[PDF] - Take Back Manufacturing Reshoring essential for both Sustainable PDF Document

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Take Back Manufacturing

Reshoring essential for both Sustainable Supply Chains and Balanced National Economies in the future.

Nigel Southway

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Take Back Manufacturing

Reshoring essential for both Sustainable Supply Chains and Balanced National Economies in the future.

The Globalized manufacturing approach with efficient supply chain management has been the business norm in the last 2 decades and many experts now predict yet another sea change underway to move to a more balanced sourcing approach involving reshoring and localized trade blocs. The logic of Sustainable supply chains and a return to LEAN business practices utilizing advanced manufacturing technology throughout the whole supply chain will significantly impact how business will be done, and will be the next initiative that many business leaders and managers will have to understand and react toward.. We will explain the latest global trends and sustainable supply chain concepts and how the events that are unfolding will affect us all.

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

… …………………………………………………………………………………..

Nigel Southway BSc IEEE C-Eng.C.Eng IEEE . MSc BIM . SME. Author.

40 years Broad Business and Manufacturing Experience British Engineering Apprentice…Manufacturing Engineer (Aerospace/Electronics) MOTOROLA Director Manufacturing Engineering / Lean and Six Sigma Implementation Author of CYCLE TIME MANAGMENT ...Fast Track to Time Based Productivity Improvement A ground breaking LEAN Thinking text book on the concept and implementation of Business Cycle Time reduction and continuous improvement.. Provides consulting coaching and education on Business Productivity Improvement and Advanced Manufacturing Engineering to all types of business sectors and helps develop a Vision, Strategy and Evolution plan to attack waste, capture productivity improvements, increase profits, and become more competitive in the global market. He has consulted many major organizations across many industrial sectors on improvement and

rganizational change and is currently coaching, consulting and educating worldwide on Business

Improvement Initiatives, Joint Ventures, New Product Introduction Systems, Global Technology Transfer projects and Sustainable Supply Chain Management. Nigel is Society Manufacturing Engineering Toronto Past Chair in 2012-2013, holds the SME Presidents Award, and is the leading advocate for the Take Back Manufacturing Forum and the North American Reshoring initiative in Canada. LEAN THINKING INDUSTRY WEEK

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Supported Clients World Wide on LEAN THINKING & Productivity Improvement.

Electronic assembly
Meat processing plant..
Metal fabrications
HVAC Manufacturing
Toothpaste manufacturing
Steel mill processes
Bank check clearing house
US army medical Corp
Whiskey distilling
Dry-cell battery production
Credit card emboss house
Electrical products
Custom Power-Supplies
Computer design/manufacture
Sheet-metal fabricators
Plastic injection molding
Truck Components supplier
Construction equipment
Oil industry equipment providers
Aerospace equipment providers
Soap factory
Bubblegum and candy factory
Food additive producer
Data-com system provider
Computer software developer
Mint (Coins and Medals)
Security equipment
Off-road equipment
Water pipeline manufacturer
Exhaust System Manufacturing
Commercial swimming pool manufacturing
Auto dealerships
Medical equipment Design/Manufacturer
Oil extraction equipment manufactures
Nano-tech Battery Manufacturing
Automotive parts supplier
Generic drug manufacturer
Vaccine Development and Manufacturing
Robotic Medical surgical devices
Commercial Heating Equipment

NEXUS

Canada / USA / Mexico / UK / China / Russia / India / Ukraine 6

NAFTA Manufacturing Expansion…To a LCC (Low Cost Country) MEXICO 1996 to 2002

A Maquiladora or Maquila (used interchangeably) is a plant in Mexico that retains a Maquiladora Permit from the Mexican government to import raw materials duty free into Mexico for manufacturing, assembly, repair or other processing. The foreign company must agree to re-export a majority of its production.

Low cost labor: Wages range from 15% to 25% of comparable

rates in the U.S. Normal work week is 48 hours. Productivity often exceeds the U.S. rates.(U.S. Bureau of Labor)

Favorable duty/tax treatment: Southbound, the Mexican

government allows duty-free imports of all materials and machinery needed for the plant. Northbound, many North American sourced products are now duty free under NAFTA.

100% Ownership of subsidiary: Leaves total control for

all operations in the hands of the parent. There are professional services available to handle such matters as personnel, accounting and import/export management.

Proximity to U.S.: Lower turnaround times compared to other

low labor rate countries, lower transportation costs, and the ability for managers or skilled technicians to commute on a daily basis to the Mexican facilities is possible in the border areas.

Access to the Mexican Market: Maquilas may sell part of

their previous years export output in Mexico’s 107 Million person consumer market . Also… Free trade with EU and other trade jurisdictions with registered Mexican subsidiary status. And tax compliance

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GLOBALIZED MANUFACTURING

2004 Onward

CHINA MANUFACTURING

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9

Components Subassemblies Some final assemblies Mixed Volumes Metal and Plastics + Welded Assemblies

CHINA MANUFACTURING

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CHINA MANUFACTURING CHINA MANUFACTURING CANADA MANUFACTURING

12

The future of Manufacturing in Ontario’s economy.

