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3/5/2015
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Reshoring - Bringing Manufacturing HomeIdentifying Prime Candidates for Reshoring
Sandy Montalbano
Consultant to
Reshoring Initiative
Georgia Tech
Basic Economic Development Course
Definitions
Reshoring/Backshoring/Onshoring/Insourcing:
Bringing back manufacture of products that
will be sold or assembled here.
Transplants/FDI: Similar logic
Localization - producing near the consumer!
We assist companies to more accurately
access their total cost of offshoring with our
Total Cost of Ownership Estimator™
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Geographic sourcing alternatives
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Why offshoring occurred
• Cheap labor
• Herd mentality in which companies followed
each other offshore
Corporate expectations of offshoring:
• Achieving lower prices for customers
• Pursuit of greater gross profit margins
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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
Indexed Unit Labor Costs in the Manufacturing
Sector of Selected Countries
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“Manufacturing Is Expected to Return to America”
“Renaissance in Manufacturing”
“Majority of Large Manufacturers Now Planning or
considering Reshoring from China to the U.S.”
“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
The Industry-Led Reshoring Initiative
Provides
Free Total Cost of Ownership (TCO) Software* for companies and suppliers
Online Library of 1,900+ reshoring articles
Case Study template for posting cases.
Solutions to major supply chain problems
Motivation for skilled manufacturing careers
* NIST’s MEPs also offer a TCO system.
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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.
Instruction Manual.
Free
TCO Comparison Example
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Why Reshoring Is Happening
Higher wages in China,
Increased use of Total Cost of Ownership (TCO) –
Includes costs, risks, and strategic factors that were
ignored over the past few decades
TCO = more obvious costs + “hidden” costs
Total Cost = True Cost
Reshoring is the act of producing or sourcing locally
again
TCO is the methodology you use to decide what to
reshore
A Counter-argument
Skilled labor shortage
Experienced management shortage
Currency manipulation
Insufficient ecosystem
Cost of transition
Lack of scale
Lack of political commitment
Source: Is re-shoring electronics manufacturing all hype?
Steven Linahan, Venture Outsource 12
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Walmart’s 10 Year $250 Billion Initiative
Over the next 10 years, Walmart is investing $250 billion in
products that support American jobs
Walmart’s U.S. president, Bill Simon, suggested in a speech
to fellow retailers that the power of their order books can help
reshore U.S. production in textiles, furniture, pet supplies,
some outdoor categories, and higher end appliances.
In the 10th year of Walmart’s program, it will be buying $50
billion more U.S. products per year, generating, by
our estimate, about 300,000 additional manufacturing jobs (by
Boston Consulting Group’s estimate, 1,000,000 total jobs).
Source:http://business.time.com/2013/04/12/how-walmart-plans-to-bring-
back-made-in-america/#ixzz2VpVYk5dB Bill SaporitoApril 12, 2013
Some Reshorers
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Water Heaters
Bringing Production back from China: Water-heaters, fridges, and washing machines
Unionized facility in Louisville, KY
1300 jobs, renovated facility, $800 million invested
Reasons: Tax incentives
High-tech new model
Ease of design collaboration with workers: retail price -20%
2 tier contract
Chinese cost: -30% becomes +6% considering inventory and delivery problems
Will move a “significant piece” of appliance production back
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1888 Mills: Towels
● Griffin, GA
● 35 jobs
● At a 17% price premium at Walmart, selling 35%
better than imports
● Reasons:
● Automation/technology
● Re-design
● Shipping costs
● Walmart
Source: U.S. Factory Work is returning, but the industry has changed. March 3, 2013. Reshoringmfg.com.
Kim Souza, “Wal-Mart asks consumers for ‘Buy American’ pledge.” September 30, 2013. The City Wire.
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Tractors & Excavators
Japan to Bogart, GA
1,400 production jobs
Reasons:
Freight cost
U.S. energy price
Sources: “Production Lines to Roll Soon at CAT Plant.” Manufacturing.net. October 23, 2013.
Harry Bradford, “11 American Companies That Brought Jobs Back Home.” Huffington Post. May 31, 2014.
