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Presentation at 2011 IEDC Annual Meeting on Reshoring
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Riding the Re-Shoring Wave: Strategies for Attracting Overseas Business Operations to Your Community: Ohio Efforts
Mark Barbash, FMFinance Fund / Economic Development Consulting
Columbus, [email protected]
Why are firms considering reshoring now?
Some firms are moving work back because the US is becoming relatively cheaper on costs that they measure: Rising shipping costs Increased wages in China, stagnant
wages in US Other firms are discovering “hidden
costs” of off-shoring that are significant; ie: costs that they can’t measure or have never measured before
“Re-shoring” considerations
Offshoring may not reduce costs, but rather shift costs to different budgets Piece price falls (good for purchasing) Travel costs rise (bad for engineering?) Product development costs may stay with
US plant (and not be charged to foreign plant)
Hidden costs of reshoring
Worst case (real example):
A US plant worked overtime fixing quality problems from a Chinese plant belonging to the same company. The overtime made the US plant look expensive, hastening its demise
Some costs are hard to monetize (but that does not make them unimportant): Opportunity cost of CEO time de-bugging
supply chain Slower ramp-up to full production due to
communication difficulties Lost opportunities to see potential
product or process innovations, because of separation of customers, product designers from production.
Hidden costs-2
Increased costs due to greater variability Need to hold more inventory due to ‘just-in-
case’ and ‘just in time’ scenarios Potential for loss of intellectual property Assumption that the value of the product
made in the US and abroad is the same Not true if US product is made with better
materials, has more reliable delivery, provides better opportunities for innovation
Hidden costs-3
Polymer / Composites Automotive Supply Chain Advanced Energy Supply Chain Open-source research collaboration
linking university researchers with business researchers
Hubs of Innovation and Opportunity
Supply Chain Initiatives
Technology Based ED Group Focused on Polymers (an Edison Center)
Worked with Polymera, a new business startup that was open to the reshoring opportunities
Development of specific case studies with fiscal and operational analysis
Goal: Develop an industry focused tool that can be applied BEFORE a company makes an offshoring decision
Survey of 500 North American Suppliers and OEMs: The percentage receiving “queries or actual
work from companies suffering supply chain disruptions” has increased from 36% to 42% in the past four quarters.
21% of North American firms surveyed have “returned a portion of [their] production into or closer to North America from a low-cost country” in the past three months, up 9% from the previous quarter.
Reshoring in the Auto Industry
Center for Automotive Research & University of Michigan
CAR’s Automotive Communities Initiative
Inventory of vacant auto facilities, both OEM’s and supply chain
Working with communities to develop an international marketing effort
University of Michigan / EDA Center
Larry [email protected]
Center for Automotive Research
Kim Hill Director [email protected]
What can the Economic Development industry do to advance the Reshoring Opportunities?
1. Begin to understand the issues2. Find ways to measure what hasn’t been
measured before; Become familiar with the work of Harry Moser and others
3. Engage your Universities and Trade Associations
4. Identify potential case studies for evaluation by Harry Moser, Sue Helper or others
Develop a Basic Understanding of the Issues
Reluctance of businesses to have their decisions “second-guessed”
Challenging how decisions are made within a company and who makes the decisions
Reluctance to provide specific decision-making data or performance data
Challenges to Understanding
MFGWatch notes that
“much more [re-shoring] activity must take place for meaningful economic or employment improvements to be seen” among U.S. manufacturers.
Jobs in the Making: The Role of Mfg in the U.S. Economy and the EDO’s Role
Report to be issued later in 2011 Manufacturing Productivity
increasing through innovation and technology
Build Innovation Infrastructure
IEDC / Economic Development Research
Partners
Regional Reshoring Webinar, April 2011 Sponsored by IEDC and the Economic
Development Administration Discussion among EDPs in Ohio,
Indiana, Michigan and Pennsylvania
Regional Reshoring Webinar
Your Strategy: Using the re-shoring logic (and
software) Help your companies see the
advantage of keeping production and other functions local
Show non-U.S. companies how much more competitive they will be if they locate a facility in the U.S., preferably near a major customer.
Business Technical Assistance
1. Engage your businesses as part of your Business Retention and Expansion (BRE) Program
2. Sponsor seminars to plant the seeds of Reshoring
3. Identify businesses considering off-shoring and help them quantify costs
4. Advocate for Reshoring at the Federal policy level
Business Technical Assistance
Partner with Industry Trade Association to conduct “Re-Shoring Fairs”
The National Tooling Machine Association held the first of these fairs, on May 12th of 2010 in Irvine, California,
The Fair attracted 45 OEMs and 113 contract manufacturers.
Re-Shoring Fairs
NIST Manufacturing Extension Partnership Reshoring Initiative: Harry Moser
www.reshorenow.com Michael P. Collins
www.mpcmgt.com
Other Important Players
Businesses should make the case based on value, not just on cost Value may be harder to measure Efforts to measure it pay off for forms and
communities in high-wage, high-skill regions Offshoring often means:
One very visible cost falls (direct labor) While many hidden costs rise Often, hidden costs are greater than visible costs
The case to be made is:
