Imports from China by Walmart, the nation’s largest retailer and biggest importer, eliminated or displaced over 400,000 jobs in the United States between 2001 and 2013, according to an estimate by the Economic Policy Institute, a progressive research group that has long targeted Walmart’s policies.
Read moreSPRING HILL, Tenn.—The hulking General Motors factory in this town south of Nashville undermines the complaints by politicians left and right that America doesn’t make things anymore. Read more
Wondering why Under Armour couldn’t make some products in U.S.? Read more
“American manufacturing is back!” breathlessly exclaim the ebullient cheerleaders in locales such as Forbes and the Boston Consulting Group. But while U.S. manufacturing may have bounced back slightly from Great Recession-lows, the reality is that America’s manufacturing recovery remains tenuous. On this National Manufacturing Day, policymakers can and should be doing much more to stimulate the growth and competitiveness of America’s manufacturing economy. Read more
After years of meeting demands for ever cheaper prices, many Wal-Mart Stores Inc. suppliers are saying no to new margin-squeezing storage fees and a payment schedule that could delay for months how quickly some are paid. Read more
Call centers are coming back to America, and flyover country is proving to be the biggest beneficiary in new jobs and overall boosts to local economies. Read more
When the leader of the free world comes calling, most people jump. When the Obama administration first contacted Michael Araten, in November 2012, he hesitated. Read more
The Reshoring Initiative recently announced a program in partnership with Walmart to help companies manufacture more consumer products in the United States. Read more
It’s been two and a half years since Walmart announced its so-called “U.S. manufacturing initiative”, which means it’s time for another PR-heavy, Walmart manufacturing “summit,” this one in Bentonville, Arkansas on July 7th and 8th. Undoubtedly, Walmart will use the summit to deliver feel-good talking points to the media, so this seems like a good time to review some facts about Walmart’s impact on the U.S. manufacturing sector, past, present and future. Read more
When President Obama visited Oregon in 2011, Nike Chief Executive Mark Parker foreshadowed what was on the sneaker giant’s horizon. Read more
As it prepared to welcome President Obama to its headquarters campus Friday morning, Nike announced it would pour more money into advanced footwear manufacturing in the United States if and when the Trans-Pacific Partnership free trade agreement is approved. Read more
The White House posted the full text of President Barack Obama’s speech at Nike headquarters near Beaverton on Friday morning. The White House has also posted a video of the speech. Read more
Walmart, the nation’s largest importer of foreign goods by volume, is currently hosting an open call for American-made product pitches at its Arkansas headquarters. This “American manufacturing summit” is part of the company’s commitment – made very publicly, with lots of fanfare, in 2013 – to buy $250 billion worth of American-made products by 2023. Read more
100 new hires. That’s how many Emilia PC expects to add by the end of this year, all resulting from one step the beauty product manufacturer took roughly 12 months ago: attending Walmart’s Open Call for products that support American jobs.
Manufacturing in the United States of America is becoming more affordable. The reason? Fracking. Read more
Last fall, Wal-Mart promised to purchase $250 billion in Made in USA products by 2023, a move it said would create 1 million U.S. jobs over time. Two-thirds of the goods in its domestic stores are already made, sourced, assembled, or grown in the United States, the company added. Read more
KENTWOOD, Mich. (WZZM) – A toothbrush company that outsourced some of its manufacturing to China years ago is bringing work back to West Michigan. Read more
The SewBots have arrived and they are bringing manufacturing back to the United States. SoftWear Automation, in Atlanta Georgia, has developed robotic technology for the textile industry to automate sewing, significantly reducing manufacturing labor costs. The machines are surprisingly inexpensive and allow for greater precision, higher speed and much longer hours than the traditional seamstress can manage by hand.
We first became aware of SoftWear thanks to Valerie Uhlir. Valerie serves as our Chief Marketing Officers, in addition to leading a boutique marketing agency based in Atlanta where she has worked with a large number of high-growth global brands over the past few years. She served as SoftWear’s head of marketing and PR from 2014 through the end of 2015, helping the company perfect their messaging leading to the wave of coverage including features by The Wall Street Journal, Fox News, The Economist, and many others. Given the company is based in the USA and could have such a large impact on American manufacturing, we’re happy to cover them.
