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MAM Team

What Are the True Costs of Offshoring?

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Ahvi Spindell
There is a growing trend to reshore manufacturing back to the U.S. as managers re-calculate and compare the true total costs of production. Still, there is a range of hidden metrics that are not factored often enough when determining where to produce goods.
Michele Nash-Hoff, author of the book “Can American Manufacturing be Saved?” told IMT the theme of this year’s Del Mar Design and Electronics Show (DMEDS) in San Diego, Calif., was “The Re-Birth of American Manufacturing.” The show conference featured a full-day track on the topic of reshoring.

“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,” said Nash-Hoff.

Time magazine’s April 22 cover article also noted the reshoring trend. The article “Made in USA: Manufacturing is Back — But Where are the Jobs?” is replete with photos of consumer products that have returned to American-based manufacturing from offshore.

What is refueling the trend of reshoring? Brands are not returning on an impulse or because of public pressure, IndustryWeek reports. They are doing so “to more efficiently serve the world’s largest free market. Unlike when they left, this time they are measuring why they should return.”

Too many companies moved their production to countries like China based solely on the unit prices. “Buyers are rewarded with the money they save their company based on the piece price,” added Nash-Hoff. “They fail to see the bigger picture.”

As the cost of manufacturing overseas is being re-examined using total costs models, several factors have been at the forefront. Nash-Hoff listed a few of the major factors that first led to bringing work back to the U.S.:

  • Inventory: “Businesses are being forced to buy larger lots to get the best China price,” she explained.
  • Cash flow: “Lower-volume businesses are being forced to pay for parts before they’re shipped… Only the major companies are getting favorable terms.”
  • Travel: This can chip away at savings “if traveling to Asia becomes necessary or frequent,” which she said often happens when “the qualities of parts are sub-par and the manufacturing has to be reworked.”

Nash-Hoff added, “When one or two of those problems became egregious, then companies would make the determination to return manufacturing” to the U.S.

The Reshoring Initiative, a non-profit industry-led effort to bring manufacturing jobs back to the United States founded in 2010, has created total cost of ownership (TCO) software and spreadsheets that calculate many of the hidden and overlooked aspects when deciding where to manufacture. TCO refers to an estimate of the direct and indirect costs and benefits related to the purchase of any part, subassembly, assembly, or product.

The Reshoring Initiative’s founder, Harry Moser points out, “Not factored often enough are costs associated with shipping, inventory time, quality issues, and exchange-rate risks.”

According to Moser and Nash-Hoff, other hidden costs of sourcing production offshore can include:

  • Currency Fluctuations. Last year’s invoice of $100,000 could be $140,000 today.
  • Appropriate Management Skills. Many companies underestimate the people, process, and technology required to manage an outsourcing contract.
  • Design Changes. Language barriers make it difficult to get design changes understood and implemented.
  • Quality Problems. Substitution of lower grade or different materials than specified is a common problem.
  • Legal Liabilities. Offshore vendors often refuse to participate in product warrantees or guarantees.
  • Cost of Transition. It is easy to overlook the time and effort required to successfully offshore production. It takes from three months to a year to complete the transition to an offshore vendor.
  • Poor Communication. Time zone differences and language barriers can make communication complex and burdensome.
  • Intellectual Property. Foreign companies, particularly Chinese firms, are notorious for infringing on IP rights without legal recourse for American companies.

Keith Mobley of Life Cycle Engineering has earned an international reputation as one of the premier consultants in the field of plant performance optimization. In an interview with IMT, he said, “Labor makes up about half of typical manufacturing cost. If you can drop the labor costs by 40 percent to 80 percent by moving offshore then that really impacts operating profit.  What is unseen is the cost of unemployment, health care, Social Security, and all of the infrastructure costs that result from the loss of manufacturing plants.”

American consumers are also putting more pressure on retailers to have more American-made products. Nash-Huff referred to recent polls that she has seen over the past few years that indicate 78 to 80 percent of consumers would be willing to pay more and prefer to pay for U.S. made goods.

On that same note, Time magazine reported in April that Walmart promised to buy $50 billion more U.S.-made goods over the next decade for its Walmart and Sam’s Club stores.

MAM Team

The Anti-Manufacturing Forces in Washington

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Gilbert B. Kaplan
Former Deputy Assistant and Acting Assistant Secretary of the U.S. Department of Commerce

Hard as it may be to believe, there are forces in Washington that oppose the revival of the U.S. manufacturing sector. Who are they, and how do we counter their efforts? I think — roughly — they fall into five groups.
First, we have the people who are making big money by moving manufacturing off-shore. This includes some retailers that make no bones about buying everything from the lowest price source possible, even if that means closing down U.S. plants and buying from producers that ignore even rudimentary environmental and labor laws. It also includes major U.S. multinationals that find it in their interests to move U.S. jobs abroad because of lower wages and because many foreign countries will give them big subsidies to abandon their U.S. roots and obligations. These companies fight against any law or policy change that will keep manufacturing here, or that seeks to incentivize bringing it back.

