First Person: Bringing Manufacturing Jobs Back to the United States by Showing OEM's the Real Value in Local Sourcing
Harry Moser has founded a movement aimed at convincing OEMs to bring their in-house and outsourced manufacturing back to the United States. The editor of Area Development recently questioned him about this endeavor.
Moser: It's a nonprofit corporation whose mission is to bring manufacturing jobs back to the United States by helping original equipment manufacturers (OEMs) see that it is in their interest to do so.
Can you tell us which organizations are supporting this Initiative?
Moser: The Reshoring Initiative is being supported by a host of organizations, including the Association for Manufacturing Technology (AMT), the Association for Manufacturing Excellence (AME), and the National Tooling and Machining Association (NTMA), as well as companies like TCI Precision Metals, Sescoi, and GF AgieCharmilles, among others.
How about government organizations on the federal, state, and local level? Have they gotten behind this Initiative?
Moser: At the federal level, the Commerce Department has been the most supportive. Deputy Assistant Secretary for Manufacturing Peter Perez has spoken at Initiative events and commented favorably on the Initiative in other speeches. And Congressman Frank Wolf of Virginia included the Initiative's concept of "total cost of ownership" in HR516 - the "Bringing Jobs back to America Act." Also, Congressman Manzullo of Illinois has expressed strong interest.
At the state and local level, the economic development agencies are starting to use the Initiative's tools to convince companies to retain, expand, or start up operations locally instead of supplying the domestic market from overseas.
Explain the concept of a company figuring out "the total cost of ownership."
Moser: The majority of companies use only simple measures to compare domestic to offshore sources. Often they merely compare price. The Initiative's "total cost of ownership Estimator"™ provides the companies a convenient tool to estimate all of the relevant costs so the company can make better decisions.
What are these other costs?
Moser: Estimator costs, in addition to price, include freight, duty, travel, carrying cost of extra inventory, quality, intellectual property, opportunity, impact on innovation, and about 20 other costs. All of the costs are inserted by the user. The Estimator merely does the calculation so that the customer has a single number for each source and can accurately compare apples-to-apples.
What problems are U.S. companies encountering when manufacturing offshore with regard to logistics, labor, intellectual property, and other issues?
Moser: Freight costs have risen with oil prices. Labor costs in China and most of the Southeast Asian competitors are rising at about 20 percent per year. Labor turnover is high, causing quality problems. Piracy is severe. Hundreds of billions of dollars are lost annually to IP pirates. Physical pirates have taken cargo from two companies that I met with.
Any specific examples you can discuss?
Moser: Labor costs are rising at FoxConn, which is a contract manufacturer for Apple and others. William Fung, CEO of trading giant Li & Fung, has told the press that Chinese wages will rise 80 percent in the next five years.
Why hasn't leveling the playing field with our global competitors worked?
Moser: The playing field has not been leveled. The Chinese cut their currency during the Asian currency crisis and have only slowly raised the Yuan's value since, despite huge increases in productivity and competitiveness. The other Asian countries keep their currencies low to stay competitive with China. The Initiative is a nonprotectionist effort to help U.S. companies see that the cost gap - between manufacturing in the U.S. or offshore - is not so large as price would suggest despite the currency issue.
What other problems does offshoring of manufacturing create in terms of product customization, marketing, etc.?
Moser: There is a clear trend toward mass customization or product differentiation, toward producing customized products at a cost and price not too much more than for a mass-produced product. Such differentiation is almost impossible with a long offshored supply chain.
Are there particular companies you are working with that are engaged in reshoring right now?
Moser: Hundreds of companies have downloaded the Estimator. I am working most closely with Morey Corp. in Woodridge, Illinois, and Hydraforce in Lincolnshire, Illinois. Interested companies can download the Estimator at www.reshorenow.org, email me for help (email@example.com), and then report on their results. Everything is free!
Anything else you would like to add?
Moser: Recent articles by Boston Consulting Group and Accenture say that the time is right for manufacturing to come back to the United States. It would be great if the Obama administration would encourage NAM and the U.S. C. of C. to ask their members to re-evaluate their offshoring activities. In the meantime, I encourage all readers to accelerate the trend: use the Estimator for sourcing or for selling the value of local sourcing; call on me for help; and send me examples of successful reshoring cases. Together we can rebuild America!
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