“Not only will this technology help manufacturers bring operations back to the United States with the reduction of labor costs, it will create higher paying technical jobs for American workers.”, said Valerie. Traditionally, manufacturing jobs are some of the least desirable roles that many individuals do not desire due to the repetition, poor work environments (hot warehouse, anyone?) and low wages. High turnover and an aging workforce have made it difficult for manufacturers to keep jobs here. Additionally, other nations do not have minimum wage restrictions and are willing to use underage labor due to less stringent regulations. All of these factors have created a void of manufacturing in the United States, SoftWear Automation would like to change that.
This month alone, the company is delivering several LOWRY systems to manufactures in the southeast United States. The future of sewn product manufacturing has officially arrived.
The U.S. has lost thousands of jobs in the past 10 years due to offshoring. In 1960, 95% of clothing sold in the USA was made here. Today, 98% of clothing purchased in the U.S. was made abroad. By implementing this technology, American manufacturing plants have several advantages:
Tailored clothing and details customized to an individual have long been expensive due to the additional time and costs to create customization. SoftWear technology eliminates that additional cost. Add this to online ordering and it is a recipe for low cost customization. For example, the software could make your jeans slightly smaller in the waist than the last pair of jeans in the same amount of time it would have made them anyway.
“Robotics are already taking over multiple industries, creating safer work environments and helping with some tough, dirty jobs. Textiles have been challenging to automate due to the pliable nature of fabric. SoftWear has created hardware that detects bunching and can fix creases before fabric is sewn, changing the game in fabric automation.“, said Valerie.
Walmart believes in bringing manufacturing back to the United States, but they also know that keeping prices low will be a challenge for their brands. Walmart invested a two million dollar grant to SoftWear Automation, through ATDC, to help bridge the gap and provide this technology to brands that want to bring their manufacturing home.
Sound exciting? We left out just one thing: this technology is for ALL SEWN products. Shoes, curtains, jackets, pants, carpet, towels, ties, hats, backpacks, blankets, bedding, car upholstery, handbags, hair ties, baby toys…
Watch the SoftWear LOWRY system work its magic here:
Connect with the friendly team @SoftWearInc on twitter to stay updated on how they continually disrupt the manufacturing industry.
For all expecting and new parents, you probably have learned how quickly buying your child’s products adds up! So why would you be willing to pay more for an American-made product when you could purchase a similar product or even the “same” product, produced overseas, for half the cost? Read more
Later this year along the banks of the James River outside Richmond, Virginia, a paper products maker based in northeastern China will begin construction on a new U.S. manufacturing plant. The factory will churn the region’s straw and corn stalks into household products including napkins, tissue and organic fertilizer—all marked “Made in the USA.” Made by China, in America.
Daniel Acker | Bloomberg | Getty Images
Jack Brown Produce workers sort apples on a packing line in Sparta, Mich. The state, a big exporter of agricultural goods, is among U.S. regions raising its export profile.
It’s well-known American jobs have been lost to overseas competition. While work on U.S. manufacturing floors has declined, overseas markets have developed a growing appetite for American-made goods—from chemicals and wood products, to medical devices.
Documentary: Made by China in America? directed by Miao Wang about Chinese firms bringing manufacturing to the U.S. It is part of Morgan Spurlock’s “We the Economy” series (www.wetheeconomy.com).
When I was a baby, my mom waited in line at 3am with her ration ticket to pick up the monthly allowance of meat. As fortunate dwellers of China’s capital city, we received a little more than two pounds. In remote provinces, it was half or a quarter of that amount.