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Injection-Molded Plastic Footwear
China to Hazelhurst, GA
$25 million total combined investment
150 jobs, potentially up to 250
Reasons:
●Walmart pledge
●Automation
●Rising wages and fuel costs
●Tariffs
Sources: Kavita Kumar. St. Louis Post-Dispatch. “Making shoes in the U.S.? An Overland Company Finds a Way.” January 11, 2014.
http://www.stltoday.com/business/local/making-shoes-in-the-u-s-an-overland-company-finds/article_ba482a99-5615-5e98-84c1-
9ffe2b8fd06c.html
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ATMs
Returned from China, India and Brazil to Columbus, GA
350,000 sq. ft. factory
900 employees
Reasons:
Slow response from contract suppliers, esp. lower tiers
Chinese wages up
Eliminate silos by having mfg. near engineering and customers
Source: 1/27/10 Strategy-Business.com Manufacturing: Backshoring on the rise
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Buttons
China to Clarkesville, GA
Reasons:
Salaries up
Expectations up
Rising Yuan
20-25% of employees did not return from
annual holiday
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Medical Supplies
● Asia to Allentown, PA
● Reasons:● Communications
● Delivery
● Freight cost
● Lead time
● Total cost
● Automation/technology
● Government incentives
● Skilled workforce
● Buy American Act
Source: Mark Kleszczewski, “Reshoring: The Supply Chain Returns.” GCX Magazine. June 27, 2014.
Truck & Bus Tires
● Japan to West Point, MS
● 500 jobs initially
● $300 million capital investment
● Reasons:
● Lead time
● Future investment could total $700 million
and bring another 1500 jobs
Source: Bruce Meyer. “Rubber Making in America: Tire Makers Pump Billions into Facilities.” Rubber News. April 7, 2014.
Dennis Seid. “TVA CEO takes economic development tour in Northeast Mississippi.” Mississippi Business News. April 16, 2014.
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Luxury Vinyl Tile
Reshoring from China to Lancaster, PA, to begin in
2014
57 jobs
$41 million factory investment
Reasons to reshore:
Competitive cost structure
Lead time
Improved customer service
Government incentives
Source: Armstrong World Industries. “Armstrong Selects Lancaster, PA Floor Plant for $41 Million Investment. October 10, 2013 .
http://ir.armstrong.com/releasedetail.cfm?ReleaseID=796306.
Software Reshoring
● India to Bridgewater, NJ
● 15 jobs
● Reasons:
● Communications
● Total cost
● Higher productivity
● Rising wages
● Travel cost
● Skilled workforce
● Lead time
● Employee turnover
Sources: Esther Surden, “Reshoring.” New Jersey Tech Weekly. March 26, 2014.
“Moving jobs back to U.S. is starting to make sense.” NJBiz. January 20, 2014.
Myra Thomas, “N.J. Software Company Adds Jobs By Reshoring.” Dice, November 25, 2013.
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Truck Parts
Brought manufacturing of truck parts back to
Reading, PA, from China
Reasons:
Disorganized shipments impacted local assembly
Lead time/time to market
Customer responsiveness
Travel cost
“more control of our destiny”
Source: Joyce M. Rosenberg. “Made in the USA back in style for small businesses.”Yahoo! Finance, May 22, 2013.
http://finance.yahoo.com/news/made-usa-back-style-small-191832931.html .
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Precision High-Tech Metal Products
● China, Europe to Avon, MA
● Workforce has doubled in last decade
● $5 million in recent investments
● Reasons:
● Delivery
● Freight cost
● IP risk
● Rising wages
● Labor concessions
● U.S. energy prices
● Customers reshoringSources: Jon Chesto, “Here are 10 Mass. manufacturers that are bringing work back to the U.S.” Boston Business Journal. May
16, 2014.
George Donnelly, “Boston Business Journal: Reshoring and Jobs” NECN/Boston Business Journal. May 14, 2014.
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Automotive Electric Switches
and Magnetic Systems
● Pelahatchie, MS
● Won Chrysler contracts over Mexican,
Korean suppliers
● Reasons:
● Quality: “zero defects record”
● “Trust”
● Price
Source: Jeff Amy, “Miss. Aims to lure factories from other countries.” Business Week. August 21, 2012.
Ted Carter, “ Mississippi getting the nod in reshoring decisions.” Mississippi Business. August 26, 2012.
Wally Northway, “Is onshoring the new trend? Local manufacturers finding a more level playing field.” Mississippi Business
Journal. November 29, 2013.
Circuit Boards
Woodridge, IL
Supplies heavy equipment companies
Had quality issue with a Chinese component
Found local IL source
Result:
Quality problem fixed
Inventory cut by 94%
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Bleeding has stopped!
Manufacturing Jobs/Year
2003 2013 % Change
New
offshoring
~150,000* 30-
50,000*
-70%
New
reshoring 2,000*
30-
40,000**
+1,500%
Net
reshoring
-148,000 0 -100%
*Estimated ** Calculated ***Feasible
Industries
Source: Reshoring Initiative Library, March 2014.