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CANADA MANUFACTURING

13

The future of Manufacturing in Ontario’s economy.

A NORTH AMERICAN PROBLEM

TBM

Take Back Manufacturing

www.SME-TBM.org

A Forum Dedicated to Restoring

ur Manufacturing Sectors.

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Since Mid 2011

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TBM

Take Back Manufacturing

www.SME-TBM.org A Forum Dedicated to Restoring

ur Manufacturing Sectors.

25 Technical Associations 3 Trade associations 5 Educational policy makers 7 Media experts 3 Local government reps 5 Industry experts

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

16 M

TBM

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TBM…Our Ultimate Goal

17

Work together ….

Government, Education organizations Industry leaders ROADMAP……..Recover our future industrial capability …… and therefore our future prosperity.

TBMTake Back Manufacturing

WWW.SME-TBM.ORG

CMTS Toronto Canada October 2011 SME Annual Conference Cleveland USA June 2012 Many Society and Association events in 2012/13

Presentations.... TAKE BACK MANUFACTURING M

Raising the Awareness

TBM

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http://www.canadianmanufacturing.com/fabrication/production/taking-back-manufacturing-51066 http://sme-tbm.org/app/download/5809147904/PEO+TBM+article.pdf

Professional Engineers Ontario

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21 22

BNN BUSINESS NEWS NETWORK

What can Canada learn from German Manufacturing?

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

http://www.sme-tbm.org/app/download/7240450499/TBM+Reshore+paper+.pdf

WHY?..Take Back Manufacturing

FOR OUR KIDS!!

24

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

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Our Kids will think we don't make things!!!

This is NOT a game!!!...

? ? ? ?

GLOBALIZED MANUFACTURING

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GLOBALIZED MANUFACTURING

? ?

We Question its future Sustainability

Moved Off-shore…..

28

Textiles

Furniture Footwear Electronics AUTO PARTS Appliances Plastic goods Equipment metalwork Fittings Foods

Un-controlled trade….. “herd behavior”

For low cost labor rates

15% Reduction in Manufacturing Intensity in the last decade

TBM

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29 2009 2010 2011

CANADA

More than 500,000 jobs lost in 6 year period (300,000 Ontario) 25% Reduction (Quantity and Quality)

TBM

50% of Manf SME’s lost in Ontario 10% Productivity Loss due to reduced Capacity utilization

Yet ….we have a skill shortage!!! (NOT a labor shortage)

1,000,000 Young Canadians Now un or under employed!!

Redeployed to part time and lower paying service jobs Source: Statistics Canada (GDP=1350B)

CANADA

1% GDP

30

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(GDP=1350B)

CANADA

1% GDP
2% GDP

31 (GDP=1350B)

10% GDP

CANADA

1% GDP
2% GDP

Worse than USA numbers!!!

Canada/World 32

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13% GDP & 15% Employment ONTARIO Reduction Intensity Gap Offshore content has increased Reduced Manufacturing intensity Declining Capital Investment (70% LESS)

Reduced Investment trends will mean 25% further decline in the next decade

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35

OUR ECONOMY NEEDS MANUFACTURING!

It is VERY obvious that we need a Balanced Economy

(Resources/Services/Manufacturing)

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

We have become distracted by the failed policy to make us a resource based economy We must avoid the economists preoccupation with globalization/over-liberalized trade We must stop believing that we can have a healthy economy based only on services. We need to Take Back Manufacturing…

So what’s next?

36

We need a critical mass of awareness by every-one to force action taking to recover our future……

THE GAME CHANGER! A 2nd Chance?

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GLOBALIZED MANUFACTURING

? ?

TBM Positional Paper on the Waste in a Global Supply Chain 38

Waste of VERY Expensive Bunker Fuel Much Non-Value-Adding Inventory

PURE WASTE

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39

Waste of VERY Expensive Bunker Fuel

This low grade bunker fuel is used by the worlds 90,000 cargo ships A single large container ship emits pollutants equivalent to 50 million cars. Total container ship pollution is 6 times that of the TOTAL cars in world 2,000 times the amount of sulfur compared to diesel automobiles. Container ships account for 90% of global trade by volume. Our Economies will be jeopardized by this global warming enabler

VERY LARGE CARBON FOOTPRINT

40 Numeric data is available, click here for information. Crude Oil Prices in USDs Start of Globalization Globalization breakeven point Note: localized supply of energy will not change this outlook

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41 Numeric data is available, click here for information. Crude Oil Prices in USDs Start of Globalization Globalization breakeven point Note: localized supply of energy will not change this outlook

We will not run out of Oil… but …. We will run out of Oil we can afford to burn!!

