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

Harry Moser PA House of President Representatives Reshoring Initiative

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 offshored 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. 4

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  or 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 % of cases Basis 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 U.S. $100 $115 Made China $100 $85 Difference 0 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 13

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 14

Walmart’s U.S. Manufacturing program  Walmart’s increase in U.S. manufactured purchases:  $250 Billion over 10 years  In the 10 th 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 16

Tools Include Tool Usage ACETool Overview, input data for TCO and Toolbox Cost Differential Impact of lead time on lost Frontier orders and obsolescence Total Cost of TCO calculator for 30 costs Ownership Estimator™ TCO and Supply TCO and supply chain help Chain Optimization by MEP

Local production dominates 18 March 22, 2015 Hidden profits of responsive supply chains

The Bleeding has Stopped Manufacturing Jobs/Year 2000-2003 2015 % Change Annual Average New ~240,000 ~60,000 -75% Offshoring New 12,000 67,000 + 400% Reshoring & FDI Net Jobs ~-220,000 ~0 N/A Gained 19

PA Reshoring by Industry # Fabricated Metal Products 3 Medical Equipment/Supplies 3 Hobbies 3 Apparel & Textiles 2 Electrical 2 Equipment/Appliances/Components 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 Quality/rework/warranty (highest Image/brand 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 Delivery innovation (R&D) 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 7530 8 SC 941 3792 13 TX 292 3412 4 KY 853 3145 8 GA 393 3137 15 TN 209 2739 24 OH 114 1742 16 MI 109 1165 19 NY 61 1020 15 NC 68 1000 2 KS 500 384 16 PA * 24 Source: Reshoring Initiative Library 12/31/14 * 19 th vs. 8 th by mfg. output 2007 thru 2014

Economic Development Program in PA & MS Action Source/Responsibility Identify local imports Datamyne by U.S. or foreign companies Suggest to companies EDO/MEP/ etc. they source locally Train companies on Reshoring Initiative TCO to overcome issue of higher local price Needed further cost MEP/ Comm. College/ reductions Technology Suppliers/EDO 24

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. offshore production:  Industrial electricity  Production  Local trucking  Port handling  Ocean freight  Warehousing

Simple Solutions to Improving Image Nationally 26

Local Skilled Workforce Recruitment Issue Solution “Trades” and Call them “Professions” “vocations” image “Middle skills” “Technical Skills” Manufacturing Industry collect and media career image due to report the local reshoring offshoring case of the month. Use our Case Studies feature. 27

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 29

Potential Benefit for PA Mfg. Jobs Mfg. Jobs Total Jobs Nationally PA @3.7% PA Current 1 million 37,000 75,000 National Playing Field Level 4 million 100,000+ 200,000+ National Playing Field

Challenges and Opportunities  Big companies:  Decision makers bonused and promoted based on 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!

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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