Is Reshoring a Real Opportunity

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Presentation at 2011 IEDC Annual Meeting on Reshoring

Text of Is Reshoring a Real Opportunity

  • 1. Riding the Re-Shoring Wave: Strategies for Attracting Overseas Business Operations to Your Community: Ohio Efforts
    Mark Barbash, FM
    Finance Fund / Economic Development Consulting
    Columbus, Ohio
  • 2. Why are firms considering reshoring now?
  • 3. 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 cant measure or have never measured before
    Re-shoring considerations
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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
  • 8.
    Dr. Susan Helper
    Case Western Reserve University
    Cleveland, Ohio
  • 9. 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
  • 10.
    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
  • 11. Wayne Earley, PolymerOhio:
    (614) 776-5720
  • 12. 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
  • 13. Center for Automotive Research & University of Michigan
    CARs Automotive Communities Initiative
    Inventory of vacant auto facilities, both OEMs and supply chain
    Working with communities to develop an international marketing effort
  • 14. University of Michigan / EDA Center
    Larry Molnar
    Center for Automotive Research
    Kim Hill Director
  • 15. What can the Economic Development industry do to advance the Reshoring Opportunities?
  • 16. Begin to understand the issues
    Find ways to measure what hasnt been measured before; Become familiar with the work of Harry Moser and others
    Engage your Universities and Trade Associations
    Identify potential case studies for evaluation by Harry Moser, Sue Helper or others
    Develop a Basic Understanding of the Issues
  • 17. 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
  • 18. MFGWatchnotes that
    much more [re-shoring] activity must take place for meaningful economic or employment improvements to be seen among U.S. manufacturers.
  • 19. Jobs in the Making: The Role of Mfg in the U.S. Economy and the EDOs Role
    Report to be issued later in 2011
    Manufacturing Productivity increasing through innovation and technology
    Build Innovation Infrastructure
    IEDC / Economic Development Research Partners
  • 20. 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
  • 21. 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
  • 22. Engage your businesses as part of your Business Retention and Expansion (BRE) Program
    Sponsor seminars to plant the seeds of Reshoring
    Identify businesses considering off-shoring and help them quantify costs
    Advocate for Reshoring at the Federal policy level
    Business Technical Assistance
  • 23. 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
  • 24. NIST
    Manufacturing Extension Partnership
    Reshoring Initiative: Harry Moser
    Michael P. Collins
    Other Important Players
  • 25. Businesses should make the case based on value, not just on cost