The end of cheap China

What do soaring Chinese wages mean for global manufacturing?

Mar 10th 2012 | HONG KONG AND SHENZHEN | from the print edition

CHINA … Low Cost Country?

WEALTH TRANSFER???

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GLOBALIZED MANUFACTURING

? ?

START THINKING LEAN & GREEN

?

44

GLOBAL SUPPLY CHAIN Localized TRADE Bloc

LEAN Review of Trading Models

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GLOBAL SUPPLY CHAIN

CHINA/ASIA Manufacturing recycle loop Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 45 HIGH WASTE NOT LEAN NOT GREEN Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store ship Sell Process

LEAN Review of Trading Models

SCRAP $

NOW

Cost Drivers

GLOBAL SUPPLY CHAIN

CHINA/ASIA Manufacturing recycle loop Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 46 HIGH WASTE NOT LEAN NOT GREEN Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store ship Sell Process

LEAN Review of Trading Models

SCRAP $

NOW

When Interest rates are “normalized” we will have a “High cost of Inventory trap”

Cost Drivers

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GLOBAL SUPPLY CHAIN

CHINA/ASIA Manufacturing recycle loop Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 47 HIGH WASTE NOT LEAN NOT GREEN Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store ship Sell Process

LEAN Review of Trading Models

SCRAP $

NOW

When Interest rates are “normalized” we will have a “High cost of Inventory trap”

Cost Drivers 48

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INSANITY

49

GLOBALIZED MANUFACTURING

? ?

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GLOBALIZED MANUFACTURING

52

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Air Pollution

53

WASTE

54

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GLOBAL SUPPLY CHAIN

CHINA/ASIA Manufacturing recycle loop Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 55 HIGH WASTE NOT LEAN NOT GREEN Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store ship Sell Process

LEAN Review of Trading Models

SCRAP $

NOW

When Interest rates are “normalized” we will have a “High cost of Inventory trap”

Cost Drivers Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 56 Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store ship Sell Process

LEAN Review of Trading Models

CHINA/ASIA

Localized TRADE Bloc FUTURE

Cost Drivers

TBM

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Mexico Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 57 Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store ship Sell Process

LEAN Review of Trading Models

CHINA/ASIA

Localized TRADE Bloc FUTURE

Cost Drivers

TBM

NAFTA Mexico Canada USA 9000 km Each way MIN 6 weeks Transit Inventory MIN $100/M cube to transport MIN Many Transactions / Handling…… Much Waste of Natural Resource’s 58 Dig Resources Ship resources Dock resources Use Resources Ship products Dock products Ship Store Ship Sell Process

Localized TRADE Bloc

1000 km Each way MAX 1 week Transit Inventory Max $10/M cube to transport Max Few Transactions Minimal Inventory/Interest rate exposure

Short Supply Chains FAST RESPONSE to customers

LEAN Review of Trading Models

FUTURE

Cost Drivers 11% 16% 10% 10%

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Canada USA 59 Process

Localized TRADE Bloc

1000 km Each way MAX 1 week Transit Inventory Max $10/M cube to transport Max Few Transactions Minimal Inventory/Interest rate exposure

Short Supply Chains FAST RESPONSE to customers

LEAN Review of Trading Models

Dig Resources Use Resources Ship Sell Local Manufacturing Strong Incubator for INNOVATION

FUTURE

Canada USA 60 Process

Localized TRADE Bloc

1000 km Each way MAX 1 week Transit Inventory Max $10/M cube to transport Max Few Transactions Minimal Inventory/Interest rate exposure

Short Supply Chains FAST RESPONSE to customers

LEAN Review of Trading Models

Dig Resources Use Resources Ship Sell Local Manufacturing Strong Incubator for INNOVATION

FUTURE

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CHINA/ASIA Canada USA 61

LEAN Review of Trading Models

LEAN & GREEN

Intrinsically less wasteful Short Supply Chains FAST RESPONSE to customers

Local Manufacturing Strong Incubator for INNOVATION Balanced Trade 1000 km Each way MAX 1 week Transit Inventory Max $10/M cube to transport Max Few Transactions Minimal Inventory/Interest rate exposure

BALANCED ECONOMY

FUTURE Localized TRADE Bloc

Other Trade Blocs Other Trade Blocs Other Trade Blocs CHINA/ASIA Canada USA 62

LEAN Review of Trading Models

LEAN & GREEN

Intrinsically less wasteful Short Supply Chains FAST RESPONSE to customers

Local Manufacturing Strong Incubator for INNOVATION Balanced Trade 1000 km Each way MAX 1 week Transit Inventory Max $10/M cube to transport Max Few Transactions Minimal Inventory/Interest rate exposure

BALANCED ECONOMY

Localized TRADE Bloc

Other Trade Blocs Other Trade Blocs Other Trade Blocs

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Canada USA 63

LEAN Review of Trading Models

LEAN & GREEN

Intrinsically less wasteful Short Supply Chains FAST RESPONSE to customers

Local Manufacturing Strong Incubator for INNOVATION Balanced Trade 1000 km Each way MAX 1 week Transit Inventory Max $10/M cube to transport Max Few Transactions Minimal Inventory/Interest rate exposure

BALANCED ECONOMY

Localized TRADE Bloc

HEALTHCARE EDUCATION TRAINING

We have “Run the Numbers”

64

USED BALANCED SOURCING MODELS

Every Engineer should understand business costing and economics!!!