IndustryReshoredCases
Electronics/Appliances/Components 41Computer/Electronic 26Apparel 24Hobbies 23Transportation 22Plastic/Rubber 18Fabricated Metal 18Machinery 16Medical 15Wood Products 14Energy 8Chemicals 4Castings 3Primary metal 2Non-metallic mineral products 1Other: primarily food, services,and home and office products 20
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Negative Issues Offshore
Source: Reshoring Initiative Library, March 2014.
Negative Issues # Cases
Lead time 111
Quality/rework/warranty 109
Rising wages and Currency Variation 88
Freight cost 82
Total cost 49
Inventory 37
IP risk/ Supply chain interruption risk 29 each
Delivery 28
Communications 18
Green considerations/Loss of control 15 each
Travel cost/time 14
Price 5
Difficulty of innovation/product differentiation/Regulatory
compliance
4 each
Burden on Staff, Emergency air freight, Political instability 2 each
Employee turnover, Strained offshore relationships, Natural
disaster risk
1 each
Positive Reasons to Reshore
So
urc
e: R
esh
orin
g In
itiativ
e L
ibra
ry, Ma
rch
20
14
.
Positive Reasons to Reshore # Cases
Skilled workforce 87
Image/brand 80
Government incentives 79
Automation/Technology/3D
printing
57
U.S. energy prices 49
Re-design 41
Higher productivity 36
R&D 35
Lean 27
Eco-system synergies 22
Infrastructure 20
Customer responsiveness 14
Lower real-estate/construction 8
Labor concessions 7
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Countries From Which Reshored
Source: Reshoring Initiative Library, March 2014.
CountryReshored Cases Global Regions
Reshored Cases
China 135 Asia 165Mexico 20 North America 26India 11 Western Europe 6Canada 6 Eastern Europe 2Japan 5 South America 1Taiwan 5 Africa 1Korea 3Hungary 2Vietnam 2Germany, France, Brazil, Spain, Netherlands, Italy, Egypt, Indonesia, UK, Singapore, Malaysia, Sri Lanka, Australia 1 each
Jobs Reshored by State
Sources: Reshoring Initiative Library, August 31, 2014.
Cases 2007 through 8/31/14.
State Jobs Companies
Avg. Jobs/
Facility State Jobs CompaniesJobs/
Facility State Jobs Companies
Avg. Jobs/
Facility
SC 7780 7 1111 AZ 700 2 350 RI 200 2 100
MI 6721 13 517 FL 611 12 51 IA 193 2 97
CA 6014 28 215 MA 598 10 60 WA 150 3 50
KY 4612 5 922 MS 540 5 108 MO 150 6 25
TX 3712 12 309 UT 464 6 77 MD 90 6 15
OH 3611 18 201 AL 397 4 99 MN 64 9 7
GA 3005 7 429 WI 342 11 31 MT 25 1 25
TN 2490 11 226 NJ 335 3 112 DE 0 2 0
NY 1089 17 64 IN 320 5 64 VA 0 1 0
NC 1020 14 73 PA 279 11 25 CT 0 2 0
ID 1000 2 500 AR 210 4 53 ME 0 1 0
KS 1000 2 500 IL 205 9 23 VT 0 2 0
CO 738 6 123 NH 200 1 200 ND 0 1 0
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Reshoring More Effective than Exporting:
U.S. is Much More Competitive at Home!
Where Sold
U.S. China
Where
Made
U.S. $100 $115
China $100 $85
Difference 0 30%
Based on TCO being 15% higher for exports
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
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 Council36
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April 2014 – Congressional Visitors Center
1/11/12 Insourcing Forum
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But how do apprenticeships and credentials pay?
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Local Skilled Workforce Recruitment
Issue Solution
“Trades” and
“vocations” image
Call them “Professions”
Manufacturing
career image due to
offshoring
Industry collect and media
report the local reshoring
case of the month. Use
our Case Studies feature.
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Economic Development Program
Starting in PA, MS, Central NY
Action Source/Responsibility
Identify local imports
by U.S. or foreign
companies
Datamyne
Suggest to companies
they source locally
EDO/MEP/ etc.
Train companies on
TCO to overcome issue
of higher local price
Reshoring Initiative
Needed further cost
reductions
MEP/ Comm. College/
EDO/technology suppliers41
Pick a Region Where You Can Win!
Larger companies that import
Suppliers that can substitute for the imports
Typically bigger than a city. Might need a
state or region
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Best Practices
Train MEPs, Chambers, EDOs, etc. on TCO
Target importers, e.g. via Datamyne
Send teams to the importers: how can we help you with
supply chain problems?