Second, are the people who believe without reservation in free trade — no matter what. To them, any changes in trade law or policy to toughen our stance violates some basic philosophical belief and will never be countenanced. Certainly open trade has helped world growth and the development of many countries, such as Korea and Brazil. But it is almost impossible to talk to these people about our manufacturing decline. What they do not understand is that the U.S. is fighting, so to speak, a two-front war when it comes to trade. On the one hand, we are seeking reasonable market opening and regulatory changes to expand the benefits of free trade — such as the effort to create a U.S./EU Free Trade Agreement. But on the other hand, we are dealing with blatantly mercantilist export machines that are seeking to harm the U.S. economy, or at least certainly couldn’t care less if they do. We see this kind of conduct in China. We cannot treat both kinds of foreign trading partners (or should we say competitors) the same. It would be like saying we must — in our foreign policy — have totally consistent rules of the road with every other country no matter who they are — for example the same policy toward North Korea that we have toward Italy. No one would even propose something so absurd. But classic free trade proselytizers want us to treat every country with the same set of rules, no matter how different their systems or motivations.

Third, we have the people who believe that trade is less important than foreign policy, and so any time we might want to take a position in support of U.S. manufacturing — a position that may rub one of our trading partners the wrong way — they are usually against it for foreign policy reasons. One example is our continual reluctance to take very strong, fast action against currency undervaluation, despite the clear evidence of the harm it is causing us. This appalling lack of action is brought about by a number of factors, one of them being the concern that our diplomatic relationships are more important than dealing with trade problems.

Fourth, there are the people who have undercut our ability to apply the trade laws to unfair trade practices. We used to have a robust body of trade laws, but years of negative decisions at the World Trade Organization (“WTO”) — which now has the right to oversee the application of our trade cases — have cut back on their efficacy. Most recently the WTO, in a truly astounding decision, said that even when a company in China is owned by the Chinese government that does not mean the company is following the directives of the Chinese government in terms of subsidizing or assisting its customers. A rudimentary knowledge of the Chinese Communist system shows the fallacies in this thinking; a more thorough knowledge shows it is totally absurd. These WTO bureaucrats are in Geneva, but many in the U.S. government have failed to stand up strongly enough against these wrong-headed WTO decisions.

Finally, many conventional economists have long argued that there is no reason to have manufacturing in the U.S. It is just as good to have service jobs, they say. But that argument, at its root, makes no sense. Service jobs do not spin off other jobs to nearly the same extent that a major manufacturing plant does. They are also generally lower paid, and they don’t spawn critical innovation and research and development.

We need to counter these arguments, and look more broadly at the problem of manufacturing decline. To that end, I would like to see the creation of a Center for United States Manufacturing Revival at a major U.S. university. The revival of U.S. manufacturing — looked at from an academic perspective — will be a multidisciplinary effort requiring expertise in economics, law, engineering, business, public policy, and education, among other disciplines. An academic center bringing together these different perspectives would be very helpful. Scholars should analyze the real costs of the enormous manufacturing trade deficit, of the decimation of United States families and communities, and of the destruction of R&D capacity in our country — all the result of harm to the manufacturing base. I have begun to talk with universities and funding sources about this idea.

The U.S. problem with manufacturing was a central issue in the Presidential campaign and numerous Congressional races. Both Democrats and Republicans took up the issue. But progress in this area remains incremental. Why? The simple fact is that there are political and policy groups arrayed on the other side of the issue. Some people in Washington do not believe it is in the U.S. interest to take the actions we need to take to correct this problem. It is not that we have just made a mistake or lack the wisdom to find solutions. Nor is it the case that manufacturing base deterioration is a natural evolution that we cannot control. Rather, in the past, and in the present, we are adopting policies that are undercutting the manufacturing base. We need to confront the nay-sayers and turn this ship around.
MAM Team

Loose Oversight of ‘Made in USA’ Export Certificates Undermines U.S. Business, Experts Warn

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 John D. Oravecz and Andrew Conte
To avoid always having to stamp documents to verify shipments originated in the United States, a chamber of commerce near Chicago’s O’Hare airport leases its seals to busy exporters for $250 a year.
It would be too much work for a chamber employee to stamp each document, said Shirlanne Lemm, president of the Greater O’Hare Association of Industry and Commerce. Besides, she asked, how much would chamber employees know about the shipments?

“We don’t necessarily do that all the time,” Lemm told the Tribune-Review. “If someone is doing (exports) a lot, we’ll talk to them about it. Someone has to sign for it, and they’re taking responsibility.”

Experts on international shipments warn that the United States’ loose system of having unregulated chambers of commerce verify the origins of exports undermines the credibility of the nation’s foreign shipments and threatens American producers.

Moreover, the practice could harm unsuspecting consumers if a substandard product makes its way into the marketplace.

“In the U.S., there is zero oversight or enforcement because it’s not considered to be a health or safety issue,” said Doug Jacobson, a Washington attorney who specializes in trade compliance. “A lot of this stuff is below the radar screen. Nobody likes to talk about it, but it’s definitely there. It renders the entire U.S. certificate of origin process meaningless.”

Exporters and shippers are supposed to prepare a commercial invoice that details what they export and the certificate of origin, which typically receives an embossed stamp or seal that’s signed, dated and notarized. U.S. chambers stamp an estimated 4 million certificates of origin each year.

Although chambers are supposed to closely examine export paperwork, critics said they do not always do so.

Unlike many countries, the United States does not limit who can start a chamber of commerce and doesn’t closely regulate who stamps products to verify their origin, said Gary Toebben, president of the Los Angeles Chamber of Commerce. Nothing would stop a shipping company from starting a “chamber of commerce” and stamping documents, he said.

Other critics say it’s common practice for some chambers to sell pre-stamped pads of blank certificates that exporters fill out. Lemm said her chamber does not do that.

“The concern is that some countries would decide they would no longer accept shipments from the United States because they identified shipments with certificates of origin that were not validated the way they expected them to be,” Toebben explained.

