Harry Moser PA House of President Representatives Reshoring - - PowerPoint PPT Presentation

Harry Moser President Reshoring Initiative PA House of Representatives

Flawed Company Economic Models

60% of manufacturers:

 Apply “rudimentary” total cost models

 Wage Arbitrage  PPV (Purchase Price Variance)  Landed Cost

 Ignore 20% or more of the total cost of

• ffshored products

Source: Archstone Consulting survey, American Machinist Mag., 7/16/09

Favorable Trends

 Localization. Producing near the consumer.  Reshoring/Backshoring/Onshoring/Insourcing:

Bringing back manufacture of products that will be sold or assembled here.

 FDI: Similar logic. Different owner.  U.S. potentially the biggest beneficiary.

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Indexed Unit Labor Costs in the Manufacturing Sector of Selected Countries

Reshoring is Happening!



BCG: MNI actively reshoring: 7% / 16% (’12/’14)



Medical Devices: Of the 49% that outsourced offshore, 45% are returning



Plastics News: 70% of plastics industry manufacturers have

• r will soon reshore



Alix Partners: U.S. favored over Mexico: 55% / 31%

 AGMA/ABMA: Members or their customer reshored: 54%

(5/1/15)

But not fast enough!

The Industry-Led Reshoring Initiative Provides

 Online Library of 3,000+ reshoring articles  Statistics from TCO and Library databases  Case Study template for posting cases.  Solutions to major supply chain problems  Motivation for skilled manufacturing

careers

 Free Total Cost of Ownership (TCO)

software for:

 Companies for sourcing  Suppliers of parts and equipment for selling

TCO Comparison Example

2012 TCO cases, China vs. U.S.

Comparison Basis % of cases where U.S. has the advantage Price 5% TCO 53% Difference 48%*

*Conservatively 25% might return if companies shifted to TCO Source: TCO user database

Reshoring More Effective than Exporting: U.S. is Much More Competitive at Home!

Where Sold U.S. China Where Made U.S. $100 $115 China $100 $85 Difference 30%

Based on TCO being 15% higher for exports

Water Heaters

Bringing Production back from China:

 Water-heaters, fridges, and washing machines  Unionized facility in Louisville, KY  1300 jobs, renovated facility, $800 million invested  Reasons:

 Tax incentives  High-tech new model  Ease of design collaboration with workers: retail

price -20%

 2 tier contract  Chinese cost: -30% becomes +6% considering

inventory and delivery problems

 “Jobs at U.S. suppliers”: 20,000

Known PA Reshorers

Company Name City Product Reshored All-Clad Metalcrafters Canonsville Pot lids, cookware Armstrong World Industries Lancaster Luxury vinyl tile

• B. Braun Medical Inc.

Allentown Medical products Bollman Hat Company Adamstown Kangol hats Buck Co. Providence Townsh. Castings for gear box parts DeVilbiss Healthcare Somerset EveryWare Global Monaca Bakeware, beverageware, glassware, ForeFront Product Design Pittsburgh Battery-powered spray pump Independence LED Wayne LED Lighting Isolator Fitness, Inc. Reading Exercise equipment K'nex Hatfield Plastic building connecting toys MCC Cecil Steel rolls for pipe-making Pequea Machine Inc. Earl Township Gear boxes for agricultural equipment Reading Truck Body Truck Parts Run-Rite Stroudsburg Cleaning tools for automotive service Toydozer Pendell Toy picker upper Unilife York Pre-filled syringes w/retractable needles Woolrich Woolrich Menswear, Blankets, Woolens

Bollman Hat

 Adamstown, PA  Bringing back Kangol hats  Moving 80 machines back from China  Will be 41 jobs  $600,000 investment  Reasons:

 Image/Brand Made in USA  Proximity  DCED grant

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Circuit Boards

 Woodridge, IL  Supplies heavy equipment companies  Had quality issue with a Chinese

component

 Found local IL source  Result:

 Quality problem fixed  Inventory cut by 94%

 $2M order

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Walmart’s U.S. Manufacturing program

 Walmart’s increase in U.S. manufactured

purchases:

 $250 Billion over 10 years  In the 10th year:

 Approx. 300,000 manufacturing jobs*  Approx. 1 million total jobs**

 http://engage.walmart-jump.com/

*Reshoring Initiative **Boston Consulting Group

Walmart’s JUMP Reshoring Support Page

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Tools Include

Tool Usage ACETool Overview, input data for TCO and Toolbox Cost Differential Frontier Impact of lead time on lost

• rders and obsolescence

Total Cost of Ownership Estimator™ TCO calculator for 30 costs TCO and Supply Chain Optimization TCO and supply chain help by MEP

