Reshoring Back to America
8 MINUTE READ
The past year has been a harsh reality for U.S. manufacturing and goods production amid a growing list of demands and shortened supply. Yet, the supply crisis also showed the important role of strong U.S. manufacturing capabilities for the good times and to keep the economy functioning in moments of crisis. Harry Moser, founder of the Reshoring Initiative (ReshoreNow.org): bringing jobs back to America, led a discussion on reshoring U.S. manufacturing for the #USAMfgHour chat on Twitter.
Local and Offshore Differences
Moser is no stranger to reshoring. The Reshoring Initiative began in 2010 to help propel momentum of returning manufacturing "home." "We've helped accelerate reshoring (the shifting of manufacturing jobs from offshore to the U.S.) from 10,000 jobs/year in 2010 to 160,000 in 2020," said Moser. Yet, many American companies considering sending their manufacturing offshore often don't consider all of the costs, e.g., inventory carrying costs, travel costs to check on suppliers, intellectual property risks and opportunity costs from product pipelines being too long, he said.
How does your company and how do your customers decide what to source and produce locally vs. offshore?
"Since we are a chemical distributor, the mines are located all over the world wherever the raw material is available in the earth," said Gina Tabasso of Dar-Tech Inc., a specialty chemical distributor in Ohio. "Some of those mines are in the U.S. We distribute only to this region of the U.S. and do not sell overseas."
"We would only choose to source offshore if the customer we are servicing were offshore," said Sue Nordman of Obsidian Manufacturing, owner of Art Precision Grinders, MagnaLift, Magna-Lock, and Power-Grip in Illinois. "Example: if an Arter grinder customer in Australia needed something for their grinder, we would consider offshore sourcing in Australia if we couldn't accommodate them here."
"Of all our products, one has the option to be made in both our USA and China facilities, which is our membrane switches," said Shannon Simpson of DuraTech, a full-service manufacturer of custom graphics in Wisconsin. "Otherwise, everything else is made in the USA. Our China plant makes products mostly distributed directly in China. We provide the option to our customers to quote membrane switches for both China and USA."
"We're 100% us-based," said Dave Meyer of BizzyWeb, a WordPress web design and social media consulting firm in Minnesota. I've tried offshoring at times over the past 22 years, but especially for the kind of marketing we do (heavily relationship-based, continually improving and adjusting as we learn together), I really need team members who are local."
"We do not outsource overseas, but we do work with many companies that are trying to reshore," said Dan Bigger of Chenango Valley Technologies, a full-service injection molding company in New York. "Price is a big determining factor for them, but we try to use Harry's (Moser) Total Cost of Ownership Estimator in our presentation."
"I would say price and availability are factors," said Ben Nordman of Obsidian Manufacturing. "Price is pretty obvious but if there's a back order or limited availability of a product, then looking elsewhere might be a good idea."
"The difficulties in the Suez Canal and potential hold up if the same thing happened in Panama have made many rethink global supply chains," said Nigel T. Packer of PelaTis, a customer experience optimization consultant in the United Kingdom. "The green agenda has made many think about the carbon miles travelled by product made overseas."
"As a proud Made-in-America company, all our products are produced here in the USA! We are proud to support the American economy by keeping jobs here," said Noah Katzenstein of Artus Corp., a shim and gasket manufacturer in New Jersey.
"From what we understand it is all based on cost + availability of raw materials," said John Buglino of Optessa, a production planning software company in California.
"I'd say much of our decision is based on cost and quality," said Rebecca Hart of Drive Source International/Dynamatic, manufacturer of eddy current drives, clutches, brakes, and controls in Wisconsin.
"We don't manufacture but work with thousands of companies that do! Some exclusively manufacture in NJ, others in other states, others outsource offshore. It comes down to price/lack of understanding of the total cost of production (tariffs, transportation, etc.)," said Mike Womack of NJMEP.org, a manufacturing extension partnership in New Jersey.
"Adding all the hidden costs of offshoring and the dangers of interruption in supply chains has made many reconsider," said Packer. "Price is not the issue with many as security of supply, quality and customer experience is more important."
"Our business is a little different - the offshoring we see is usually international developers competing for price with US programmers," said Erin Courtenay of EarthlingInteractive, a web and mobile app developer in Wisconsin. "Customers going that direction are usually doing so just on price. But sometimes that ends up being more expensive!"
According to Moser, about 60% of companies decide based on wage rates, Free on Board prices or landed cost. "By doing so they are missing 15 to 25% of the relevant costs and risks," he said.
What is a better way to decide on offshore vs. local sourcing?
"There's definitely advantages in cost and scale to exploring the global marketplace. But if your main need is quality, adaptability or high-touch interaction, onshore is hard to beat," said Meyer.
"As with our software, we look at the entire situation to aid in our decision making and recommendations to clients. Be clear on the goals/objectives both near & far when making a decision," said Optessa.
"Total cost of business, like customer service, understanding the market, lead times, trust factor. Those soft skills," said Dar-Tech.
"I think we take this on a case-by-case basis. When the process turns to the possibility of offshoring, we weigh each decision carefully to make the best decision for the customer and situation at hand," said Sue Nordman.
"I guess look at what would work best for your business. Not just money-wise which is what I feel is the biggest factor, but all aspects," said Obsidian.
"The first place to start is understanding that it is not a simple decision," said NJMEP. "There are countless variables beyond the cost to produce a single component or product. Manufacturers need to take every single variable into consideration when making this decision."
"Look at all of the variables," said CVT. "I work with Mfg's and hear horror stories all of the time. I share these to let them know that basic price is not the only thing to consider in the decision. You have to catch these projects early in the process."
