Reshoring Initiative aims to educate manufacturers about the true costs of outsourcing.
According to a 2009 survey by Archstone Consulting, 60% of manufacturers use only rudimentary calculation methods to determine what it costs them to offshore. (Photo courtesy of Hella.)
Harry Moser might be the only person ever elected to a Hall of Fame based not on what he’s done, but on what he’s going to do. This past November, Moser was named one of the 2010 inductees into Industry Week
magazine’s Manufacturing Hall of Fame, an institution that includes Michael Dell, founder and CEO of Dell Inc.; Jack Welch, former CEO of General Electric; and James Womack, lean guru and author of The Machine That Changed the World
Although Moser has spent more than 40 years in American manufacturing-the last 22 as president of Swiss machine tool supplier GF Agie Chamilles-he became a “Hall of Famer” for founding the Reshoring Initiative, a nonprofit organization dedicated to persuading manufacturers to bring work back to the U.S. from overseas. His passion has led him to travel the country, work with policymakers, and offer manufacturers a total-cost-of-ownership formula that helps them calculate the real impact of offshoring on their balance sheets.
“For decades, I promised America’s youth and their parents that if they went into the skilled manufacturing trades...there would be jobs for them,” says Moser. “Then, all the jobs started to go away. I had to redeem by promise. I had to do my best to bring jobs back.”
Moser will share his vision for achieving that goal May 4 during a keynote address to start Tech ManufactureXPO, a virtual trade show sponsored by ASSEMBLY, Quality, CircuiTree, ASI
and World Trade
. (See sidebar.)
The Reshoring Initiative
Moser’s roots are firmly planted in manufacturing. Both his father and grandfather worked at Singer Corp.’s massive sewing machine factory in Elizabeth, NJ. Moser himself worked there summers during high school and college. “Once the envy of the world, the Singer plant is now long gone, and I don’t want to see more U.S. manufacturing disappear,” he says.
After meeting Moser at his home in Kildeer, IL, northwest of Chicago, it’s clear he’s no stuffed shirt. He’s optimistic, quick to laugh and passionate about manufacturing. “Most people don’t understand reshoring-they think it has something to do with Lake Michigan,” he quips. “When they realize I’m trying to bring manufacturing jobs back to the U.S., everyone agrees that it’s about the most important thing anyone in the country can do....They think I’m a hero just for trying.”
Moser is also a man of considerable energy. Since he launched the Reshoring Initiative last year, he’s been quoted in The Wall Street Journal
Today, and he’s appeared on CBS News and CNBC. Moser has also met with myriad local and national organizations, including the AFL-CIO, the Society of Manufacturing Engineers, the Institute of Supply Management, the Council on Competitiveness, the Manufacturing Extension Partnership, and the Association for Manufacturing Excellence. In each case, he urges OEMs to look beyond just the unit price of a part when deciding whether to produce it domestically or offshore.
“According to a 2009 survey by Archstone Consulting, 60% of manufacturers use only rudimentary calculation methods to determine what it costs them to offshore,” he explains. “On average, they miss about 20% of the total costs of offshoring.”
These additional, hidden expenses include higher costs for travel, packaging, shipping and inventory. For example, overseas suppliers typically deliver parts in larger shipments than domestic suppliers. Delivery times will also be longer. As a result, OEMs must keep a large supply of parts at a local warehouse, which necessitates additional costs for storage and retrieval.
“The problem is, the typical accounting system isn’t designed to aggregate that data,” says Moser. “It simply calculates the cost of goods sold and therefore misses out on these other variables.”
To give OEMs a better idea of these hidden costs, Moser developed a spreadsheet that compares the total cost of ownership for domestic and offshored parts (see table). The spreadsheet covers “hard” costs, such as packaging, shipping, duties and brokerage fees. But it also includes less tangible variables, such as missed opportunities due to long delivery times, product warranty and liability costs, and intellectual property losses.
Each input includes a brief explanation for how to assign a value for it. If OEMs don’t trust the “softer” variables, they can be excluded from the analysis or considered separately. If the parts will be supplied for a number of years, OEMs can enter estimates for wage inflation and currency appreciation to see how that affects the bottom line over the long term. Once all the variables have been entered, the spreadsheet outputs tables and graphs comparing the total cost of ownership of the domestic part vs. the offshored part over the life of the contract.
“Let’s say a part made in the U.S. costs $100 and the same part made in China costs $70, a difference of $30,” says Moser. “When you look at the total cost of ownership, the price is $108 for the U.S. part and $97 for the Chinese part. Now the difference is $11, and at that point, a supply chain manager may think outsourcing the part isn’t worth the trouble. However, if you look forward at the projected price increases over time, the price of the U.S. part barely changes, while the price of the Chinese part increases. In five years, the price of the Chinese part is actually $10 higher than the U.S. part.”