The U.S. Trade Representative’s Office declined to comment but referred to World Trade Organization negotiations with trading partners that identified certificates of origin and other required export approvals as barriers to trade, and said the government has taken a position against them.

Lisa Burgess, spokeswoman for the U.S. Chamber in Washington, declined to comment, saying its expert on the subject was overseas and unavailable.

The International Chamber of Commerce, based in Paris, has said its members should verify shipment paperwork before stamping it.

International agreements govern trade worldwide, starting with the Geneva Convention of 1923 and more recently the Kyoto Convention of 2005.

Many countries require a certificate of origin for imports, and the international agreements say chambers should do the verification. The certificates can be used to set import duties and tariffs, which vary by nation.

WEALTH OF DISCREPANCIES

The international implications of failing to properly verify certificates can be serious, said Alaa Issa, consul general for Egypt in Houston. His office started looking at certificates of origin more closely when beef that supposedly came from the United States turned out to be Brazilian and past its expiration date.

“What we found were quite a number of discrepancies,” Issa said.

His office identified documents stamped by fictitious chambers of commerce and others from legitimate chambers that had unauthorized signatures. In two cases, he said, papers were signed by individuals who had left their chambers of commerce more than five years earlier.

In the beef case, Issa said a U.S. certificate of origin eased its entry into Egypt and then complicated authorities’ ability to trace the source. A similar but separate case involved a shipment of powdered milk, he said.

American trade officials and chamber executives often are surprised that the rest of the world takes the practice seriously, said Carman Rossi, president of E-Certify, an electronic certification company based in Adelaide, Australia. His company allows chambers to issue electronic certificates of origin.

“I’ve had quite a few people tell me they’ve lent out their seal,” Rossi said. “I was astounded to find that chambers in U.S. were doing that and admitting it.”

Importing countries rely on the certificates, he said, adding that it is fraudulent for an exporter or freight forwarder to acquire and use a chamber seal.

“It’s like Dracula in a blood bank,” Rossi said. “Who’s to know whether the freight-forwarder is rubber-stamping whatever the papers say? … They have a vested interest in getting the goods overseas without getting involved in the details.”

WATCHFUL IN PITTSBURGH

The 109-year-old Pittsburgh Airport Area Chamber of Commerce in Moon has issued certificates of origin since at least the 1990s, said Doug Keeter, membership director, who oversees the process.

The chamber stamps its embossed seal on shippers’ documents if they’re in order. Then a staff member who processes the paperwork signs the certificate in blue ink.

Typically, the chamber issues about 130 paper-based certificates each month and about 50 electronic ones. The chamber charges members $10 per page and nonmembers $17, generating about $30,000 a year in revenue, said Bernadette Puzzuole, interim CEO.

“It’s a nice item in our budget,” she said.

An employee of R.L. Swearer, a shipping company in Moon, goes to the chamber at least once a week to get a certificate of origin stamp, said Chas Watson, vice president. Although his company follows the rules closely, he said not everyone does — if only to eliminate a step in the process.

“If someone could cut a corner, they generally will,” Watson said. “If you’re going to import from China, slap a ‘Made in the USA’ sticker on it and certify it was made in the USA, then you’re committing fraud on many levels. Most people are not doing that; they’re doing it because it’s convenient.”

SOURCE:  TribLIVE.com
by
MAM Team

Making Manufacturing “Cool” for our Youth

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If we want to attract today’s youth to manufacturing careers, We need to make manufacturing “cool,” so they will choose to be part of the modern advanced manufacturing. We need to show them what great career opportunities exist in the industry and expose them to the variety of career opportunities in manufacturing.
Most outsiders have no idea of the variety of management jobs available at manufacturing companies. Besides the usual executive jobs, other management jobs available at medium and large manufacturers are in these areas: operations, plant and facilities, manufacturing and production, purchasing and procurement, sales and marketing, quality, supply chain, lean manufacturing and continuous improvement, human resources, R&D and product development, and safety and regulatory compliance.

In an article in July 2, 2008 issue of Industry Week magazine, John Madigan, a consultant with Madigan Associates, observed, “Jobs paying $20 per hour that historically enabled wage earners to support a middle-class standard of living are leaving the U.S. Public sector aside; only 16 percent of today’s workers earn the $20-per-hour baseline wage, down 60 percent since 1979.

We need to help our youth realize that manufacturing careers, and particularly the advanced manufacturing that now dominates the U.S. industrial sector, creates more wealth than any other industry. Moreover, manufacturing pays higher wages and provides greater benefits, on average, than other industries. For example, in 2010, the average U.S. manufacturing worker earned $77,186 annually, including pay and benefits. The average non-manufacturing worker earned $56,436.

The Society of Manufacturing Engineers Education Foundation (SME) is working to change the image of manufacturing and make it “cool” by sponsoring the ”Manufacturing is Cool” award winning, interactive website, which challenges and engages students in basic engineering and science principles and provides interesting and useful educational resources for teachers. This fun and information rich website was recently “re-engineered” (updated) and marketed around the country. SME has received positive feedback from teachers, parents, and students about its usefulness.

“The explosion of technology and advanced manufacturing processes are evolving faster than it can be learned and applied,” says Bart A. Aslin, CEO, SME Education Foundation. “We designed the Manufacturing is Cool website to inspire, prepare and support young people for careers in advanced manufacturing without patronizing them. We’re giving them access to real-world – people, jobs and technologies, all critical to them finding their place in a global economy.”

