May 14, 2012
Manufacturing and Technology News
The Reshoring Initiative created by Harry Moser, former U.S. CEO of AgieCharmilles, is picking up steam.
The organization has increased the number of sponsors to 36. It is increasingly active throughout the country promoting its “Total Cost of Ownership” product manufacturing estimation tool. The software provides companies with comparison costs for importing versus domestic production.
“Reshoring is happening,” says Moser. Labor costs in China are going up, and Chinese workers are beginning to demand workable conditions and hours. Breakdowns in global supply chains such as the one caused by the Japan earthquake, political uncertainties, expensive transportation costs, the need to be more responsive to customer demands and declining prices for U.S. natural gas and electricity are contributing to companies re-thinking their offshoring decisions, says Moser.
Other factors favoring reshoring are becoming prevalent.
- The Chinese yuan is appreciating slowly against the U.S. dollar, making it more expensive to export from China.
- Companies continue to lose their intellectual property by moving offshore, creating unwanted competitors. In China, employees are not returning to their jobs from annual holidays.
- Companies continue to deal with problems associated with culture, language, time and travel.
- American customers are choosing products stamped “Made in America.”
- And quality issues can be addressed easier with a production process close to home.
The Reshoring Initiative has chronicled hundreds of examples of companies bringing production back to the United States, including General Electric water heaters, Master Lock locks and WHAM-O Frisbees. “If they can make Frisbees competitively in expensive states such as California and Michigan, a broad range of products are reshorable somewhere in the U.S.,” says Moser.
The organization’s Total Cost of Ownership software has found that the average price of a product made in the United States is 142 percent higher than in China. But when the total cost of ownership is calculated, the U.S. price disadvantage shrinks to 23 percent.
“For 40 percent of the cases, U.S. total cost of ownership is lower than Chinese total cost of ownership, averaging 37 percent lower,” says Moser. The conclusion: “Using total cost of ownership instead of price brings the percentage of the sample that a company would source [in the United States] up to 40 percent from 15 percent.”
But the Reshoring Initiative’s software tool is not enough to generate a huge reshoring trend, says Moser.
Policymakers must get engaged. “The lack of skilled workers must be addressed now if we are able to compete in the future,” says Moser.
The U.S. must also address unfair trade practices by foreign countries, including currency manipulation that has helped lead to “offshoring’s jobs devastation.”