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Tag Archives: Bring Manufacturing Back

Walmart 2015

Last week we participated in the Walmart US Manufacturing Summit in Bentonville, Arkansas. Walmart has taken the lead and has ignited the Reshoring movement in America by committing to spend $250 Billion for products Made in the USA over the next few years. The annual Summit was an amazing event again this year, with an important “Open Call” day for suppliers pitching their American-made products to Walmart buyers.
Walmart estimates that 1 million new US jobs will be created through this initiative, including direct manufacturing job growth of approximately 250,000 jobs and indirect job growth of 750,000 in the support and service sectors. This alone is important for rebuilding the US economy, but because of Walmart’s size and influence, other retailers are likely to follow Walmart’s lead and establish initiatives of their own that will also result in more job creation in the US. And as we know, Retailers are the “Mothers of all Supply Chains.” These initiatives will affect manufacturers and their global supply chains.
Walmart is quickly becoming a catalyst for the Reshoring movement for another important reason. By igniting the US manufacturing movement, suppliers and their supply chains will cause the reshoring and redevelopment of key industries needed to support manufacturing in general. Take small motor manufacturers, for example. These small motors are in many consumer products such as lawn mowers, vacuums, hair dryers, and small appliances. Yet most of the small motor production was offshored to China in the early 2000s. Bringing back the production of these motors will help boost US content for many US manufactured industrial products.
Plastic injection molding, cut-and-sew equipment and other component parts will be reshored as a result of this movement. The skills to support all kinds of manufacturing were offshored too, and now skilled labor is in very high demand in America. So the Reshoring movement will drive the redevelopment of these industries and skills in America.
The federal government is supporting innovation through the bi-partisan Revitalize American Manufacturing Act of 2014 and the establishment of 45 Innovation Institutes, bringing together companies and universities to co-invest in advanced manufacturing technologies.
Walmart is the company that will make the difference because it is basing the need for innovation on the demand of its customers, and that is powerful.

reshoringinstituteWe have been working hard over the past couple of years to help companies evaluate and plan for bringing manufacturing back to America. We believe it’s important to rebuild the American economy and in particular, the middle class. Rebuilding our strength in the manufacturing sector is one important way.

For every new manufacturing job created, there are about 1.5 additional jobs created. This is because manufacturing workers spend their money on houses, cars, consumer electronics, food and clothing which drives employment and economic growth in other sectors. All this spending has a remarkably positive economic effect. Communities thrive, employment rates improve and the American dream is once again revived.

Although we have been assisting clients in their Reshoring efforts, we decided to broaden our efforts by establishing a research and support institute. This gave rise to the Reshoring Institute, a collaboration with the University of San Diego.  The Institute is a 501c3 Non-profit organization and survives on tax-deductible donations.

Our Mission

Reshoring Institute provides research and support for companies bringing manufacturing and services back to the America.

Our Vision

In collaboration with the University of San Diego Supply Chain Management Institute, we provide information, research and support for companies trying to “Reshore” or bring manufacturing and services back to America. This may include things like site selection, tax incentives, science and math education, marketing and PR and cost comparison development. We direct this Reshoring work and include student interns in support of research projects and consulting projects.

You can read more about the Institute here: www.ReshoringInstitute.org or contact Rosemary Coates, Executive Director at rcoates@ReshoringInstitute.orgreshoringinstitute

I spoke at the Global Supply Chain Council’s Sourcing Shift Conference in Shanghai last week. The audience was a mix of c-level executives and very senior sourcing people. These folks have been running international sourcing and manufacturing operations throughout China and across Asia for many years. They are savvy business people with amazing international experience.
So I was astonished that almost no one in the crowd had heard about America’s Reshoring movement. A 2014 Boston Consulting Group report says that 52% of American corporations over $1B in revenue are considering Reshoring. And with Walmart’s new pledge to spend $250B on US-made goods over the next 10 years, Reshoring is all over the news.
We listened to various speakers talking about the shift of manufacturing from China to even lower cost countries including Indonesia, Vietnam, Myanmar and Bangladesh. The cost per hour comparisons were remarkable. They quoted “cut and sew” and assembly operations in Myanmar at $.35/hour and Bangladesh at $.33/hour. Yes, you read that right…thirty-three cents per hour. These sourcing folks and the multinationals they represent are still chasing the lowest labor cost to produce their products.
Then it was my turn to talk about how Reshoring will affect China and specifically, how it will change these people’s jobs. I asked for a show of hands to see how many people were familiar with the American Reshoring movement. Only three or four raised their hands.
So as I described the Reshoring movement in America, they were fascinated. “How can it be that Americans will pay so much more for American-made goods?” they asked. I explained about the new “economic patriotism” that has enveloped the country. Americans want to rebuild the economy and believe that bringing back manufacturing is one way. But products must also be cost competitive. To achieve this, reshored manufacturing must be very automated including the use of robotics, 3D printing and 5-axis milling. “This is not a return to 1960’s manufacturing,” I said. “It is an evolution. And, in fact, the costs can be very competitive with China, when production is fully automated and when the total cost of ownership is considered.”
That got their attention. They are used to dealing with total cost comparisons. They have seen amazing changes in China over the past 25 years and understand the potential for evolution. And suddenly they understood. Their sourcing jobs are going to change, too.
Sourcing Shift Conf

RESHORINGFor the past 15 years or so, I have been helping companies offshore their manufacturing.  There have been, and continue to be, pretty significant cost savings in low-cost labor markets.  But with the waning US economy, it’s time we wake up and put some Yankee ingenuity into bringing some manufacturing back. We think it is possible to bring 15-20% of offshore manufacturing back to the US.

I am not saying we can or should bring it all back.  There are still global cost advantages to low-cost labor markets.  And China represents the largest single target market in the world to sell goods to.  Companies should continue to  manufacture in China to serve the Chinese market.

The U.S. manufacturing sector has added 430,000 jobs since 2010; a small trickle of what we need to recover, but still a move in the right direction. Companies that are reshoring include some of the nation’s largest manufacturers: Apple, General Electric, Ford, Caterpillar and NCR.  A 2012 study concluded that reshoring could add 2 million to 3 million jobs and an estimated $100 billion in annual output to a range of industries by the year 2015.

But bringing manufacturing back isn’t as easy as you may think.  There are a host of considerations and analyses that companies must do to determine the costs and feasibility of reshoring. Several of the important factors in the original offshoring decisions have dramatically changed. Consider these 5 factors as the initial steps in determining your need to rebalance global manufacturing and reshore some activities back to the US.

1)      Cost Increases, Taxes

2)      Innovation and Automation

3)      Market Access and Localization

4)      Skills

5)      Political Environment and Public Sentiment

We are helping clients evaluate the possibilities now.  For more information go to www.BlueSilkConsulting.com/Reshoring