The site engages students in basic engineering and science principles and provides interesting and useful educational resources for parents and teachers. Today’s tech-savvy K-12 audience can explore the exciting world of advanced manufacturing engineering 24/7 to learn about the careers it offers and how its advanced technologies affect their daily lives.

In 2011, the SME Education Foundation initiated PRIME® (Partnership Response in Manufacturing Education) as a major national initiative to take a community-based approach to advanced manufacturing education and create strong partnerships between exemplary schools, businesses and organizations. Through its advanced manufacturing education program, SME is re-tooling and building the pipeline with technically skilled workers as business, industry and academia form partnerships and accelerate their collaborative efforts to provide funding, equipment, mentoring, teacher training and co-op programs for high school students to begin manufacturing products in the classroom. The manufacturing sector is on the upswing and public perception of manufacturing as a career is more positive as students see first-hand the kinds of things they are capable of making.
Since 2011, the following schools have been designated as PRIME®schools:

ALABAMA:  
Calera High School provides an enrollment of approximately 900 students, grades 9-12, provides a pre-engineering program offers opportunities for student scholastic achievement with science, technology, engineering and math (STEM) curriculum.

CALIFORNIA:
Hawthorne High School, Los Angeles, CA – the School of Engineering and Manufacturing has 347 students and has a rigorous educational program built on the Project Lead the Way (PLTW) curriculum

Esperanza High School, Anaheim, California – a comprehensive four-year public high school serving an enrollment of 1808 students in the northeast part of Orange County.

Petaluma High School, Petaluma, CA – a public high school in which students can self-select a pathway leading to certification at graduation, leading to post-secondary opportunities, credit enhancement, or directly to the workforce.

ILLINOIS:   
Wheeling High School, Wheeling, Il – is a public, culturally diverse, four-year comprehensive high school with a STEM providing college credit bearing courses and entry level career certifications including information technology, engineering, architecture and advanced manufacturing. It has a newly equipped fabrication, prototyping lab rivaling local manufacturing companies and a team of engineering students who are quickly becoming advanced manufacturing savvy. The lab includes a 3D printer for rapid prototyping, HAAS CNC lathes and mill, CNC Plasma Cutter, CNC training stations, robotic workstation, surface grinder and more.

“Our students graduate with more than a diploma in hand,” says Dr. Lazaro J. Lopez, principal, Wheeling High School. “Students have an opportunity to leave here with 14 college credits and be on their way to securing an associate degree in manufacturing technology as well as NIMS certification in two or three areas, plus all four MSSC safety certifications. Students who want to work after graduation will be able to meet the expectations of the hiring manufacturer.”

INDIANA: 
McKenzie Center for Innovation and Technology, Indianapolis, IN. The McKenzie Center for Innovation and Technology houses state-of-the art equipment, materials and curriculum. A high concentration of student population is involved with PLTW courses in pre-engineering and biomedical science. Students receive dual college credit and national certifications in their fields of study.

Walker Career Center, Indianapolis, IN offers 24 career and technical education programs equipped with state-of the-art technology. Each program offers excellent instruction and most programs lead to an industry certification or college dual credit which in most cases, is free to their students.

The Walker Center also provides Computer Integrated Manufacturing (CIM) using Chris and Jim’s CIM, a web resource that makes it possible for students, teachers and even industry pros to find solutions to problems they migh
t enco
unter with this technology. This resource site, created by CIM educators Jim Hanson of Walker Career Center and Chris Hurd of Cazenovia High School in New York, started as a tool to help their students continue to learn outside of the classroom but developed into a knowledge, research and exploration instrument used by many industry professionals. Chris and Jim’s CIM is another way to help educate and train a new generation of engineers to deal with state-of-the-art technology in designing, manufacturing, maintaining, selecting, and procuring manufacturing engineering systems.

IOWA: 
Cedar Falls High School provides courses that satisfy elective requirements for World Studies, Personal Economics, Health, Practical Arts, and General Administrative. Because of a partnership with Hawkeye Community College, students may enroll in college-level courses taught during the regular school day. Upon successful completion of the course, students will earn both high school and college credit.

MASSACHUSETTS: 
Westfield Vocational Technical High Schoolrecognizes career and technical education as an integral part of the public school system. Westfield students are prepared for careers which are common in modern industry and offer an abundance of job opportunities upon graduation.

MICHIGAN: 
The Jackson Area Career Center provides its students with career and technical educational classes, industry certifications, and free college credit, and guidance counseling services. More than 38,000 students have experienced Career Center CTE opportunities and possibilities through hands-on and applied learning.

MISSOURI:  
Summit Technology Academy, Kansas City – located on the campus of the Summit Technology Center in Lee’s Summit. It is an off-campus pre-professional learning opportunity for high school students seriously interested in the course technology-based courses of study. Professional IT certifications and dual college credit is offered through Metropolitan Community College, University of Central Missouri, Missouri University of Science and Technology, and the University of Missouri-Kansas City.

OHIO:
Centerville High School in Dayton provides a curriculum that includes vocational courses in the Performing Arts, Music, Preparatory College-Career, and the School of Possibilities offering an alternative educational pathway. It also offers 25 Advanced Placement tests in 18 courses in science, mathematics, history, government, language, economics, and psychology.

Kettering Fairmont High School is a public four-year comprehensive high school with a STEM (Science, Technology, Engineering and Math) based education. A majority of students move on to higher education or specialized training. Kettering is an industrial first-ring suburb of Dayton, Ohio that has a local manufacturing base and is in close proximity to Wright-Patterson Air Force Base. The curriculum supports these industries with PLTW manufacturing curriculum.