LEAN Review of Trading Models

TBM

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BEST WORST % of Total Cost LOCAL OFFSHORE OFFSHORE Issues Material content 40 40 50 Foreign country materials may need harmonizing with your designs Labor content 25 3 3 A clear advantage, but product skill and training may be an issue Overhead 25 4 6 A lack of foreign management capability may effect other hidden costs Local Support costs 7 10 10 Your internal support for offshore will be an adder to your business costs Offshore support costs 3 6 Support at offshore site will be an adder to your business costs Transportation 6 8 These added costs can also be effected by containerization skills and knowledge Inventory costs 3 6 10 longer line of supply and maybe associated forecasting will attract inventory Duty (export and import) 8 10 Brokerage, duty and insurance will add to the costs Total factory cost 100 80 103 Baseline set on local supply 20 40 60 80 100 120 LOCAL BEST CASE WORSE CASE

We built Cost Trade-off Models … LOCAL versus Off-shore

BALANCED SOURCING

BALANCED LANDED COST LOCAL BEST OFF-SHORE WORST OFF-SHORE

?

OFFSHORE SAVINGS CAN GO POSITIVE OR VERY NEGATIVE OFFSHORE LOCAL 66 Material DIRECT OVER HEAD OH

Balanced Source Landed Cost Comparison

LOCAL Material OFFSHORE Transportation Other Duty Inventory costs Support costs COPQ Material OFFSHORE 2015 DIRECT OH DIRECT 10% 20% 30% + + + + + + 2012 2011 Tipping Point RESHORE

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67 Material DIRECT OVER HEAD OH

Balanced Source Landed Cost Comparison

LOCAL Material OFFSHORE Transportation Other Duty Inventory costs Support costs COPQ Material OFFSHORE 2015 DIRECT OH DIRECT 10% 20% 30% + + + + + + 2012 2011 Material DIRECT OVER HEAD LOCAL 2015+ TBM 5% IMAGINE IF WE IMPROVED Productivity BY 5%? Tipping Point RESHORE ADVANTAGE! LOCAL BEST OFF-SHORE WORST OFF-SHORE

?

Boston Consulting Group (BCG)……

Predict BALANCED LANDED COST parity by 2015 in most sectors

The REAL Costs to Manufacture OFF-SHORE will be projected to rise. Due to: Exchange, tariffs, Labor wage inflation, Product Quality Cost escalation Transportation costs, Customer location Inventory costs, Ease of doing business, Many Other hidden drivers…. OFFSHORE LOCAL

BALANCED SOURCING

Validated Cost Trade-off Models … LOCAL versus Off-shore

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LOCAL BEST OFF-SHORE WORST OFF-SHORE

?

Boston Consulting Group (BCG)……

Predict BALANCED LANDED COST parity by 2015 in most sectors

The REAL Costs to Manufacture OFF-SHORE will be projected to rise. Due to: Exchange, tariffs, Labor wage inflation, Product Quality Cost escalation Transportation costs, Customer location Inventory costs, Ease of doing business, Plus…Many Other hidden drivers…. OFFSHORE LOCAL

BALANCED SOURCING

Validated Cost Trade-off Models … LOCAL versus Off-shore

COMBINED OPERATIONS

Take Back Manufacturing

TBM

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CIM: What factors are driving manufacturers' decisions to bring production back to Canada? Southway: It's a North American-wide realization that

ff shoring is getting more expensive with increased

transportation expense due to oil costs, as well as labor price escalation in emerging economies. Many corporations and large consulting groups also recognize that there are many hidden costs and issues in supporting a remote supply chain. In general, local manufacturing is now considered to be no more expensive than offshore

production. The landed cost tipping point in some sectors

and commodities is projected to be reached by 2015. Local manufacturing also offers more stability and the ability to innovate at home more effectively. And, being closer to the customer has added inventory and flexibility advantages. CIM: How can industry members communicate the importance and value of manufacturing to the general population? Southway: We have had three decades of people thinking manufacturing is bad news. Manufacturing has been viewed as dirty and dangerous, risky and unstable employment, and so forth. We have a lot of work to do to change this negative image. Just talking about TBM, telling the real story, and showing what we do will help. If we look at the long term, today's 12- to 15-year-olds will lead the way. When they reach 22 years old, we will have a thriving localized manufacturing economy. It certainly won't be based on cheap oil or energy, but it will be very lean and very green. Things will be made in local manufacturing hubs or clusters. Factories will be very high-tech and their

peration will demand high levels of skill and education.

