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Reshoring vs. Offshoring: How to Decide and Bring Manufacturing Jobs Back to the U.S.

In the face of rising costs and changing consumer preferences, many companies are reevaluating their manufacturing strategies. This discussion, led by Harry Moser of the Reshoring Initiative, delves into reshoring—bringing production back to the U.S. by assessing total costs and economic viability. Explore the motivations behind reshoring, such as improved collaboration, tax incentives, and the shifting landscape of labor costs. Discover valuable tools, including the Total Cost of Ownership estimator, to guide companies in making informed sourcing decisions.

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Reshoring vs. Offshoring: How to Decide and Bring Manufacturing Jobs Back to the U.S.

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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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