As published in the July 1, 2012 Toledo Business Journal
Harry Moser
Reshoring Initiative
Reshoring bringing new investment and jobs
Toledo Business Journal recently interviewed Reshoring Initiative president Harry Moser. He shared the following thoughts.
Toledo Business Journal: Can you explain the mission of The Reshoring Initiative?
Harry Moser: The mission of the Reshoring Initiative is to bring good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess their total cost of offshoring, and shift collective thinking from offshoring is cheaper to local reduces the total cost of ownership.
TBJ: Why should US manufacturers look at reshoring?
HM: The massive US trade deficit is a major cause of the decline of US manufacturing over the past several decades, the high unemployment rate, and the debilitating budget deficit. Domestic suppliers have watched as large manufacturers have offshored work and well-paying jobs. Offshoring ultimately contributes to waste and instability.
Reshoring is an efficient way to reduce imports, increase exports, and regain manufacturing jobs in the United States. It's also the fastest and most efficient way to strengthen the US economy.
For the nation, reshoring brings back desirable jobs that have been lost to decades of offshoring. Reshoring also helps manufacturers recover from offshoring's poor quality, trade secret thefts, supply chain disruptions, and lengthy delivery times – all while staying cost competitive.
Top reasons for companies to reshore include reducing total cost of ownership (TCO), improving quality and consistency of inputs, reducing pipeline and surge inventory impact on just-in-time operations, clustering manufacturing near R&D facilities, enhancing innovation, reducing intellectual property and regulatory compliance risk, eliminating the waste and instability caused by offshoring, and strengthening companies’ ability to respond quickly to customers' demands.
TBJ: What benefits will accrue to the United States if manufacturers increase their reshoring efforts?
HM: Top reasons for the nation to reshore include: bringing jobs back to the US; helping balance US, State, and local budgets; motivating recruits to enter the skilled manufacturing workforce; and strengthening the defense industrial base.
These reasons have been true for years. Now the company benefits of reshoring are growing daily as offshore sourcing faces increased wages and currencies, higher transportation and fuel costs, and inability to provide required responsiveness. Nationally, reshoring breaks out of the waiting-for-policy-decisions problem (currency, trade negotiations) and the economic zero-sum-game (taxes and spending).
Many companies are shifting their operations back to the US because offshoring has hindered their ability to rapidly deliver goods, maintain low inventories, uphold competitive costs and meet demand for rapid adjustments to unique products.
TBJ: Can you discuss any trends taking place concerning the issue of reshoring?
HM: An MIT Supply Chain industry survey said 60% of big manufacturers are considering bringing work back in 2012. A lot of the big companies say they’re going to do it and the smaller companies that do manufacturing for them are already getting jobs because of this.
When you look at our website, under the library section, it will pull up approximately 276 articles about reshoring. If I sort the articles by region, I find more reshoring happening in the southeast right now, but that could always change. By industry, I have found things aren’t as solid, with products like garments, shoes, Frisbees, and other toys coming back. Some of these categories aren’t what you’d expect. It’s broadly distributed because a lot of the companies that went offshore did not understand the economic impact of that decision.
TBJ: What is the Total Cost of Ownership Estimator?
HM: The Total Cost of Ownership Estimator is a complimentary tool that enables aggregation of all cost and risk factors into one cost for simpler, more objective decision making.
Most companies make sourcing decisions based on price alone, resulting in a 20% to 30% miscalculation of actual offshoring costs. With the Total Cost of Ownership Estimator, users account for all relevant factors when determining their total cost of ownership including overhead, balance sheet, corporate strategy, and other external and internal business costs.
Once a company’s unique data is input into the calculator, it will receive its total cost of ownership analysis complete with calculations of each source’s cost; an accumulation of all costs into cost categories; a grand total cost; line charts showing each source’s current price, total cost of ownership, and five-year forecast; and line charts showing the company’s cumulative cost by category.
TBJ: Can you discuss some specific cost areas that are included in the Total Cost of Ownership Estimator tool?
HM: A specific cost area is travel costs, as well as carrying cost of the inventory when a company goes offshore. There is a longer pipeline of things coming in and the company has to keep a large supply here to allow for it to adapt as quickly. Another cost area example is product liability risk.
TBJ: We have a company in our area, B&B Molded Products, Inc., that is working to assist other companies to assess the cost of using offshore suppliers. What can other companies in our area do to assist the Reshore Now initiative?
HM: Companies should use the Total Cost of Ownership Estimator tool. Businesses can go to our website and look for case studies. Under case studies they can report their own reshoring success and the details of it for others to see. Because of that, we can lead businesses to those posts to conclude that reshoring is a major trend so they can reevaluate their own reshoring process.
TBJ: Are there any other issues you would like to address?
HM: The total cost to supply from overseas is much more than just the product price. Companies can call on us for help. Calling and email is free and I’m happy to help. As an example in the Toledo area, Dana Corp. could use these tools to make decisions on where to source components. It can also be used as a sales tool by a supplier to convince Dana to purchase from a local company instead of looking offshore.
President Obama is very supportive of this and the Commerce Department is developing a website to promote reshoring, as well as to explaining and documenting it.
In manufacturing today, there is a shortage of skilled workers. For reshoring to succeed, we need a better quality and quantity of skilled workforce. To recruit them, society has to believe reshoring is working because otherwise, why would the intelligent student want to be a precision machinist if he or she assumed there weren’t any jobs? There needs to be a link between reshoring and recruiting for both of them to succeed. If the manufacturers want to motivate local people to come work, they can show commitment to reshoring.