OKLAHOMA:   
Francis Tuttle Technology Center in Oklahoma City encompasses six public school districts serving 11,780 students who may attend Francis Tuttle tuition-free while in high school. The Center works closely with business and education partners with specific focus on workforce needs of the marketplace with the delivery of on time, just-in-time, customized training.

WISCONSIN:  
Lynde & Harry Bradley Technology and Trade School is the premier technology and trade school of Milwaukee and offers a broad range of scholastic options, including clear pathways for students into four-year universities, tech/trade education, and apprenticeships.

During the previous recession, the National Association of Manufacturers heard from its members that they were still having trouble attracting employees with the right mix of skills in certain job functions despite layoffs. To learn more, NAM and Deloitte & Touche conducted extensive quantitative and qualitative research across the U.S. They found that an estimated 80 percent of manufacturers reported a moderate-to-serious shortage of qualified job applicants during the recent recession, a problem growing increasingly urgent with the increase in global competition and retirement of Baby Boomers.

They also found that manufacturing has an outdated image, filled with stereotypes of assembly line jobs, that has kept young people from pursuing careers in it. The “Dream It. Do It TM” campaign was created because these perceptions are out-of-step with manufacturing’s broad range of interesting and financially rewarding careers. Examples include an electrical engineer for a private jet manufacturer, a product developer for a candy manufacturing plant, or a designer at an MP3 manufacturing company.

NAM’s Manufacturing Institute/Center for Workforce Success received almost $500,000 in November 2004 from Elaine Chao, Secretary of Labor, for this campaign. Over a period of 36 months, the campaign created, tested, and disseminated a growing set of creative materials. These include radio advertising spots, billboard designs, newspaper and magazine ads, student and parent brochures, and a style-branding guide. The materials are ready to use and provide the national brand to local users.

The campaign has formed strong and committed coalitions with local civic, political, education, and business entities; launched a focused advertising campaign; created a world-class website on the array of highly paid manufacturing jobs; and formed local partnerships with community colleges, technical schools and universities for students pursuing manufacturing careers.

NAM’s “Dream It. Do It TM” Manufacturing Careers Campaign is currently operating in the following regions:

  • Phoenix, Arizona
  • Connecticut
  • Florida 

  • Will County, Illinois
  • Indiana
  • Southeast Indiana 
  • Kentucky
  • Western Michigan
  • West Central Minnesota
  • Kansas City, Missouri
  • Mississippi
  • Nevada 
  • Chautauqua County, NY
  • Northeast Ohio
  • Pennsylvania 
  • Upstate South Carolina
  • The Tennessee Valley
  • North  and South Central Texas
  • Virginia
  • Southwest Virginia
  • Washington State 
  • Wisconsin

The SME and NAM programs described above will help expose our youth to the modern manufacturing environment and change the image of manufacturing to one that is “cool” and full of exciting career opportunities for our youth.

MAM Team

Senators Appeal For Military To Buy American Made Athletic Footwear For Soldiers

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WASHINGTON, April 23, 2013 /PRNewswire via COMTEX/ — The following is being released by New Balance Athletic Shoe, Inc.:

Senators are asking President Obama to apply the Berry Amendment to athletic footwear so that manufacturing jobs can be created in the United States and military trainees receive American-made goods rather than foreign products.
In an April 19th letter to the President, a bi-partisan group of 15 Senators wrote that they shared the President’s objective outlined in his State of the Union Address to encourage manufacturers to create more jobs in America.

“We can increase American footwear manufacturing jobs at no cost to the federal government simply by your directing the Department of Defense (DOD) to align its athletic footwear procurement policies to those it has already adopted for other footwear, such as combat boots, service shoes, and other uniform items,” the letter said. It urged the President “to insist that footwear worn by our troops is top quality and made in America in keeping with the intent of the law known as the ‘Berry Amendment.'”

Written by Senators Susan Collins (R-ME) and Angus King (I-ME), the letter was signed by Sen. Sherrod Brown (D-OH), Sen. Jack Reed (D-RI), Sen. Lindsey Graham (R-SC), Sen. Sheldon Whitehouse (D-RI), Sen. Jeanne Shaheen (D-NH), Sen. Roy Blunt (R- MO), Sen. John Boozman (R-AR), Sen. Richard Blumenthal (D-CT), Sen. Kelly Ayotte (R-NH), Sen. Elizabeth Warren (D-MA), Sen. Mo Cowan (D-MA), Sen. Robert Casey Jr. (D-PA) and Sen. Chris Murphy (D-CT).

The Berry Amendment was enacted in 1941 to ensure that American soldiers trained and operated in American-made materials whenever possible. As required by the law, the Defense Department purchases combat boots, service shoes, and other uniform apparel that is made in America for military recruits. For decades, American-made footwear was treated the same way.

But under new polices enacted over the last 11 years, the acquisition process no longer directly procures American-made athletic footwear for incoming recruits and other personnel. Now, military personnel receive a cash allowance to “purchase” the athletic footwear of their choice regardless of where it is manufactured.

The cash allowances for athletic shoes are valued at about $15 million annually, which far surpasses the minimum acquisition threshold of $150,000 that triggers compliance under the Berry Amendment. In their letter, the Senators noted that the Defense Logistics Agency has awarded more than $36 million since October 2012 to domestic companies for other footwear such as combat boots and shoes.