The United States remains the largest medical device market in the world with a market size of around $110 billion, and it is expected to reach $133 billion by 2016. The U.S. market value represented about 38 percent of the global medical device market in 2012. U.S. exports of medical devices in key product categories identified by the Department of Commerce (DOC) exceeded $44 billion in 2012, a more than seven percent increase from the previous year. Read more
A Montgomery County manufacturer of plastic injection molds and K’NEX construction toys is bringing production of one of its classic toy brands back to the United States from China.
Lincoln Logs, a classic toy brand developed nearly 100 years ago, is part of the K’NEX family of brands. Beginning next year, Pride Manufacturing in Burnham, Maine, will manufacture the Lincoln Logs product line. The Maine company is a manufacturer of engineered wood products.
K’NEX Brands, which licenses the Lincoln Logs brand from Hasbro, has designed Lincoln Logs since 1999, but decided to build upon its reshoring initiative that it introduced in 2009, said Michael Araten, president and CEO of K’NEX and its subsidiary, The Rodon Group in Hatfield. As part of this initiative, K’NEX delivered the production of Tinkertoy products back to the U.S. in 2012, where it is mass produced by The Rodon Group.
Since The Rodon Group does not make wood products, it needed to find a manufacturer in the U.S.
“We kept at it and finally found a manufacturer in Maine who will manufacturer the Lincoln Logs,” Araten said. “It’s really about substituting our U.S. supply chain for the China supply chain.”
Now, the entire supply chain for the production of Lincoln Logs will be U.S.-based, Araten said.
K’NEX will continue to design Lincoln Logs in Hatfield.
“We’ve started production of the logs now, so we can have product on the shelf in July,” Araten said.
Next year, K’NEX will launch 10 new sets that are made in the U.S.: Horseshoe Hill Station, Country Meadow Cottage, Oak Creek Lodge, 100th Anniversary Tin, Collector’s Edition Village, Wrangler’s Ranch, Wolf’s Lodge, Mountaintop Hideout, Grand Pine Lodge and Colts Creek Command Post.
Next on the company’s agenda is to potentially bring production of toy motors back to the U.S. “That’s our next big initiative,” Araten said.
He said there are many reasons manufacturing is returning to the U.S. from China.
Chinese labor rates are rising dramatically, the U.S. is experiencing an energy boom, manual labor is being replaced by automated systems in U.S. manufacturing facilities and the flexibility and skills of the American workforce are strong, according to Araten.
Lincoln Logs, the popular building toy created nearly a century ago by a son of architect Frank Lloyd Wright, is coming home to the U.S. Read more
Brad DeNoyer, manufacturing and distribution leader for accounting and advisory firm Baker Tilly Virchow Krause LLP, said a lot of middle market manufacturers supplying larger companies are starting to come back to the U.S.
“There’s just not necessarily a drive to go there anymore and there is talk about coming back,” DeNoyer said. “Five to 10 years ago, the work was leaving and going overseas, even the smallest of companies was going to China. Now the faucet has stopped and there is talk about whether to come back.”
But some manufacturers are just starting to have conversations with Milwaukee-based suppliers about re-shoring.
Frank Krejci, president and chief executive officer of Strattec Security Corp., also heads up a contract die-casting division called Strattec Component Solutions. Companies that used to get castings from China are now looking to bring back the work to the U.S., but this push to come back home isn’t going to happen overnight, Krejci said.
“This is not an impulse buy at a grocery store,” Krejci said. “The choice is…do you move inventory or tools? What manufacturers are more likely to do is create a separate set of tools, then ramp up in America and shut down in China. But they are still getting the parts from China.
“But next year they are coming out with a new and improved version of their product. And instead of having the new tools coming from China, now they are making it in America.”
Krejci also said more companies are auditing his firm to determine if they might need his company’s services six months or two years down the line for their next product generation.
What does that mean on the jobs front?
Jeff Sachse, regional economist for the Wisconsin Department of Workforce Development, said that he’s seeing manufacturing companies in the four-county metro region have been hiring at a stable rate. The re-shoring effort has been segmented, but companies have also been reinvesting in some production facilities and cutting costs.
