufacturing and returning manufacturing to America four years ago after the  first edition of my book, <em>Can American  Manufacturing be Saved? Why we should and how we can<\/em>, came out, I was met  with a great deal of skepticism. Some typical comments were:\u00a0 \u201cI don\u2019t think we can.\u201d \u201cIt\u2019s too late.\u201d \u201cI  wish we could.\u201d \u201cWe need to.\u201d Very few thought we actually could return  manufacturing to America.<\/p>\n<p>A lot has changed in four years. At last week\u2019s Del Mar  Design and Electronics Show (DMEDS) in San Diego, CA, a very successful fellow  manufacturers\u2019 sales rep, stopped me in the parking lot and said, \u201cI used to  think you were nuts, but you were right. Manufacturing is returning to America.\u201d  While this manufacturers\u2019 representative sales agency is headquartered in  southern California, it has affiliate companies in Mexico, Malaysia, China  (Beijing, Shanghai, and Shenzhen) and Taiwan (Taipei and Hsinchu) so I did not  take this admission lightly.<\/p>\n<p>The theme of this year\u2019s DMEDS was \u201cThe Re-Birth of American  Manufacturing, and it featured a full-day Reshoring track. This track began with  my presentation on \u201cReshoring: Bringing Manufacturing Back to America Using  Total Cost Analysis and ended with \u201cReshoring:\u00a0  What is a Fit and How Can it Save Your Company Money?\u201d This track also  featured \u201cLean Manufacturing is the Path to Operational Excellence,\u201d \u201c3D  Printing:\u00a0 What it is, Isn\u2019t, Will Be and  Won\u2019t Be,\u201d and \u201cSave Your Factory with Robotic Automation.\u201d<\/p>\n<p>While there were offshore companies exhibiting at DMEDS, it  was dominated by U. S. manufacturers, regional contract manufacturers, and local  sales reps and distributors. The buzz at the show was that manufacturing is  returning to America, and every contract manufacturer I spoke to at the show had  experienced a \u201creshoring\u201d event.<\/p>\n<p>In the past year, there have been numerous articles debating  whether \u201creshoring\u201d is a myth or really happening. For example, the cover  article of the April 22, 2013 issue of <em>Time <\/em>magazine was \u201cMade in USA \u2013  Manufacturing is Back ? But Where are the Jobs? The first page of the article is  full of pictures of products that have returned from offshore, representing an  unbelievable cross section of consumer goods, ranging from toys such as the  Frisbee. Slinky and Crayola crayons to electric mixers, barbecues, saws,  hammers, and many more.<\/p>\n<p>The reason the article poses the questions about how many  jobs are being created by the return of manufacturing to America is that the  manufacturing plants of the present and future have more machines and fewer  workers than in the past. Robotics, automation, and lean manufacturing are  helping companies do more with fewer people, and the rapidly improving  technology of additive manufacturing is changing the way parts are being  made.<\/p>\n<p>The article featured a glimpse of manufacturing\u2019s future in  the stories of two companies:<\/p>\n<ul>\n<li>ExOne, near Pittsburgh, PA, providing Digital Part  Materialization (DPM) that transforms engineering design files directly into  fully functional objects using 3D printing machines<\/li>\n<li>GE\u2019s highly automated battery factory in Schenectady,  NY.<\/li>\n<\/ul>\n<p>ExOne needs only two workers and a design engineer per shift  to support its 12 metal-printing machines. The GE plant produces Durathon sodium  batteries that are large and powerful enough to power cell phone towers. Because  of being highly automated, the plant only employs 370 high-tech workers in a  200,000 sq. ft. facility.<\/p>\n<p>What was most encouraging to me was that the article reported  that Ashley Furniture is building a new plant south of Winston-Salem, NC that  will employ 500 people. This is an industry that even I doubted would ever come  back to the U.S.<\/p>\n<p>Key statistics pointed out in the article were that China\u2019s  average hourly wage was only $0.50 in 2000 but is projected to be $4.50 by 2015.  This is probably a conservative estimate because China\u2019s wages rose by 15-20%  over the last five years but are expected to increase by another 60% in 2013  alone. Another factor noted is that the cost to ship a 40-ft. container from  China to the West Coast rose from $1,184 in 2009 to $2,302 this year. These  facts corroborate the Boston Consulting Group\u2019s 2011 <a href=\"http:\/\/www.bcg.com\/documents\/file84471.pdf\">report<\/a> that there will be  a convergence in the total costs between China and the U. S. by 2015.<\/p>\n<p>&nbsp;<\/p>\n<p>This quote from GE CEO Jeff Immelt concluded the  article:\u00a0 \u201cWill U.S. manufacturing go  from 9% to 30% of all jobs? That\u2019s unlikely. But could you see a steady increase  in jobs over the next quarters and year? I think that will happen.\u201d I agree and  so does Harry Moser, founder of the Reshoring Initiative and developer of the  Total Cost of Ownership<sup>TM <\/sup>spreadsheet.<\/p>\n<p>&nbsp;<\/p>\n<p>Mr. Moser\u2019s organization promotes and tracks cases of  reshoring across the U.S. He estimates that between 2010 and 2012, about 50,000  jobs were created in the U.S. because of the trend\u2014which equates to 10% of the  500,000 manufacturing jobs created in the past three years.<\/p>\n<p>&nbsp;<\/p>\n<p>On the myth side of the debate, the 2012 Hackett Group\u2019s <a href=\"http:\/\/www.thehackettgroup.com\/research\/2012\/reshoring-global-manufacturing\/hckt2012-reshoring-global-manufacturing.pdf\">report<\/a>,  \u201cReshoring Global Manufacturing:\u00a0 Myths  and Realities\u201d by Michel Janssen, Erik Dorr and David P. Sievers<\/p>\n<p>states, \u201cBy next year, China\u2019s cost advantage over  manufacturers in industrialized nations and competing low-cost destinations will  evaporate.