Local production dominates

March 22, 2015 Hidden profits of responsive supply chains

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The Bleeding has Stopped

Manufacturing Jobs/Year 2000-2003 Annual Average 2015 % Change New Offshoring ~240,000 ~60,000

• 75%

New Reshoring & FDI 12,000 67,000 + 400% Net Jobs Gained ~-220,000 ~0 N/A

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PA Reshoring by Industry

# Fabricated Metal Products 3 Medical Equipment/Supplies 3 Hobbies 3 Apparel & Textiles 2 Electrical Equipment/Appliances/Components 2 Non-Metallic Mineral Products 2 Machinery 1 Primary Metal Products 1 Transportation Equipment 1

Note: Vs. U.S. Light on Transportation Equipment and Computers

Reasons for Reshoring in PA

Positive Domestic Negative offshore Image/brand Quality/rework/warranty (highest reason @7) Automation/technology Lead time/time to market Walmart Total Cost Customer responsiveness Communications Government Incentives Freight Cost Customization/Flexibility IP Risk Lead time/Time to market Rising wages Higher productivity Proximity Manufacturing/engineering joint innovation (R&D) Delivery Skilled workforce availability/training U.S. price of natural gas

More PA Reshoring Data

 Industries:

 Medical devices: 3  Fabricated metal products: 3  Electrical equipment: 2  Non-metallic minerals: 2  Hobbies: 2  Apparel and textiles: 2

 Countries reshored from:

 China: 12  Mexico: 1  Unknown: 5

Jobs Reshored by State Top 10

Jobs Cases Jobs/ Facility SC 7530 8 941 TX 3792 13 292 KY 3412 4 853 GA 3145 8 393 TN 3137 15 209 OH 2739 24 114 MI 1742 16 109 NY 1165 19 61 NC 1020 15 68 KS 1000 2 500 PA * 384 16 24

Source: Reshoring Initiative Library 12/31/14 2007 thru 2014

* 19th vs. 8th by mfg. output

Economic Development Program in PA & MS

Action Source/Responsibility Identify local imports by U.S. or foreign companies Datamyne Suggest to companies they source locally EDO/MEP/ etc. Train companies on TCO to overcome issue

• f higher local price

Reshoring Initiative Needed further cost reductions MEP/ Comm. College/ Technology Suppliers/EDO

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Another Planned Tool: CSR Estimator

 U.S. macroeconomic impact

 Increased taxes by company and supplier employees and

supplier companies

 Reduced Safety Net expenditures

 World environmental impact, comparing pollution, for U.S. vs.

• ffshore production:

 Industrial electricity  Production  Local trucking  Port handling  Ocean freight  Warehousing

Simple Solutions to Improving Image Nationally

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Local Skilled Workforce Recruitment

Issue Solution “Trades” and “vocations” image Call them “Professions” “Middle skills” “Technical Skills” Manufacturing career image due to

• ffshoring

Industry collect and media report the local reshoring case of the month. Use

• ur Case Studies feature.

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Timely Benefits of Reshoring

 Balance the $500 billion trade deficit:

 3 million manufacturing jobs  6-8 million total jobs  Improved income equality  Cut U.S. budget deficit by about 50%  Provide more funding for other programs  25% - 30% increase in manufacturing  Reduced economic volatility

1/11/12 Insourcing Forum

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Potential Benefit for PA

• Mfg. Jobs

Nationally

• Mfg. Jobs

PA @3.7% Total Jobs PA Current National Playing Field 1 million 37,000 75,000 Level National Playing Field 4 million 100,000+ 200,000+

Challenges and Opportunities

 Big companies:

 Decision makers bonused and promoted based

• n price and wages

 Mostly source and site accordingly  MBAs preaching offshoring and short-term

strategies

 Need to get senior management’s buy-in

 Suppliers:

 Ready to help

How to Level Playing Field in PA

 Manufacturing:

 Target large importers  Continue training on TCO via IRCs  Provide technical help via IRCs  Help find PA suppliers  Help sell to Walmart

 Retail:

 National $1.1T in stock-outs and overstocks  Train on TCO and CDF  List on our Resources site

 State:

 Accelerate skilled workforce training: CCs, certificates, apprenticeships  Expand the IRC Reshoring program  Focus on reshoring as much as on exporting  Make PA the leader in reshoring!

Questions for you!

A non-profit with 28 sponsors

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Accelerate Reshoring in Pennsylvania!

Contact: Harry Moser Founder and President 847-726-2975 harry.moser@reshorenow.org www.reshorenow.org 35