“There is a lot of interest in re-shoring from China…Some of that was driven by labor costs because they dropped during the recession and a lot of companies got rid of the high-wage earners because a lot of that was driven by seniority, but there was definite cost cutting going on,” Sachse said. “So we’re seeing relatively lower wage rates in assembly here than there used to be and we are seeing more competitive costs compared to other countries like China.”
Picture Eugene Hoshiko, File/Associated Press
U.S. manufacturing becoming low cost over the past decade compared with factories in China, Brazil and most of the world’s other major economies.
So says a new private study, which found that rising wages and higher energy costs have diminished China’s long-standing edge over the United States. So has a boom in U.S. shale gas production. It’s reduced U.S. natural gas prices and slowed the cost of electricity.
The Boston Consulting Group is issuing a report on its study of manufacturing costs in the 25 biggest exporting countries. Only seven of those countries had lower manufacturing costs than the United States did this year. And since 2004, U.S. manufacturers have improved their competitiveness compared with every major exporter except India, Mexico and the Netherlands.In 2004, for example, manufacturing in China cost 14 percent less than manufacturing in the United States. By this year, the China advantage had narrowed to 5 percent. If the trends continue, Boston Consulting found, U.S. manufacturing will be less expensive than China’s by 2018.
Over the past decade, labor costs, adjusted to reflect productivity gains, shot up 187 percent at factories in China, compared with 27 percent in the United States. The value of China’s currency has risen more than 30 percent against the U.S. dollar over the past decade.
The higher Chinese currency made goods produced in China and sold abroad comparatively more expensive. And foreign goods became comparatively more affordable in China.
Chinese electricity costs rose 66 percent, more than double the United States’ 30 percent increase. The start of large-scale U.S. shale gas production in 2005 has helped contain electricity bills in the United States and neighboring Canada and Mexico.
China, too, has reserves for shale gas. But it will need years to develop them.
“This is not something you can turn on overnight,” said Justin Rose, a partner at Boston Consulting and co-author of the study.
Brazil has lost even more ground than China. In 2004, manufacturing was 3 percent cheaper in Brazil than in the United States. By 2014, Brazil was 23 percent more expensive. Brazilian factories didn’t improve efficiency enough to offset rising energy and labor costs.
The countries where manufacturing was cheaper than in the United States are Indonesia, India, Mexico, Thailand, China, Taiwan and Russia.
Australia was the most expensive country for manufacturing. Its costs were 30 percent higher than those in the United States.
The survey doesn’t include transportation costs, which vary depending on where goods are shipped. Several countries also face obstacles not captured by Boston Consulting’s manufacturing cost index — from corruption to inefficient government bureaucracies.
SOURCE: Washington Post
Last week, Walmart expanded on the $50 billion Buy American pledge it made last January with a full-fledged Made-in-America summit.
Martin Rawls-Meehan, CEO of Reverie, poses at the company showroom next to a bed that reveals the manufacturing process, in Silver Creek, N.Y. The company is working to expand manufacturing in the United States. (AP Photo/David Duprey)
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“Shipping costs are tremendous,” he says. “I could put that money into the manufacturing side in the U.S.,” he says.
Reverie is one of a growing number of small businesses that are chipping away at the decades-old trend of manufacturing overseas. They’re doing what’s known as reshoring, moving production back to U.S. factories as labor costs grow in countries like China and India and shipping also becomes more expensive. Over the last 20 years, the price of a barrel of oil has risen to about $95 from $20.
There are other issues encouraging the shift. Owners are tired of having to wait weeks for shipments on slow-moving container ships, and they want to get products to customers faster. Some newer businesses aren’t even considering overseas manufacturing. It’s not just small businesses. Some of the largest companies in the U.S. are also joining the trend. Apple Inc. and Caterpillar Inc. are among the manufacturers planning to bring production back to the U.S.
Reverie has had the bases of its beds made in Taiwan since the company was founded. Rawls-Meehan and a business partner in Taiwan agreed that the cost savings and proximity to many customers were good reasons to manufacture there.
“The mentality was that products were going to be manufactured more cheaply in Asia than in the U.S.,” Rawls-Meehan says.