All this needs vision and a can-do attitude. Not having both

f these is our biggest risk.

Take Back Manufacturing

Reshoring Tipping point

Product $ labor versus Cubic Volume USA Economy

$ Lab Product Cubic Volume Offshore Onshore Tipping Point 2012 I Phone Fridge

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Reshoring Tipping point

Product $ labor versus Cubic Volume USA Economy

$ Lab Product Cubic Volume Offshore Onshore Tipping Point 2015 I Phone Fridge 74

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GLOBALIZED MANUFACTURING

? ?

START THINKING LEAN & GREEN

What is happening in the USA?

Resurgence of Manufacturing in USA … Now at “tipping point”

via lower US exchange rate ……………………………... Rethinking of globalized supply

Balanced Sourcing Cost trade-off modeling

Re-shoring !!!

THE GAME CHANGER!

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What is happening in the USA?

Resurgence of Manufacturing in USA … Now at “tipping point”

via lower US exchange rate ……………………………... Rethinking of globalized supply

Balanced Sourcing Cost trade-off modeling

Re-shoring !!!

Reasons.. Transportation costs Labor costs Product quality Customer location Ease of doing business

What is happening in the USA?

Resurgence of Manufacturing in USA … Now at “tipping point”

via lower US exchange rate ……………………………... Rethinking of globalized supply

Balanced Sourcing Cost trade-off modeling

Re-shoring !!!

Most Next generation products will Re-shore if:

Large bulk shipping cost % Low/Mid labor content (less than 50%) Hi Technology (Embedded Innovation) Value adding local supply chains Integrated with customer services

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What is happening in the USA?

Resurgence of Manufacturing in USA … Now at “tipping point”

via lower US exchange rate ……………………………... Rethinking of globalized supply

Balanced Sourcing Cost trade-off modeling

Re-shoring !!!

Most Next generation products will Re-shore if:

Large bulk shipping cost % Low/Mid labor content (less than 50%) Hi Technology (Embedded Innovation) Value adding local supply chains Integrated with customer services

TBM

80

CANADA / US $ EXCHANGE

(Appreciated) 75 cent $ 0.5 1.0 100 cent $ 1985 1990 2000 2010 75 cent $ 2015

?

Purchase Price Parity 81 Cent $ 4% Prod Growth Mis-management period

?

We did not earn the par dollar so its rise has done a lot of damage already.. A 75 Cent $ is mostly good news, but very late, It won’t help those with significant material supply chain not now in Canada due to past offshore practices.. 2% Productivity Growth

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Impact of Poor Economic footprint (Auto sector)

Canada (Ontario) at

$76/hour $65/Hour $60/Hour

US North

$85/hour

US Mid West

$67/hour

US South

$49/hour

Mexico

$18.5/hour

81

Reshoring will force some geographical location changes

Loaded Factory direct costs 0.95 Cdn $ 0.81 Cdn $ 0.75 Cdn $ NAFTA Scenario Other International trade deals will increase pressure Non Competitive Wage rates Employment taxation Energy Safety costs Government incentives Competitive Corporate taxation Process productivity Output quality Canada

Many Factors will determine Reshoring

(Resource & Product Transfers)

82 Low Cost Country Global Trade

Localized Trade

Oil /transport price increases Emerging Economy Price Inflation Public and industrial Pressure Interest Rate Normalization Re-evaluated Balanced Sourcing Models Corporate taxation adjust Complex Supply Chain Costs Import/Export Re-balance Re-shoring! Local Re-Capitalization! Re-Hiring! / Re-training! Government budget Re-balance Right sized Loonie!????? The Globalization Purist!

Our Inability to Understand And Take Action!!!

M Close proximity to customer IP protection issues Ease of doing business Quality performance Labor cost differential Energy footprint Technology trends

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Key game-changer will be the direction of “political will” in the future government/s

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

The best environment for Reshoring /Balanced Sourcing

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Strong Government industrial policy National commitment Right valued exchange rate Higher interest rates Mid to high oil prices Low energy footprint NAFTA friendly borders Refocus on industrial learning CI rebirth within industry ? CANADA ?

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Balanced Sourcing raises what appear obvious questions, but ones that have not been well utilized by business in the past. These questions now being revisited are giving some different answers in terms of the sourcing directions when coupled with the latest cost data available for globalized manufacturing based on the globalized manufacturing experience of the last 2 decades. Such questions as: Do you fully understand the benefits and total costs of going offshore or out-sourcing versus Local costs? What is the strategic opportunity to offer your products and services to this offshore market? Is your sourcing journey a strategic market advantage, or just reaction to local cost or market price pressure? Have you balanced your local capability and capitalization with that available offshore? Have you correctly selected products/services to offshore and integrated with your internal or local capacity? Have you fully assessed the risks to your customer delivery/quality and intellectual property? Do you know where the political business world is heading and what changes are evolving? Have you selected the supply base you will use?

