Is Reshoring a Real Opportunity

Riding the Re-Shoring Wave: Strategies for Attracting Overseas Business Operations to Your Community: Ohio Efforts

Mark Barbash, FMFinance Fund / Economic Development Consulting

Columbus, OhioMark.barbash@gmail.com

Why are firms considering reshoring now?

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Some firms are moving work back because the US is becoming relatively cheaper on costs that they measure: Rising shipping costs Increased wages in China, stagnant

wages in US Other firms are discovering “hidden

costs” of off-shoring that are significant; ie: costs that they can’t measure or have never measured before

“Re-shoring” considerations

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Offshoring may not reduce costs, but rather shift costs to different budgets Piece price falls (good for purchasing) Travel costs rise (bad for engineering?) Product development costs may stay with

US plant (and not be charged to foreign plant)

Hidden costs of reshoring

Mark.barbash@gmail.com

Worst case (real example):

A US plant worked overtime fixing quality problems from a Chinese plant belonging to the same company. The overtime made the US plant look expensive, hastening its demise

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Some costs are hard to monetize (but that does not make them unimportant): Opportunity cost of CEO time de-bugging

supply chain Slower ramp-up to full production due to

communication difficulties Lost opportunities to see potential

product or process innovations, because of separation of customers, product designers from production.

Hidden costs-2

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Increased costs due to greater variability Need to hold more inventory due to ‘just-in-

case’ and ‘just in time’ scenarios Potential for loss of intellectual property Assumption that the value of the product

made in the US and abroad is the same Not true if US product is made with better

materials, has more reliable delivery, provides better opportunities for innovation

Hidden costs-3

Mark.barbash@gmail.com

Dr. Susan HelperCase Western Reserve

UniversityCleveland, Ohio

Susan.helper@case.edu

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Polymer / Composites Automotive Supply Chain Advanced Energy Supply Chain Open-source research collaboration

linking university researchers with business researchers

Hubs of Innovation and Opportunity

Supply Chain Initiatives

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Technology Based ED Group Focused on Polymers (an Edison Center)

Worked with Polymera, a new business startup that was open to the reshoring opportunities

Development of specific case studies with fiscal and operational analysis

Goal: Develop an industry focused tool that can be applied BEFORE a company makes an offshoring decision

Mark.barbash@gmail.com

Wayne Earley, PolymerOhio: wayne.a.earley@polymerohio.org

(614) 776-5720

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Survey of 500 North American Suppliers and OEMs: The percentage receiving “queries or actual

work from companies suffering supply chain disruptions” has increased from 36% to 42% in the past four quarters.

21% of North American firms surveyed have “returned a portion of [their] production into or closer to North America from a low-cost country” in the past three months, up 9% from the previous quarter.

Reshoring in the Auto Industry

Mark.barbash@gmail.com

Center for Automotive Research & University of Michigan

CAR’s Automotive Communities Initiative

Inventory of vacant auto facilities, both OEM’s and supply chain

Working with communities to develop an international marketing effort

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University of Michigan / EDA Center

Larry Molnarkallen@umich.edu

Center for Automotive Research

Kim Hill Director khill@cargroup.org

Mark.barbash@gmail.com

What can the Economic Development industry do to advance the Reshoring Opportunities?

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1. Begin to understand the issues2. Find ways to measure what hasn’t been

measured before; Become familiar with the work of Harry Moser and others

3. Engage your Universities and Trade Associations

4. Identify potential case studies for evaluation by Harry Moser, Sue Helper or others

Develop a Basic Understanding of the Issues

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Reluctance of businesses to have their decisions “second-guessed”

Challenging how decisions are made within a company and who makes the decisions

Reluctance to provide specific decision-making data or performance data

Challenges to Understanding

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MFGWatch notes that

“much more [re-shoring] activity must take place for meaningful economic or employment improvements to be seen” among U.S. manufacturers.

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Jobs in the Making: The Role of Mfg in the U.S. Economy and the EDO’s Role

Report to be issued later in 2011 Manufacturing Productivity

increasing through innovation and technology

Build Innovation Infrastructure

IEDC / Economic Development Research

Partners

Mark.barbash@gmail.com

Regional Reshoring Webinar, April 2011 Sponsored by IEDC and the Economic

Development Administration Discussion among EDPs in Ohio,

Indiana, Michigan and Pennsylvania

Regional Reshoring Webinar

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Your Strategy: Using the re-shoring logic (and

software) Help your companies see the

advantage of keeping production and other functions local

Show non-U.S. companies how much more competitive they will be if they locate a facility in the U.S., preferably near a major customer.

Business Technical Assistance

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1. Engage your businesses as part of your Business Retention and Expansion (BRE) Program

2. Sponsor seminars to plant the seeds of Reshoring

3. Identify businesses considering off-shoring and help them quantify costs

4. Advocate for Reshoring at the Federal policy level

Business Technical Assistance

Mark.barbash@gmail.com

Partner with Industry Trade Association to conduct “Re-Shoring Fairs”

The National Tooling Machine Association held the first of these fairs, on May 12th of 2010 in Irvine, California,

The Fair attracted 45 OEMs and 113 contract manufacturers.

Re-Shoring Fairs

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NIST Manufacturing Extension Partnership Reshoring Initiative: Harry Moser

www.reshorenow.com Michael P. Collins

www.mpcmgt.com

Other Important Players

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Businesses should make the case based on value, not just on cost Value may be harder to measure Efforts to measure it pay off for forms and

communities in high-wage, high-skill regions Offshoring often means:

One very visible cost falls (direct labor) While many hidden costs rise Often, hidden costs are greater than visible costs

The case to be made is:

Mark.barbash@gmail.com

Thank you.