"Raw materials + added value + profit = success," said Packer. "What you do to add value is your prime goal. How you present the finished product can increase profit. Cheap has drawbacks. Position yourself so your customers understand the value of your proposition."
"Be willing to reach out to your networks, especially like the one here at #USAMfgHour to ask others when you are considering to buy US or not," said EarthlingInteractive. "Don't be ashamed of the problem, everyone is doing their best. Your networks will give you great advice."
According to Moser, start with a Total Cost of Ownership (TCO) checklist. His TCO quantifies 29 costs and risks that include duty, freight, cost of inventory, IP risk, stock out risk, value of a Made-in-USA label, etc. It also compares time, such as faster local delivery vs. offshore.
Has your company reshored anything? Its own products or for customers? Reshoring does not have to be the exact same product that was offshored. If you take business away from imports, you have reshored.
"From what I understand, we found a better supplier for some of our parts in another country and haven't reshored anything yet," said DSI/Dynamatic. "Cost was too high, or we couldn't find the materials in the U.S."
"Okay, this is on a much smaller scale, but at the office in Lumberton, we have giant Lego desks that each new hire can build as they like. All of those building materials (and we have a room full of giant Legos) we order only from a USA manufacturer," said Julianne Schaub with Striven, an all-in-one business software solution in New Jersey.
"Development has been completely reshored (and has been for the past 10 years)," said Meyer. "We can't afford to do it any other way. BTW, quick nod to my Canadian pals here too - lots of friends and clients "up north."
"I've brought some vendor relationships either in-house or from outside countries. For our customers, yes, can say without a doubt they have done some sort of reshoring over the years," said Optessa.
"Well, I think all of us here that show our faces would love to reshore anything and everything," said Sue Nordman. "We are all here to support MADE in the USA. We have customers that have bought from us versus an overseas competitor because we are located here. So, yes!"
"I would lean towards no. We've always been proudly using USA products and will continue to," said Obsidian Manufacturing. Nordman affirmed.
"We have," said CVT. "We picked up a customer that was having quality issues and had to shut down their plant. We picked up another recently due to local. We are talking to many others."
"We work to source all our promotional products for events like MFG Day locally," said NJMEP. "Our latest reshoring effort was souring local chocolate from Astor Chocolate."
"We have the tools and resources to help you re-evaluate offshoring," said Moser. "TCO shows that about 20% of imports would be more profitably sourced here, adding millions of manufacturing jobs."
Do you know of opportunities to reshore?
"Things have slowed a bit due to the plastics supply chain issues that we all are experiencing," said CVT. "The last opportunity we had was about a month ago and that is still in process. Nothing super new."
"We give customers the option. If price is a critical consideration, we can engineer a part here and then offer to manufacture it in China," said DuraTech. "But if they're looking for quicker turnarounds and a more stable supply chain, we recommend the U.S."
"Has anyone considered a dating website? One that matches US suppliers with US Manufacturers," asked Packer. "It is surprising that there are suppliers that you are not aware of in the same state or just a few miles away."
Local MEPs are great options for connecting with local manufacturing sources. Other national databases include organizations such as SME.org, National Association of Manufacturers (NAM), Fabricators and Manufacturers Association (FMA), the Association for Manufacturing Technology (AMT), Manufacturing News (MNI), among others.
When thinking about reshoring, Moser said, it's important to think about imported products that cause pain: quality, travel, late-night calls, too much inventory, stock-outs, etc. "Break down silos and get all departments to identify opportunities within your company. When selling, compare your product vs. imports," he said.
What should the government do to accelerate reshoring?
"Get involved and stop playing politics," said CVT. "We need to protect ourselves against future issues/pandemics/etc. If we have learned nothing from this shame on them. What happens next time when we cannot get what we need? It needs to stop and be fixed now."
"Honestly, I don't know the answer to this because it I think it would require so much red tape, paperwork and political arguments, the reason for the assistance would get lost in it all. We just need more integrity in the business owners in our country," said Nordman.
"Give them a Lego desk as a thank you - kidding (sort of). Incentivize - give to get - we all know how the world works. Make. It. Happen," said Optessa.
"Looking to push for the close of the skilled trades gap would be a good start," said Obsidian. "Many companies have a hard time finding younger workers as Boomers are approaching retirement. Supporting that development would be a great start by the government."
"Maybe tax incentives for local factories, and incentives for companies that bring work back to the U.S., and grants for apprenticeship programs," said DSI/Dynamatic.
"Link innovation with reshoring," said EarthlingInteractive. "The stereotypes around reshoring are nostalgic - but that's not true, it is our future. Encourage young people to go into manufacturing not only because it is the ?right thing to do' but because it is linked with a powerful future."
Improving a skilled workforce is one way, said Moser. "Massively shift resources from liberal arts degrees to engineering degrees and apprenticeship programs. Reduce the USD by 20 to 30%. Add VAT & reduce other taxes, like other countries. Do not raise corporate income tax rate."
Reshoring is the easiest way to strengthen the economy, reduce income inequality, help with climate change, and balance the federal budget. What are you going to do to accelerate reshoring?
"I am going to keep beating the streets looking for companies that are looking to reshore and market this better. I also need to spend more time reading and talking to Harry," said CVT.
"As the marketing manager, I will listen, learn, and speak to other leadership about opportunities that might exist," said DSI/Dynamatic.
"Supporting USA companies and continuing to buy American as much as we can," said Obsidian.
Anyone who champions U.S. manufacturing can join in on a new conversation each week on Twitter using the hashtag #USAMfgHour. The chat starts at 11 a.m. Pacific Standard Time/2 p.m. Eastern. Share positive blog posts, helpful articles, news, important information, accomplishments, events, and more with other manufacturers and supporters from throughout the country.
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