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

IT WILL BE A CHALLENGE FOR CANADA BUT SOME MANUFACTURING CAN RETURN BUT ONLY IF WE TAKE IT BACK

Based on a decline in Resource sectors its our best plan B

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But….Are WE Ready???

TBM

M

?

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

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TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

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Imports/Outsourcing (Balance value adding trade) Re install value adding Manufacturing in the economy Employment in all forms (Reset balance between capital and labor) Personal debt Inequality Consumer spending Infrastructure spending Heath Education (less foreign students) Value added use of natural resources (Improve economic contribution) Reinstall renewable energy such as nuclear Automation (focus on productivity Immigration (much less needed) The National Industrialization Roadmap (NAFTA) Policy Change!! Wealth for Citizens (Progressive Economists) Note: Discourage the use of wasteful “economic rent-seeking” Avoid the trap of over-reliance on a “sharing economy”

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

IT NEEDS … A DELIBERATE ACT OF NATIONAL & REGIONAL LEADERSHIP AND PLANNING.

TBM

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TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

TBM

North-American Manufacturing Prosperity for all.

TBM – The 3 Parallel Imperatives

Educators

Education must better serve its citizens
Ensure it is value adding to the economy
Re-Balance Education versus Training
Integrated Industrial Learning System

Reconsider the dubious logic of a focus on the global sell-off of Education to Foreign students

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Take Back Manufacturing (TBM) Will demand the availability Of a future manufacturing workforce that Is well-educated, well-trained with industry experience. The Development Of The future Industrial Workforce Has Suffered A Decline. The Current Skill Mix Is in Disarray and misaligned. We have become an Over-educated / Under-trained /Redundant Workforce!!! The Various agencies to support and regulate are operating in vertical silos.

TBM has formed a committee to work on this ISSUE!!

(SME/OSPE/OACETT/CME/UNIFOR etc etc)

We need a Nationwide formal system to change the Industrial learning Environment. (Learning = Education/Training/Experience)

Draft at www.sme-tbm.org

Integrated Industrial Learning System

98 Take Back Manufacturing (TBM) Will demand the availability Of a future manufacturing workforce that Is well-educated, well-trained with industry experience. High School Current Environment Future IILS Environment Education Institution Education Institution Work Term Work Term Education Institution ? ?

?

High School Education institution Industrial Integrated Learning Contract Work Term Education institution Work Term Career!

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TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

SLIDE 51

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TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

SLIDE 52

11/11/2015 52

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

SLIDE 53

11/11/2015 53

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

SLIDE 54

11/11/2015 54

Industry Game-plan Checklist

Supply Chain Strategy… Reduce intrinsic waste

Run a Balanced Sourcing model…Include all cost factors … Rethink Sourcing plans within NAFTA…. US/Canada/Mexico Develop shorter supply chains where possible (NAFTA + Global) Strategize manufacturing closer to the trade bloc customer with partnerships and focused supply. Strategize manufacturing closer to the trade bloc supply (including primary resources).. Rebuild and Invest in strong local supply cluster relationships

Productivity Improvements… In all aspects of the business

Re-invent business wide LEAN Thinking and a business Continuous Improvement culture Gain an aptitude for all forms of INNOVATION and commercialization tools Integrated Business systems … Ensure you have a future “Integration plan”. New process technology and capital reinvestment… Flexible Automation/Rapid Technologies. Participate in integrated Learning system to develop/retain/stabilize/mobilize your workforce.

Local Community Engagement ….. Work on the image

Encourage local government to provide “business easy” infrastructure and costs Ensure engagement in applicable grants/saving programs and subsidies available to industry. Plan to minimize exposure to high energy and infrastructure costs Participate in local sustainable environment goals Re-Engineer and improve the local Manufacturing Image and value for every-one RUN THE NUMBERS!!!

Industry Game-plan Checklist

Supply Chain Strategy… Reduce intrinsic waste

Run a Balanced Sourcing model…Include all cost factors … Rethink Sourcing plans within NAFTA…. US/Canada/Mexico Develop shorter supply chains where possible (NAFTA + Global) Strategize manufacturing closer to the trade bloc customer with partnerships and focused supply. Strategize manufacturing closer to the trade bloc supply (including primary resources).. Rebuild and Invest in strong local supply cluster relationships

Productivity Improvements… In all aspects of the business

Re-invent business wide LEAN Thinking and a business Continuous Improvement culture Gain an aptitude for all forms of INNOVATION and commercialization tools Integrated Business systems … Ensure you have a future “Integration plan”. New process technology and capital reinvestment… Flexible Automation/Rapid Technologies. Participate in integrated Learning system to develop/retain/stabilize/mobilize your workforce.