But shipping costs have risen to as much as 20 percent of the wholesale cost of a bed made in Asia. In 2004, it was just 10 percent on some of Reverie’s products. So the company is now making a new line of upscale beds in Silver Creek, N.Y., near Buffalo. Shipping on those beds accounts for no more than 5 percent of the wholesale price. That offsets the higher cost of labor in this country.
Rawls-Meehan is considering moving more of his manufacturing to the U.S., but because the company also sells beds to Asia and Australia, he says it likely will always have overseas production.
A good deal of U.S. manufacturing shifted to foreign shores in the 1990s and early 2000s. Workers in China, India and other countries earned far less than workers in U.S. factories. That lowered costs substantially for U.S. companies. Between 1997 and 2008, the U.S. lost nearly 4.5 million manufacturing jobs, according to the Census Bureau. And the amount of overseas manufacturing by U.S. companies grew 141 percent between 1997 and 2010, according to the government’s Bureau of Economic Analysis.
But the growing middle class in countries such as China and India have been demanding and getting higher wages. In Asia, labor costs are rising 20 percent a year, compared to 3 percent in the U.S., says David Simchi-Levi, a professor at the Massachusetts Institute of Technology whose specialties include supply chain management.
A weaker dollar has also made foreign-made goods more expensive. A study by the consulting firm AlixPartners predicts that the costs of manufacturing in the U.S. and China on average would be equal in 2015. For products including disposable packaging and some metal parts, costs are already equal or less when they’re made in the U.S., the study found.
Reshoring began picking up momentum in 2010 after the recession and as the dollar began to lose value, says Lisa Ellram, a professor at Miami University of Ohio who specializes in supply chain management. Businesses that were unsure how strong their sales would be in a weak economy didn’t want to make as many commitments to far-flung factories.
“They really just didn’t have as much certainty about their volume and their needs, so it was maybe a little bit easier to deal with somebody closer,” she says.
Innovations in manufacturing in the U.S. are encouraging the shift. Many U.S. companies use robots and highly specialized processes that allow them to make custom components for the automotive and aerospace industries.
“Instead of hiring people, we’re using robots,” Ellram says. Chinese companies are also using robots, but U.S. manufacturers are ahead of them, she says.
The government doesn’t have figures tracking how much manufacturing companies are bringing back the U.S., according to Jeannine Aversa, a spokeswoman with the Bureau of Economic Analysis. About 50,000 manufacturing jobs came back to the U.S. between 2010 and 2012, many of them in factories that turn out electrical equipment and components and metal parts, according to the Reshoring Initiative, a nonprofit group that advocates moving manufacturing back to the U.S.
The trend could gain momentum because demand for U.S. goods is growing. Ninety-five percent of manufacturers surveyed last year said they are increasing their purchases from domestic companies, or keeping them at the same level as 2011, according to ThomasNet, a company that operates an online marketplace where businesses can connect with manufacturers, distributors and service companies.
The amount of time it takes to get goods made overseas is another reason manufacturing is coming back to the U.S. It’s taking longer to ship finished products because cargo ships have lowered their speed by 20 percent to conserve fuel, Ellram says. That reduction adds four or five days to a container ship trip from China, she says. It takes two weeks or more for a ship to travel from China to the U.S., depending on which ports it departs from and where it makes its deliveries.
Shipping times matter for companies that need to get their goods to market quickly. Now that Cotton Babies, a manufacturer and retailer of baby merchandise, has moved manufacturing of its cotton diapers to Denver from Egypt, it has cut in half the time it takes to get them to market, says CEO Jennifer Labit.
Product development can be slowed by the distance between designers in the U.S. and manufacturers in other countries, Labit says. Communication takes longer and expensive overseas trips are often necessary to make sure that the products are being made to specifications.
Quality, and the ability to fix problems faster, gives small domestic manufacturers an advantage over foreign companies, Ellram says.
“Those are the things that (domestic) small businesses can use as a selling point,” she says.