\u201d However, they conclude that \u201cfew of the low-skill Chinese  manufacturing jobs will ever return to advanced economies; most will simply move  to other low-cost countries.<\/p>\n<p>&nbsp;<\/p>\n<p>Using hard data from their 2012 Supply Chain Optimization  study, they analyzed the trend in \u201creshoring\u201d of manufacturing capacity, and  their findings debunk the myth that manufacturing capacity is returning in a big  way to Western countries as a result of rising costs in China. The report  states, \u201cThe reality is that the net amount of capacity coming back barely  offsets the amount that continues to be sent offshore.\u201d<\/p>\n<p>The report also offers recommendations on how companies  should plot their manufacturing sourcing strategies. Interestingly, their  recommendations incorporate some of the factors that Mr. Moser and I include as  part of a Total Cost of Ownership analysis, such as \u201cintegrate the views of  manufacturing, procurement, finance and business-unit leadership,\u201d \u201cEstablish a  game plan to deal with risk: Geopolitical, supply base, environmental and  commodity risks are a given,\u201d \u201cEstablish a proactive approach to anticipate  risks, creating mitigation plans with clear triggers for implementation,\u201d and  \u201cBroaden the decision making approach beyond total landed cost.\u201d<\/p>\n<p>The Hackett Group\u2019s definition of \u201cTotal landed cost\u201d is not  as broad and encompassing as the definition of Total Cost of Ownership I provide  in the 2009 edition of my <a href=\"http:\/\/www.savingusmanufacturing.com\/\">book<\/a> and that Mr. Moser uses in  the TCO spreadsheet he developed in 2010. Their definition is \u201cTotal landed cost  is the set of end-to end supply chain costs to transform raw materials and  components into a finished good ready for sale. Key components include: raw  material and component costs, manufacturing costs (fixed and variable),  transportation and logistics, inventory carrying cost, and taxes and  duties.<\/p>\n<p>My definition of TCO includes the \u201chidden costs of doing  business offshore,\u201d 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, currency  fluctuation. Mr. Moser\u2019s TCO spreadsheet includes calculations for factors such  as Intellectual Property risk, political instability risk, effect on innovation,  product liability risk, annual wage inflation, and currency appreciation.<\/p>\n<p>While the number of companies bringing products lines back to  America is increasing, I have to admit that as manufacturers\u2019 sales reps for all  American companies; we are still losing business to China for individual parts  our principals are quoting. Just recently, we lost several rubber parts that our  rubber molder has made for a customer in our territory for 15 years. Our  customer had been purchased by a multinational awhile back that has a subsidiary  in China, so the new management decided to tool up these parts in China and  discontinue ordering them from our molder. I am sure that the decision was made  based on the lower piece price without doing a TCO analysis.<\/p>\n<p>You can help your company get the most value for its dollars  and help return manufacturing to America by doing the following:<\/p>\n<ul>\n<li>Use the TCO spreadsheet available for free at  www.reshorenow.org<\/li>\n<li>Use the archived webinars to inform staff and customers<\/li>\n<li>Work with groups being trained on TCO \u2013 Manufacturing  Extension Program (MEPs) sites around the country<\/li>\n<li>Prepare your workforce for reshoring<\/li>\n<li>Submit cases of reshoring for publication and posting using  the Reshoring Initiative\u2019s \u00a0template<\/li>\n<li>Sponsor the Reshoring Initiative<\/li>\n<\/ul>\n<p>I strongly believe that if more companies would learn to  understand and utilize the TCO estimator spreadsheet of the \u201cReshoring  Initiative,\u201d they would realize that the best value for their company is to  source their parts, assemblies, and products in America. Doing this would help  return manufacturing to America to create a far higher percentage of jobs than  the 10% that have been brought back to America thus far and help maintain more  manufacturing in U. S.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>When I first started talking about saving America manufacturing and returning manufacturing to America four years ago after the first edition of my book, Can American Manufacturing be Saved? Why we should and how we can, came out, I was met with a great deal of skepticism. Some typical comments were:\u00a0 \u201cI don\u2019t think we [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[51,6],"tags":[11,26,82],"class_list":["post-442","post","type-post","status-publish","format-standard","hentry","category-manufacturing","category-reshoring","tag-american-manufacturing","tag-reshoring-2","tag-total-cost-of-ownership"],"_links":{"self":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/442","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/comments?post=442"}],"version-history":[{"count":2,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/442\/revisions"}],"predecessor-version":[{"id":444,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/posts\/442\/revisions\/444"}],"wp:attachment":[{"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/media?parent=442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/categories?post=442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/savingusmanufacturing.com\/blog\/wp-json\/wp\/v2\/tags?post=442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}