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A presentation made in Hong Kong in March, 2012 to a private equity panel before reshoring was fashionable.
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The Reshoring Case
Sarma Vangala, PEng, PhD
Reshoring is the movement of manufacturing from China
back to the United States/Mexico/Canada.
Reshoring
Sarma’s
Bio
Past
Future
Examples
Reshoring
Reshoring is the movement of manufacturing from China
back to the United States/Mexico/Canada.
Reshoring
Sarma’s
Bio
Past
Future
Examples
Reshoring
Credentials
Reshoring
Past
Future
Examples
Sarma’s
Bio •! Professional engineer, university faculty and consultant to Fortune 1000 enterprises
•! Over 20 years of manufacturing technolgy transfer and supply chain experience gained in China
•! Established facilities for large US corporations •! Counsels enterprises on strategic sourcing, QA standards and optimisation of supply chains
•! Specialist in Oracle and SAP enterprise resource planning (ERP) implementations
China of the 1990’s
Reshoring
Sarma’s
Bio
Past
Future
Examples
20 yrs ago (1992) •! Large wage gap vis a vis US
•! Co-operative bureaucracy, attractive tax incentives •! Favourable exchange rate (USD1 = RMB10)
•! Keen, motivated labour force
China in 2016
Reshoring
Sarma’s
Bio
Past
Future
Examples
China 5 yrs from now (2018) •! Labour rate convergence
•! Supply chain and transportation costs marginally cheaper •! Increasingly opaque bureaucracy
•! RMB float against USD (USD1 estimated to be RMB5)
•! Unsustainable employee turnover
•! Workforce increasingly restive (a la 2010)
•! Stringent hukou (household registration system) enforcement •! Militant labour unions
•! Likelihood of increasing import tariffs by US
US in a few years from now
Reshoring
Sarma’s
Bio
Past
Future
Examples
US 5 years from now •! Incentives from individual states to attract investments
•! Federal incentives for some sectors, e.g., ‘green’ products •! Tax deferrals
•! Training and ‘’Earn as you learn’ programmes
Early adopters
Reshoring
Sarma’s
Bio
Past
Future
Examples
Anecdotal •! Nissan: Li-ion battery production reshored to Tennessee
•! Electrolux: reshored to Tennessee •! Yamaha Motor Corp: Transferred ATV production to Newnan, Georgia
•! Sleek, maker of professional grade earphones, moving its production back to US
Summary
Bio
Summary
Questions and answers
Bio
Q & A
Bio
Thank you.