The Defense Department’s policy shift has placed jobs in jeopardy in states, such as Maine and Massachusetts, where New Balance Athletic Shoe, Inc. has offices and plants. New Balance is the last surviving American athletic footwear manufacturer.

“Maine has a long and proud shoemaking history, and the men and women who work in the New Balance factories in our state are part of that legacy,” said Sen. Collins. “The Department of Defense can make a sound investment in American factories, providing good-paying manufacturing jobs in Maine, and at no added cost to the government.”

Added Sen. King: “Maine’s shoemakers, including the talented workforce at New Balance, produce some of the highest quality footwear in the United States and can undoubtedly meet the diverse needs of our servicemen and women. The Department of Defense needs to support our highly competitive, domestic athletic shoe manufacturers in the same way it does combat boot and shoe manufacturers, just like the Berry Amendment always intended.”

Matt LeBretton, Director of Public Affairs for New Balance, said the language in the Defense Department’s Acquisition Regulations System (DFARS) clearly includes footwear among the clothing covered by the Berry Amendment. He said that athletic footwear should be made in America whether it is purchased by the military for its personnel or is purchased through cash allowances.”

“The Berry Amendment should apply,” said Mr. LeBretton. “Our industry has come together to request that the DOD simply follow their own rules and allow for a competitive environment where companies that are committed to manufacturing in the United States are encouraged to do so. We are hopeful that the Administration will correct this inequity and support domestic manufacturers.”

Of the company’s more than 1350 manufacturing associates, about 900 are located in Maine.

In October, Representatives Mike Michaud (D-ME) and Duncan Hunter (R-CA) sent a bipartisan letter signed by 50 Members of Congress to the Defense Department, asking that athletic footwear be included under the Berry Amendment.

“Our effort is gaining momentum. Americans take pride in what’s produced on our soil,” Mr. LeBretton said. “We believe the White House will agree that it is important to produce jobs for Americans and to outfit our armed forces with American-made goods.”

SOURCE New Balance Athletic Shoe, Inc
Media Contacts:Michael K. Frisby 202.625.4328 Paula Gates 617.488.2853

SOURCE: MarketWatch
by
MAM Team

Has China's Economy Hit a ‘Dead End’?

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Getty Inages

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Ansuya Harjani
Assistant Producer, CNBC Asia

China’s disappointing economic growth that came in at 7.7 percent in the first quarter, when the market was expecting an expansion of 8 percent, is leading to a loss of confidence in the outlook for the world’s second largest economy.
“Slowing first quarter 2013 GDP [gross domestic product] growth despite massive credit expansion, much of it off balance sheet, spells bad, bad news for the Chinese economy,” Patrick Chovanec, chief strategist at Silvercrest Asset Management tweeted following the release of the data.

When “exploding” credit growth is met by slower economic growth, this equates to a “dead end,” he added on Twitter.

Despite stabilization in the global economy, support from the government’s $157 billion infrastructure stimulus package unveiled in the second half of 2012 and strong credit issuance, China’s economy has failed to live up to expectations in the first three months of the year, said experts.

Robust credit issuance – which rose by almost 60 percent in the first quarter from a year earlier – is no longer able to generate the same level of growth as it did compared to a decade ago, said analysts.

Back in the mid-2000s, one yuan of credit generated around one yuan of nominal GDP. In 2012, three yuan of credit generated around 1 yuan of nominal GDP, according to financial analysis firm IHS.

“It’s shocking. The fact that growth slowed from the fourth quarter is concerning. One now has to question forecasts that assumed improvements in the global economy are going to translate into higher Chinese growth,” said Tim Condon, head of research for Asia, ING, who had expected 8.1 percent growth for the first quarter.

“We have lost confidence in a robust recovery,” added Alistair Thornton, senior China economist at IHS. “Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving Wen Jiabao correct – that the current economic model is ‘unsustainable’.”

In his final speech as Premier in March, Wen Jiabao said the country lacks a sustainable growth model, noting that in the domestic economy, “unbalanced, uncoordinated and unsustainable development remains a prominent problem.”

Slowdown in Industrial Output Worrying
Of the data released on Monday, economists say the most telling indicator of weakness in the economy is the deceleration in industrial production in March to 8.9 percent from an expected increase of over 10 percent. In August 2012 when hard landing fears were running high industrial production also grew at the same pace.

“While August 2012 proved the bottom for last year’s downturn, we doubt March will be the turning-point for 2013, given macro policy has shifted to a tighter stance with renewed controls on the housing market, local government financing vehicles and wealth management products,” Thornton said. 

Confirming sluggish activity in the industrial sector, China’s electricity consumption rose by 4.3 percent in the first quarter – much slower than the 6.8 percent seen in the same period last year. 

Growth Bad Enough for Stimulus?
Some experts including Vasu Menon, vice president of wealth management at OCBC, believe the lower-than-expected growth numbers could prompt the government to unveil fresh measures to support the economy.

“You might see modest action out of the authorities, they could come out with a mini stimulus package to kick start the economy. They want to see even distribution of growth, at the same time the government wants to make sure China doesn’t fall off the cliff you need to ramp up domestic demand,” Menon said.

ANZ’s chief China economist Liu Li-gang expects GDP growth to pick up to around 8 percent in the second and third quarters. “With external side risks diminishing and domestic credit picking up strongly we should have an upturn in the second quarter.” 

SOURCE:  CNBC
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MAM Team

Is The Successor To Manufacturing Jobs … Manufacturing?