The Next Step
After spending more than a year preaching the gospel of reshoring, the next step for Moser is to set up regional reshoring events that bring OEMs and domestic contract manufacturers together to consummate business relationships. Moser has already begun the process in Illinois. Working with industry associations and local government agencies, Moser is organizing a series of conferences dubbed the Illinois Reshoring Initiative.
The first conference, aimed at OEMs, was held March 16 at Harper College in Palatine, IL. The goal of the conference was to educate OEMs about the true costs of offshoring and the advantages of working with domestic suppliers. The second conference, aimed at suppliers, will be held in July. The goal of that meeting is to teach suppliers how best to meet the needs of OEMs. Finally, in September, the Initiative will hold a purchasing fair that enables OEMs to meet and evaluate numerous local suppliers in one day.
“Our hope is that these reshoring events will result in a measurable number of jobs being brought back,” says Moser.For more information on the Reshoring Initiative or to download a free copy of the total cost of ownership spreadsheet, e-mail firstname.lastname@example.org or visit www.reshorenow.org.
SIDEBAR: Tech ManufactureXPO
A virtual trade show, Tech ManufactureXPO will be held May 4 from 8:30 a.m. to 3:30 p.m. EDT. It’s the online equivalent of a traditional trade show, featuring webinars, podcasts and “virtual booths.” Participants can browse exhibitor booths, chat with booth representatives, and collect information, such as brochures, data sheets, and white papers. Nearly 30 suppliers are exhibiting at the event (see list below).
In addition to live webinars, the event will also include 15-minute how-to podcasts from Automated Precision Inc., InterTech Development Co., Sealant Equipment & Engineering Inc., and Bosch Rexroth. A “lunch-and-learn” session on trends in green manufacturing will be held from 12:30-1:00 p.m. In this interactive chat-room session, which will be led by the editors of the five sponsoring magazines, manufacturing professionals will learn about the latest ideas in environmentally friendly materials, landfill-free manufacturing, supply chain management and more.
For more information, visit www.techmanufacturexpo.com Tech ManufactureXPO Exhibitors to DateAutomation Tool Co.
-Custom automated assembly and test systems.Automated Industrial Systems Inc.
-Pad printers and high-speed installation equipment for O-rings, seals, backup rings and retaining rings.Automated Precision Inc.
-Advanced metrology equipment.ATI Industrial Automation
-Robotic accessories and tooling, including automatic tool changers, collision sensors and compliance devices.Avdel USA
-Rivets, inserts, and threaded fasteners, and tools for installing them.Balluff
-Innovative sensors for a range of applications and industries.Baltec Corp.
-Radial and orbital riveting equipment and assembly presses.Bosch Rexroth Corp.
-Hydraulics, pneumatics, electric drives, motors and control systems, conveyors, and linear motion and assembly systems.COX North America Inc.
-Manual, pneumatic and battery-powered caulk guns and epoxy applicators.CyberMetrics
-Affordable, scalable software solutions for calibration management, preventative maintenance and supplier QA.Delta Regis Tools, Inc.
-Assembly tools and torque measurement systems.Design Tool Inc.
-Automatic screw feeding and driving systems.Emhart Teknologies
-Rivets, inserts, and threaded fasteners, and tools for installing them.FARO Technologies Inc.
-Computer-aided coordinate measurement machines and software.Intelex Technologies Inc.
-Software that captures, tracks and reports on essential corporate data.InterTech Development Co.
-Leak testing equipment, functional testing equipment, and automated assembly and test systems.Item International America
-Modular building kits, including aluminum framing, fasteners, linear guides, tubing and workbench systems.Logistick, Inc.
-One-way, disposable freight securing devices.Mahr Federal Inc.
-Dimensional metrology equipment, from handheld gauges to advanced measurement systems for form, contour, surface finish and length.Motoman Robotics
-Robotic automation solutions for virtually every industry and application.Origin Technologies Corp.
-Laser-based dimensional measurement and surface contour inspection systems.Promess Inc.
-Highly adaptive monitoring and motion control systems to assemble and test products.Schunk Inc.
-Grippers, rotary actuators, linear slides, robotic accessories, and pick-and-place equipment.Sealant Equipment & Engineering Inc.
-Dispensing systems for bonding, sealing, potting, encapsulating, casting, gasketing and lubricating.SINTECO Robotics
-Robotic systems and custom automated assembly, handling, machining, and testing systems for small- and medium-sized products.Sprinter Marking
-Automatic ink code marking machinery for date, product, lot and spot ink marking impressions.Weiss North America Inc.
-Rotary indexing tables, palletized conveyors, motor-driven pick-and-place units, camand servo-driven assembly chassis, indexing rings, machine bases, and tool plates.