Help the importer and suppliers become more competitive vs.
imports: MEPs, comm. colleges, technology suppliers, etc.
Have Reshoring Summits for the importers and suppliers
Document and promote reshoring successes
Ideally, bring importers and suppliers together in Purchasing
Fairs
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How to get started
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Ask companies about pain and opportunities with imports:
Delivery/air freight
Orders lost due to delivery or slow response
Quality
Excess inventory
Travel
Late night calls
IP loss or risk
Regulatory issues
Purchase price rising
Corruption
Violence
Natural disasters or political instability
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Suggested Company Priorities re Reshoring
1st Keep existing domestic sources
2nd Shift outsourcing back
3rd Repurpose offshore own-facility to serve the
offshore market. Incrementally invest domestically to
serve domestic market
4th Shut offshore own facility. Build new domestic
facility.
TAKEAWAYS for EDOs
Use TCO to:
Help companies make sourcing decisions
Convince local companies to stay, expand and source locally
Convince foreign companies to locate here
Use reshoring case studies to promote local companies
Put as much emphasis on local outsourcing as on OEMs’
factories:
Try state Purchasing Fairs
Much faster implementation
Less need for incentives!
Build clustering/moats/ecosystems around your companies
Attract suppliers, OEMs and FDI to join the cluster
Have the nation’s best skilled workforce training: recruits and
incumbents. Compete on number of NIMS and MSSC
credentials earned.
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Training Resources
Northeastern Pennsylvania Industrial
Resource Center (NEPIRC) TCO Training
Webinar
A training webinar on reshoring and the total cost
of ownership
SelectUSA Investment Summit – Harry
Moser, founder/president will be training and
exhibiting
Washington, DC on March 22 – 24, 2015
Reshoring Seminar
Reshore Readiness
Engagement
Post Item
to Website
Scout
Suppliers
Goal: Reshore 18 items to Pennsylvania by October 2015
Plan:
Use Datamyne to identify items imported into Pennsylvania
Identify five “reshore ready” industries based on imports and other
factors
Use Datamyne to identify “reshore ready” companies in Pennsylvania
that are importing in the industries
Invite “reshore ready” companies to attend a reshoring seminar
Engage with companies and identify “reshore ready” items by using
Total Cost of Ownership EstimatorTM
Post “reshore ready” opportunity to PA Reshoring website
Scout suppliers (performed by NIST MEP, EDA and WIB partners)
Facilitate buyer / supplier connection for successful reshoring!
Status: Started in January 2014
Make It In America: PA Made Again
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Make it in Mississippi ….
MSU, MEP, MMA, etc. Annual Reshoring Summits
Share “Best Practices and Lessons Learned.”
Developing the Supply Chain
Reshoring Opportunities Workshops (18 events)
“Tiger Team” Sourcing projects (84 projects)
Technical Assistance projects focused on creating capacity (20
projects)
Developing the Workforce
Professional Development: Lean, Six Sigma Green Belt,
Management & Supervisory Training … (90 certifications)
Advanced Manufacturing Internships: Community College-
Industry Internships … (270 Internships).
Tracking Results … Economic Impact and Career
Pathways.
Started: January 2014
The Partners in the MS Reshoring Program
South Delta Planning and Development District | Greenville, MS
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Getting More Boots on the Ground
Invite local suppliers to join the team:
equipment sales, industrial supplies, contract
manufacturers, metal supply houses, etc.
Reason: Highly motivated since their orders
will boom from reshoring
Get from them:
Companies that offshored
Contacts
Companies that are having issues with offshoring
Introductions
Central NY Office of ED, Onondaga County
Develop/refine (TDO’s MEP’s) manufacturers and suppliers
database with appropriate NAICS and/or production data
Analyze import data (Datamyne) – statewide data review
PILOT Program – 5 county CNY Region
Get funding:
Expand CNY supplier and manufacturing databases
Develop a marketing/brand to promote the reshore effort
Roadshows and seminars to describe reshoring, total cost estimator,
availability of matchmaking database
Identify and assess skill gaps or worker shortages
Boots on the Ground
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A non-profit with 38 sponsors, including
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Silver
Platinum
Gold
Silver
A non-profit with 38 sponsors
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Iron
Iron
Bronze
Steel
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Help reverse the offshoring flood now!
Contact:
Harry Moser
Founder and President
847-726-2975
www.reshorenow.org
Sandy Montalbano D’Amico
Consultant to
Reshoring Initiative
973-641-0005
www.ReshoreNow.org
Recruiting trainees for the skilled manufacturing workforce:
http://tinyurl.com/33vpz9k55