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Can “strategic plans” for different communities help a manufacturing renaissance? (AP)

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Jim Tankersley
When the factory jobs disappear, what comes next?
That’s one of the most important economic questions America has confronted over the last decade-plus – where are the new industries, the new big ideas, the new jobs that should be springing up to replace the millions of manufacturing jobs lost to outsourcing and automation?

President Obama hasn’t had much success cultivating a big new sector to fill that vacuum. Now, his administration is trying something small. It’s a pilot program to encourage new industry development in cities that have shed factory jobs. And the new industry it seeks to develop is – yep – manufacturing.

Obama’s acting commerce secretary, Rebecca Blank, announced a small-bore program Wednesday that hopes to plant the seeds of new, advanced manufacturing activity in cities across the country. (If the goal sounds familiar, it is – Obama has been preaching the virtues of advanced manufacturing since he first ran for president, like so many other American politicians.)

This year, the program will offer grants to 20 to 25 communities, of about $200,000 each, to write “strategic plans” for their advanced manufacturing futures. The plans are supposed to say what each region is good at, what sort of product it might become a manufacturing hub for, and what federal help the region needs to make that happen. Blank calls that investing in “industrial ecosystems.”

“What we’re trying to do is give communities an incentive to change their thinking – to think, how do we attract new investment? – instead of coping with the loss of manufacturing,” she said. 2014 budget proposes giving five or six of those communities grants of about $20 million each, to help make their manufacturing infrastructure dreams come true.

It’s a relatively small amount, and Blank didn’t exactly raise expectations that it will lead to millions of new factory jobs, especially because manufacturing today is far less labor-intensive than it used to be.

But she hopes the proposals will set off a happy chain of activity in cities that have been beset by job losses, with new factory work driving more business activity (and job creation) to support it, along with new research that could lead to new industries.

“There are a lot of reasons to want more advanced manufacturing located in the United States beyond just job creation,” she said. “And the most important one is, advanced manufacturing is often on the cutting edge of research and development.”

Problem is, America is staring at a huge factory employment void – and needs a lot of job creation to fill it. University of Chicago economists recently found that manufacturing employment declines explain half of the increase in joblessness among men without college degrees in the past 10 years.

The dominant industry that replaced those jobs, in the mid-2000s, was housing. And that was driven by a bubble, which popped.

MAM Team

New Study Finds China Manufacturing Costs Rising to US Level

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Philip LeBeau
CNBC Auto and Airline Industry Reporter

Walk onto the shop floor at Prince Industries in Shanghai, China and it looks like most other manufacturing plants in this country. It’s busy running two shifts, cranking out components that will be shipped to major manufacturers like Caterpillar, Siemens, and Honeywell

But change is in the air..

The cost of manufacturing in China is going up and rising quickly.

“It’s something that we anticipated when we went to China, we just didn’t know how quick it would happen,” said Mark Miller, CEO of Prince Industries.

China and US Costs Even by ’15
China is no longer a slam dunk for manufacturers looking for the lowest cost for operations.

In fact, a new study by the consulting firm AlixPartners estimates by 2015 the cost of outsourcing manufacturing to China will be equal to the cost of manufacturing in the U.S.

“The Chinese manufacturing cost advantage has eroded dramatically in the last few years,” said Steve Maurer, AlixPartners managing director. “If you go back to 2005, it was pretty common for landed cost from China to be 25 to 30 percent less than the cost of manufacturing in the United States. Based on our analysis, two-thirds of that gap has closed.”

Maurer said higher labor wages, the rising value of China’s currency, and the cost of shipping goods from China to points around the world have made manufacturing in China more expensive.

“If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years,” said Maurer.

Higher Wages, Rising Currency
Since Prince Industries opened its plant in Shanghai a decade ago, wages have increased an average of 12 percent annually, while China’s currency, the RMB, has appreciated 25 percent vs. the U.S. dollar.

The rising value of the RMB was expected and has made it more costly to ship goods built in China around the world.

Meanwhile, hourly wages have been going up steadily due to China raising minimum wages, while competition for labor has forced manufacturers to pay more to attract skilled workers and keep them.

Pulling Out of China or Moving Further Inland?
As the cost of manufacturing in China has risen, so have reports of companies pulling their plants out of the country to find cheaper locations.

Some have re-shored facilities to the U.S., where cost differences are offset by higher productivity of American workers.

But few expect a mass exodus of manufacturers in China.

“I don’t think companies are going to pull out of China,” said Hal Sirkin with the Boston Consulting Group. “Because of Chinese domestic demand which is growing at 8 or 10 percent a year, even if they decide to pull out their export plants they will then convert those plants, basically re-tool them into Chinese consumption because there is a great market in China given all that growth.”

Sirkin said manufacturers squeezed by higher costs in more expensive cities on the coast of China like Shanghai will increasingly look to move plants to inner or western China where labor costs are lower.

“Some companies have found success in inner China and others have decided it is not worth it for them because they cannot get the productivity that they need,” said Sirkin.

Made in China and the US
Even with manufacturing costs rising in China, Prince Industries has benefited from expanding its operations outside Chicago to include a plant in China. Since making the move into China, the firm’s annual revenue has doubled to $40 million.

Much of that growth is spurred by the Prince Industries plant in Shanghai supplying customers who are manufacturing in China.

Given the changing market, would CEO Miller still expand to China?

“I think for us it made sense, it doesn’t make sense obviously for every U.S. manufacturer,” he said. “Once we announced that we were going to China, we had to convince our U.S. workforce that we weren’t going to move all of our manufacturing to China and just become a shell over here. Fortunately for us it worked out.”