A myriad of problems helped Reading Truck Body decide to bring manufacturing of truck parts back to the U.S. from China.
Shipments were disorganized. The compan
y didn’t know until it opened containers which parts had been shipped. That meant it couldn’t be sure ahead of time which of its truck bodies could be finished and sold, national sales director Craig Bonham says. Reading, based in Reading, Pa., also was concerned about the amount of time it took to get shipments.
“It spans about three months from purchase order to the time you get products to North American shores,” Bonham says. “That timeline did not allow us to become reactionary to market demands.”
Reading lost some sales because it didn’t have the parts to finish a truck a customer wanted. But the impact of unpredictable shipments went beyond lost revenue — it also led to chaos on the production line and frustration among the company’s managers.
“You feel a larger sense of dependency when you’re relying on someone that far away,” Bonham says. The company received its last shipment from Asia in December.
It also dealt with high expenses to send two employees to China each quarter, at a cost of $100,000 a year.
But with production now entirely in the U.S., the company is more confident.
“We have more control of our destiny,” he says.
Learn how you too can begin reshoring and creating jobs here in the U.S.A. Check out how Harry Moser and his team at the Reshoring Initiative can help. Reshoring Initiative: http://www.reshorenow.org/
A lot has changed in four years. At last week’s Del Mar Design and Electronics Show (DMEDS) in San Diego, CA, a very successful fellow manufacturers’ sales rep, stopped me in the parking lot and said, “I used to think you were nuts, but you were right. Manufacturing is returning to America.” While this manufacturers’ representative sales agency is headquartered in southern California, it has affiliate companies in Mexico, Malaysia, China (Beijing, Shanghai, and Shenzhen) and Taiwan (Taipei and Hsinchu) so I did not take this admission lightly.
The theme of this year’s DMEDS was “The Re-Birth of American Manufacturing, and it featured a full-day Reshoring track. This track began with my presentation on “Reshoring: Bringing Manufacturing Back to America Using Total Cost Analysis and ended with “Reshoring: What is a Fit and How Can it Save Your Company Money?” This track also featured “Lean Manufacturing is the Path to Operational Excellence,” “3D Printing: What it is, Isn’t, Will Be and Won’t Be,” and “Save Your Factory with Robotic Automation.”
While there were offshore companies exhibiting at DMEDS, it was dominated by U. S. manufacturers, regional contract manufacturers, and local sales reps and distributors. The buzz at the show was that manufacturing is returning to America, and every contract manufacturer I spoke to at the show had experienced a “reshoring” event.
In the past year, there have been numerous articles debating whether “reshoring” is a myth or really happening. For example, the cover article of the April 22, 2013 issue of Time magazine was “Made in USA – Manufacturing is Back ? But Where are the Jobs? The first page of the article is full of pictures of products that have returned from offshore, representing an unbelievable cross section of consumer goods, ranging from toys such as the Frisbee. Slinky and Crayola crayons to electric mixers, barbecues, saws, hammers, and many more.
The reason the article poses the questions about how many jobs are being created by the return of manufacturing to America is that the manufacturing plants of the present and future have more machines and fewer workers than in the past. Robotics, automation, and lean manufacturing are helping companies do more with fewer people, and the rapidly improving technology of additive manufacturing is changing the way parts are being made.
The article featured a glimpse of manufacturing’s future in the stories of two companies:
ExOne needs only two workers and a design engineer per shift to support its 12 metal-printing machines. The GE plant produces Durathon sodium batteries that are large and powerful enough to power cell phone towers. Because of being highly automated, the plant only employs 370 high-tech workers in a 200,000 sq. ft. facility.
What was most encouraging to me was that the article reported that Ashley Furniture is building a new plant south of Winston-Salem, NC that will employ 500 people. This is an industry that even I doubted would ever come back to the U.S.