Local Community Engagement ….. Work on the image

Encourage local government to provide “business easy” infrastructure and costs Ensure engagement in applicable grants/saving programs and subsidies available to industry. Plan to minimize exposure to high energy and infrastructure costs Participate in local sustainable environment goals Re-Engineer and improve the local Manufacturing Image and value for every-one RUN THE NUMBERS!!!

SLIDE 55

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Industry Game-plan Checklist

Supply Chain Strategy… Reduce intrinsic waste

Run a Balanced Sourcing model…Include all cost factors … Rethink Sourcing plans within NAFTA…. US/Canada/Mexico Develop shorter supply chains where possible (NAFTA + Global) Strategize manufacturing closer to the trade bloc customer with partnerships and focused supply. Strategize manufacturing closer to the trade bloc supply (including primary resources).. Rebuild and Invest in strong local supply cluster relationships

Productivity Improvements… In all aspects of the business

Re-invent business wide LEAN Thinking and a business Continuous Improvement culture Gain an aptitude for all forms of INNOVATION and commercialization tools Integrated Business systems … Ensure you have a future “Integration plan”. New process technology and capital reinvestment… Flexible Automation/Rapid Technologies. Participate in integrated Learning system to develop/retain/stabilize/mobilize your workforce.

Local Community Engagement ….. Work on the image

Encourage local government to provide “business easy” infrastructure and costs Ensure engagement in applicable grants/saving programs and subsidies available to industry. Plan to minimize exposure to high energy and infrastructure costs Participate in local sustainable environment goals Re-Engineer and improve the local Manufacturing Image and value for every-one RUN THE NUMBERS!!!

Industry Game-plan Checklist

Supply Chain Strategy… Reduce intrinsic waste

Run a Balanced Sourcing model…Include all cost factors … Rethink Sourcing plans within NAFTA…. US/Canada/Mexico Develop shorter supply chains where possible (NAFTA + Global) Strategize manufacturing closer to the trade bloc customer with partnerships and focused supply. Strategize manufacturing closer to the trade bloc supply (including primary resources).. Rebuild and Invest in strong local supply cluster relationships

Productivity Improvements… In all aspects of the business

Re-invent business wide LEAN Thinking and a business Continuous Improvement culture Gain an aptitude for all forms of INNOVATION and commercialization tools Integrated Business systems … Ensure you have a future “Integration plan”. New process technology and capital reinvestment… Flexible Automation/Rapid Technologies. Participate in integrated Learning system to develop/retain/stabilize/mobilize your workforce.

Local Community Engagement ….. Work on the image

Encourage local government to provide “business easy” infrastructure and costs Ensure engagement in applicable grants/saving programs and subsidies available to industry. Plan to minimize exposure to high energy and infrastructure costs Participate in local sustainable environment goals Re-Engineer and improve the local Manufacturing Image and value for every-one RUN THE NUMBERS!!!

Apply new technologies to traditional sectors to innovate new products The use of new technologies such as Additive 3D printing in both Plastic and Metal can provide many industries with both Rapid prototyping and hi performance tooling strategies to relief new and traditional industries.

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Comments for Plastics Industry…..

Leverage resource sector for raw materials Review the use of innovative materials and tooling to create differentiation. Capitalize on the low labor content to effect reshoring (less LCC leverage) Focus on time to market and lower distribution costs of local supply Consider Mexico as a viable LCC (Low Cost Country) within NAFTA Create a focus on Rapid technologies (Additive/3D printing) Technology. Ensure the toolmaking sector of your industry uses the Additive Metal Technology to develop advanced and highly effective tooling for plastics production…. Advanced cooling cycles/less costly tooling. (http://www.additivemet.com) Ensure a continued focus on sustainability and environmental goals 112

Balanced Source Landed Cost Comparison

Material OFFSHORE 2015 OH DIRECT Material DIRECT OVER HEAD LOCAL 2015+ +TBM 5%+ + + + + + +

Local Advantage? NAFTA

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Industry Game-plan Checklist

Supply Chain Strategy… Reduce intrinsic waste

Run a Balanced Sourcing model…Include all cost factors … Rethink Sourcing plans within NAFTA…. US/Canada/Mexico Develop shorter supply chains where possible (NAFTA + Global) Strategize manufacturing closer to the trade bloc customer with partnerships and focused supply. Strategize manufacturing closer to the trade bloc supply (including primary resources).. Rebuild and Invest in strong local supply cluster relationships

Productivity Improvements… In all aspects of the business

Re-invent business wide LEAN Thinking and a business Continuous Improvement culture Gain an aptitude for all forms of INNOVATION and commercialization tools Integrated Business systems … Ensure you have a future “Integration plan”. New process technology and capital reinvestment… Flexible Automation/Rapid Technologies. Participate in integrated Learning system to develop/retain/stabilize/mobilize your workforce.

