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To Offshore or Reshore? How to Objectively Decide

To Offshore or Reshore? How to Objectively Decide. Bringing manufacturing Jobs Back Home. Harry Moser President Reshoring Initiative. SMA. Definitions. Reshoring/Backshoring/Onshoring/Insourcing: Bringing back manufacture of products that will be sold or assembled here.

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To Offshore or Reshore? How to Objectively Decide

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  1. To Offshore or Reshore? How to Objectively Decide Bringing manufacturing Jobs Back Home Harry Moser President Reshoring Initiative SMA

  2. Definitions • Reshoring/Backshoring/Onshoring/Insourcing: Bringing back manufacture of products that will be sold or assembled here. • Producing near the consumer!

  3. Geographic sourcing alternatives

  4. Flawed company economic model 60% of manufacturers: • Apply “rudimentary” total cost models • Wage Arbitrage • PPV (Purchase Price Variance) • Landed Cost • Ignore 20% or more of the total cost of offshored products Source: Archstone Consulting survey, American Machinist Mag., 7/16/09

  5. “Manufacturing Is Expected to Return to America” “Renaissance in Manufacturing” • “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015” • “take a hard look at the total costs” Source: Boston Consulting Group press release 5/11 & 4/12 Source: Michelle D. Loyalka, 2/17/12 NYT Chinese no longer “just thankful not to go hungry.”

  6. The Industry-Led Initiative Provides Free Total Cost of Ownership (TCO) Software for companies and suppliers Online Library of 400+ reshoring articles Case Study template for posting cases. Media coverage of the trend: WSJ, Fox Business, USA Today, IW, CBS, CNBC, etc. ~100 presentations/year nationwide Motivation for skilled manufacturing careers Solutions to major supply chain problems

  7. TCO Estimator benefits • Provides a single TCO for each source • Flexible: values are 100% user selected. • Broad: • 29 cost factors. • Via pull down menus you automatically insert: • Freight rates for 17 countries • Duty rates for parts or tools, e.g. molds • Current value and 5 year forecast of TCO. • Easy to use: • Explanations and references to help select values. • Free

  8. TCO Comparison Example

  9. Even Landed Cost Misses a lot of TCO Source: TCO user 2012 database 27 cases China vs. U.S: Median values

  10. Some Reshorers

  11. Water-heaters Bringing Production back from China: • Water-heater production • Unionized facility in Louisville, KY • 400 jobs, renovated facility • Reasons: • Tax incentives • High-tech new model • Ease of design collaboration with workers: cut cost $20 • 2 tier contract • Chinese cost: -30% becomes +6% considering inventory and delivery problems • Will move a “significant piece” of appliance production back

  12. Reshoring is happening! • 34% of larger companies surveyed “are considering bringing manufacturing back to the U.S.” (MIT Forum for Supply Chain Innovation 2012) • 40% of contract manufacturers have done reshoring work this year (MFG.com 4/12) • % of U.S. consumers who view products Made in America very favorably: 78% (2012) up from 58% (2010) (AAM June 28-July 2, 2012) • More likely to buy U.S. product 76% Less likely to buy Chinese product 57% (Perception Research Services Intl. survey 7/12, 1400 consumers)

  13. 50,000 Manufacturing Jobs since Jan 2010! • Reshoring yielded: • About 50,000 manufacturing jobs* • ~ 10% of manufacturing job growth since the Jan. 2010 low • ~ 100,000 total, including multiplier effect * Source of estimate: Reshoring Initiative tabulation of jobs listed in 287 Reshoring Library articles, 85% published since Jan 2010

  14. BCG’s Tipping Point Industries Computers and electronics Appliances/electrical equipment Machinery Furniture Plastics and rubber Fabricated metals Transportation goods U.S. Manufacturing Nears the Tipping Point, Boston Consulting Group

  15. Industries of published cases Library, July 2012 Source: Reshoring Library, March 2013

  16. Reasons for reported cases Reshoring Library 3/13

  17. 61% of reshoring cases are from China Source: Reshoring Library 3/16/13

  18. Potential for reshored jobs is huge! * # of jobs is cumulative. ** Assumes a low 1.0 Multiplier Effect.

  19. Gaining support in Washington, DC • Commerce Dept: • 2012 budget specifies TCO. • Links: • http://nist.gov/mep/reshoring.cfm • http://business.usa.gov/program/reshoring-initiative • http://www.manufacturing.gov/other_orgs.html • Major new site: http://acetool.commerce.gov/ • 6 rounds of free MEP webinars, next 6/12/13 • Testified at Congressional hearing on 3/28/12 • Working actively with SelectUSA • Calls from: • United States-China Economic and Security Review Commission • White House National Economic Council

  20. 1/11/12 Insourcing Forum

  21. But how do apprenticeships and credentials pay?

  22. What can you do? • Use the tools. Free at www.reshorenow.org • Reshore. Help your customers reshore • Use our archived webinars to inform staff and customers • Call on me to speak at: open houses, webinars, customer industry conferences • Post a link like http://www.pres-flex.com/american-made/ • Submit cases of customer reshoring to promote your company and steel • Help me find a big U.S. “poster company.”

  23. Investment • By understanding: • the advantage of producing near the consumer, and • the small TCO gap instead of the large price gap • Your U.S. customers can: • justify domestic investment, process improvement, automation, training, etc. • And do not have to sacrifice quality, delivery, time-to-market, or employees to be competitive and profitable.

  24. A not-for-profit with 47 sponsors Platinum Gold Silver GoldGoldG Silver

  25. A not-for-profit with 47 sponsors Bronze Steel BronzeBronzeBronze SteeelSStSteeleel Iron Iron

  26. Help slow the offshoring flood now! Contact: Harry Moser Founder and President 847-726-2975 harry.moser@reshorenow.org www.reshorenow.org Recruiting trainees for the skilled manufacturing workforce: http://tinyurl.com/33vpz9k

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