Key statistics pointed out in the article were that China’s average hourly wage was only $0.50 in 2000 but is projected to be $4.50 by 2015. This is probably a conservative estimate because China’s wages rose by 15-20% over the last five years but are expected to increase by another 60% in 2013 alone. Another factor noted is that the cost to ship a 40-ft. container from China to the West Coast rose from $1,184 in 2009 to $2,302 this year. These facts corroborate the Boston Consulting Group’s 2011 report that there will be a convergence in the total costs between China and the U. S. by 2015.
This quote from GE CEO Jeff Immelt concluded the article: “Will U.S. manufacturing go from 9% to 30% of all jobs? That’s unlikely. But could you see a steady increase in jobs over the next quarters and year? I think that will happen.” I agree and so does Harry Moser, founder of the Reshoring Initiative and developer of the Total Cost of Ownership TM spreadsheet.
Mr. Moser’s organization promotes and tracks cases of reshoring across the U.S. He estimates that between 2010 and 2012, about 50,000 jobs were created in the U.S. because of the trend—which equates to 10% of the 500,000 manufacturing jobs created in the past three years.
On the myth side of the debate, the 2012 Hackett Group’s report, “Reshoring Global Manufacturing: Myths and Realities” by Michel Janssen, Erik Dorr and David P. Sievers
states, “By next year, China’s cost advantage over manufacturers in industrialized nations and competing low-cost destinations will evaporate.” However, they conclude that “few of the low-skill Chinese manufacturing jobs will ever return to advanced economies; most will simply move to other low-cost countries.
Using hard data from their 2012 Supply Chain Optimization study, they analyzed the trend in “reshoring” of manufacturing capacity, and their findings debunk the myth that manufacturing capacity is returning in a big way to Western countries as a result of rising costs in China. The report states, “The reality is that the net amount of capacity coming back barely offsets the amount that continues to be sent offshore.”
The report also offers recommendations on how companies should plot their manufacturing sourcing strategies. Interestingly, their recommendations incorporate some of the factors that Mr. Moser and I include as part of a Total Cost of Ownership analysis, such as “integrate the views of manufacturing, procurement, finance and business-unit leadership,” “Establish a game plan to deal with risk: Geopolitical, supply base, environmental and commodity risks are a given,” “Establish a proactive approach to anticipate risks, creating mitigation plans with clear triggers for implementation,” and “Broaden the decision making approach beyond total landed cost.”
The Hackett Group’s definition of “Total landed cost” is not as broad and encompassing as the definition of Total Cost of Ownership I provide in the 2009 edition of my book and that Mr. Moser uses in the TCO spreadsheet he developed in 2010. Their definition is “Total landed cost is the set of end-to end supply chain costs to transform raw materials and components into a finished
good ready for sale. Key components include: raw material and component costs, manufacturing costs (fixed and variable), transportation and logistics, inventory carrying cost, and taxes and duties.
My definition of TCO includes the “hidden costs of doing business offshore,” such as Intellectual Property theft, danger of counterfeit parts, the risk factors of political instability, natural disasters, riots, strikes, technological depth and reserve capacity of suppliers, currency fluctuation. Mr. Moser’s TCO spreadsheet includes calculations for factors such as Intellectual Property risk, political instability risk, effect on innovation, product liability risk, annual wage inflation, and currency appreciation.
While the number of companies bringing products lines back to America is increasing, I have to admit that as manufacturers’ sales reps for all American companies; we are still losing business to China for individual parts our principals are quoting. Just recently, we lost several rubber parts that our rubber molder has made for a customer in our territory for 15 years. Our customer had been purchased by a multinational awhile back that has a subsidiary in China, so the new management decided to tool up these parts in China and discontinue ordering them from our molder. I am sure that the decision was made based on the lower piece price without doing a TCO analysis.
You can help your company get the most value for its dollars and help return manufacturing to America by doing the following:
I strongly believe that if more companies would learn to understand and utilize the TCO estimator spreadsheet of the “Reshoring Initiative,” they would realize that the best value for their company is to source their parts, assemblies, and products in America. Doing this would help return manufacturing to America to create a far higher percentage of jobs than the 10% that have been brought back to America thus far and help maintain more manufacturing in U. S.