SOURCE:  CNBC
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MAM Team

Congressman Calls for American Made Clean Energy Equipment 

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The goods and equipment used in clean energy projects purchased or paid for by federal taxpayer dollars would have to contain 85 percent American-made content, if a bill proposed by Central Valley Rep John Garamendi, D-Fairfield, makes it into law.
“We know that clean energy is an absolutely essential part of our future, yet under current law, much of our tax dollars are directly shipped to China, the European Union, and other competitors to purchase equipment manufactured abroad,” says Mr. Garamendi.

“Our government is directly offshoring too many American jobs, and that must change,” he says.


The bill sets a three-year phase-in schedule for the policy, with American content requirements set at 50 percent in the first fiscal year after enactment and 60 percent in the second. H.R. 1524 would also set an 85 percent American content requirement for companies that use the Investment Tax Credit and the Production Tax Credit.

“I think most American taxpayers would agree that it is a rather moderate expectation when we’re using their money – money that will create jobs somewhere,” Mr. Garamendi says. “When we make it in America, we provide pathways to the middle class and encourage our best and brightest to reinvent America’s economy for the better.”

MAM Team

Is “Buy American” a Domestic Growth Tool or Hindrance?

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Al Bredenberg
Many feel that having U.S. consumers and businesses and especially the government buy exclusively American-made products would support domestic jobs and bolster the U.S. economy. But many others argue that “Buy American” policies are restrictive and could do more harm than good.
Critics of “Buy American” often refer to such policies as protectionist efforts that seek to give preference to domestic manufacturers, as opposed to “free trade” policies that support unrestricted trade internationally and allow procurers to seek out the lowest-cost suppliers for goods.

The Buy American issue recently reheated due to Texas House Bill 558, which is now in committee in the state’s legislature. It would require the purchase of iron, steel, and manufactured goods made in the United States for certain state, state-aided, and governmental entity construction projects.

Lobbyist Perry Fowler, who represents construction companies working on water and wastewater plants, says it’s a bad idea. “Well-intentioned ‘Buy American’ measures have unintended costs, consequences, and liabilities,” he told the Dallas Business Journal. “This won’t level the playing field for U.S. companies who stand to benefit more from selling their goods across the U.S. and abroad.”

Fowler explained that construction companies’ costs would go up if they were required to source materials only from domestic manufacturers. The way engineering specifications are written makes these restrictions unfeasible, he claimed.

State Representative Yvonne Davis (D-Dallas), who filed the bill, argued, “Is it protectionism when Texans want to promote and support Texas businesses? Over the past few years, we have witnessed a number of Texas manufacturing companies close, and some companies have even moved overseas.” Spending Texas tax money on U.S.- and Texas-made products supports domestic business, she asserted.

In exploring the long history of Buy American laws, it’s important to keep in mind that there are two primary laws that apply: the Buy American Act of 1933 and the Buy American provision of the Surface Transportation Assistance Act of 1982. These laws limit some federal-funded purchases of certain materials to domestic sources or create a price preference for domestic products. The American Recovery and Reinvestment Act of 2009 (ARRA) also contains Buy American provisions.

The Alliance for American Manufacturing (AAM) claims that domestic sourcing requirements, such as those in the ARRA, are “the most effective way to ensure taxpayer dollars are used to create and maintain jobs and manufacturing capacity to the maximum extent possible, thereby vastly improving the stimulative effect of government spending.” The group calls Buy American “a proven job creation tool that is broadly supported by Congress, the American people, and hundreds of local governments throughout the United States.”

The AAM cites a number of examples of U.S. companies that gained from Buy American provisions. Pennsylvania steel manufacturer ArcelorMittal benefited from public rail transportation projects funded in part by ARRA. AAM makes the point that “ArcelorMittal’s Steelton plant is one of three rail-producing plants in the U.S. that compete with imported products.” Because of the Buy American provisions of the 1982 legislation, United Streetcar of Clackamas, Ore., won a contract to build streetcars for new public transit projects in Oregon and Arizona.

The U.S. Chamber of Commerce says Buy American rules are counterproductive and expensive. In fact, the Chamber maintains that such rules “invite foreign retaliation and threaten U.S. access to export markets and the American jobs they support.” The organization says that Chinese officials frequently cite Buy American rules “as a justification for their own discriminatory policies.”

Fox Business commentator John Stossel bluntly said that “’Buy American’ is a dumb idea.” In a column on Reason.com, he quoted Hoover Institution economist David R. Henderson, who told him that “almost all economists say it’s nonsense, and the reason is: We should buy things where they’re cheapest. That frees up more of our resources to buy other things, and other Americans get jobs producing those things.”

Buy American advocate Todd Lipscomb, of MadeinUSAForever.com, presents some additional arguments for purchasing American-made products. He points out that many other countries do not have the worker-safety, minimum-wage, and environmental-protection laws in the U.S. that make manufacturing costlier. Lipscomb argues that “no Western nation can ultimately compete on price with a country willing to massively exploit and pollute its own people. When you buy only American-made products, you insist on a higher standard.”

Henderson counters this point, saying that while working conditions might be difficult for people in developing nations, they’re still better off taking those jobs: “The mistake Americans make is they think they would never work in a sweatshop and therefore say these people shouldn’t. They’re choosing their best of a bunch of bad options. And when you take away someone’s best of a bad option, they’re worse off.”

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