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Reshoring becomes more and more compelling

Steady trends beg: What can a supply chain do to get in? 

The “buy American” trend is gaining traction. Increasingly, American consumers are avoiding foreign manufactured products. It’s a trend powered by renewed belief in American made products, and the promise to save jobs. To this end, a study released this year by J.D. Power and Associates show “the percentage of buyers who avoided import models because of their origin has increased to 14 percent in 2012—the highest level since the inception of the study in 2003.” And this trend isn’t limited to automobiles. Another study indicates 65 percent of high-end shoppers prefer to buy American. The latter study, conducted by the Harrison Group and American Express, did not discern whether shoppers believe American products are of superior quality, or if they just feel it’s important to support American manufacturing (jobs), or some mix of the two. As trends go, it may not make any difference.

Case in point. Apple—the world’s largest trendsetter—intends to invest $100 million into U.S. manufacturing in 2013. Feeling the pressure, Apple chief, Tim Cook, acknowledges his company has some level of responsibility for creating jobs in America. Of course the amount is pocket change for Apple and the move could be an attempt to appease the media temporarily but regardless, any action by Apple in this regard will add momentum and help perpetuate worldwide attention to this important trend. The supply chain will be wise to prepare for sudden strategic moves by various industries.

What’s become clear?

First, a growing number of large companies, such as Chrysler, GE and Caterpillar, have proven the U.S. can be competitive on both quality and price. Second, China’s costs are rising and the risks of doing business there are increasing.

 “A decade ago you just went to China. You didn’t even look locally…. Now people are trying to come back. Everyone knows they’re miserable.” —CEO, Outsource Manufacturing in San Diego, Ted Fogliani

An MFG.com poll of nearly 260 U.S manufacturers, revealed that by April of this year 40 percent of respondents benefited … from work previously done abroad. And nearly 80 percent were optimistic [about future] sales and profits.

What hasn’t been so clear?

Manufacturers are only slowly discovering cost reduction and the many other hidden benefits to reshoring. The Reshoring Initiative is here to help by assisting [both First and Second-tier] companies to accurately assess the true cost of offshoring. Watch Harry Moser founder, discuss “Total cost of ownership.” (Video was made at G & G Manufacturing in Cincinnati, Ohio)

[youtube http://www.youtube.com/watch?v=UjVzEmzmLgM&w=560&h=315]

Big companies say they believe, but don’t always factor

“We, lemming-like, over the last 15 years extended our supply chains a little too far globally in the name of low cost. We lost control in some cases over quality and service. When we did that, we underestimated in some cases the value of our workers back here.” —Boeing chief executive, Jim McNerney

Studies show most companies use rudimentary calculation to analyze the cost/benefit of offshoring. As a result they commonly miss 20-30% of the true cost of doing business abroad. Yet when work is brought back to the United States, these hidden costs invariably turn into visible savings. They might look at price, duty and freight but total cost of ownership has to include lead-time, compliance, inventory, travel, intellectual property risk as well as opportunity cost and more.

What can a small independent manufacturing business do to actively pursue the kind of work that’s coming back to North America?

Harry Moser: Besides being responsive and keeping up to date with automation so [you] can be more competitive … go to reshorenow.org and get our (spreadsheet) tool, “The Total Cost Estimator.” Use it in [your] negotiations to get customers to consider total cost of ownership—rather than just price.

Last word

As consumer awareness increases so will demand for more and more products to be manufactured in the United States, bolstering a trend already set in motion. But once again, it’s really up to you to prove your value and help larger concerns to prove that “Made in America” really means business!

HIT Solutions believes the more your business keeps up with important trends, the more you will improve your product, and improve your bottom line.

Leave me your comments below; share your thoughts.

1. “On-shoring/Re-shoring” by Siobhan Dilly, TIP Strategies
2. “Small U.S. Manufacturers Give Up on ‘Made in China’” by David Rocks and Nick Leiber, TIME
3. “Is ‘Made in America’ Back In Style?” by Katherine Tarbox, TIME
4. MFG.com

One thought on “Reshoring becomes more and more compelling

  1. This sounds great in theory, but when the rubber hits the road so does this theory. The customer wants price first, or at least my customers do. In a market where Qty & price are still king, offshore is still option #1. Given the commodities upturn, price will still be the driving force in customer negotiations.

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