Local Community Engagement ….. Work on the image

Encourage local government to provide “business easy” infrastructure and costs Ensure engagement in applicable grants/saving programs and subsidies available to industry. Plan to minimize exposure to high energy and infrastructure costs Participate in local sustainable environment goals Re-Engineer and improve the local Manufacturing Image and value for every-one RUN THE NUMBERS!!!

Manufacturing has an IMAGE problem!!

Most manufacturing-based businesses are beyond dispirited…. Our Politicians/Government/Population have little understanding of business and manufacturing…We must EDUCATE them!! Manufacturing is deemed:

Dark, Dirty, Dangerous, Deafening and Difficult….

114

….. And Smelly!

M And…. Highly unstable as a career!

?

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115

TBM

EXCITE the NEXT GENERATION

Change ….

The Image of Manufacturing

Let’s Make Manufacturing TBM

North-American Manufacturing Prosperity for all.

Industry

TBM – The 3 Parallel Imperatives

Educators Government

IMPROVE POLICY Hold a Policy Blitz process!! IMPROVE Balance Integrated Industrial Learning system Balance Education/Training/Experience Focus on local population Ensure Learning is economically viable IMPROVE & Mobilize Supply Chain Strategy

+

Productivity Improvements + Local Community Engagement

SLIDE 59

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TBM Take Back Manufacturing

WWW.SME-TBM.ORG

Final Comments….. In general for the future… A long supply chain is bad ..short ones are better! But Canada has been far from the Reshore tipping point compared with others in NAFTA . High Dollar …..until recently Distraction of resource based economy Hi Energy/Labor/Safety/Border costs Canada – US Border costs.. 35% rate hikes with sticky prices.. it has got worse.. Lack of financial attention span/investment confidence Economist’s preoccupation with Resource and service based economy vision Smaller economy of scale of plants/population Declining once strong skill set due to retirements/redeployment from manufacturing. No integrated industrial learning system Lack of “political will” for manufacturing via poor integrated federal/provincial Policies.

TBM Take Back Manufacturing

WWW.SME-TBM.ORG

 We need to Re-birth manufacturing – Via Innovative startups/re-start-ups  Need to avoid assuming old technology can be reshored.. So we need plenty of venture capital to fund startups that will be game changing.. not just in what we call high tech but in traditional sectors but with new tech solutions.  Supply base perspective: Just focusing on exports in not enough, we need to look at import avoidance so we build back up our value adding and take advantage of the $ much more..  Canadian corps need to do more business in NAFTA.. incl a strong support to embrace the LCC (Mexico).. Final Comments…..

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WWW.SME-TBM.ORG

1. What went wrong with off-shoring? What are some challenges companies encountered when manufacturing overseas?

Many issues with rising costs of labor and transportation and long supply chains that are intrinsically more expensive to support as well as a host of quality issues..

2. What are the advantages of re-shoring? What's changed over the years to make it affordable to manufacture in North America again?

Some costs have risen and other costs reevaluated with balanced sourcing that shows a need to move product and related services closer to the customer. Being closer to the customer is a huge strategic advantage, and as interest rates in the US rise inventory will become more expensive and will push this concept of manufacturing close to customer much more.

3. In a nutshell, what constitutes a balanced sourcing strategy?

Running all the costs both direct and hidden in terms of material labor overhead and all support costs including the total cost of poor quality. also the issue of supply chain sustainability in terms of carbon footprint would be included….. and most corporation are applying this thinking.,.

4. What sectors benefit most from reshoring?

The products at the tipping point are large bulky products with a reasonable labor content such as white products such as refrigerators and washing machines and heavy plant and equipment... things that are small and highly automated by design such as electronics with invested manufacturing capital

ffshore are further from the tipping point
5. What needs to be done from a government perspective to make Canada an attractive place to re-shore?

It needs to be a federal driven political will to focus on manufacturing and this needs to be defined and communicated and policy written to support and redevelop not only the manufacturing sector but also the educational infrastructure to support it.. currently we score a 2 out of 10 on all this compared to

ther industrial countries that are getting it right.. Germany, Korea.. even the USA,.
6. What can Canadian manufacturers do to become more attractive to multinational companies looking to re-shore?

Join the supply chain in the sector they occupy and look and think like a NAFTA company with relationships in all 3 countries including Mexico.. Mexico will be a must to explore in the future for most NAFTA based corporations. Typical Reshoring Questions….. 120

Take Back Manufacturing

FOR OUR KIDS!!!

Let’s Re-engineer Our Economy to Work Again!

TBM

Toronto Chapter

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Questions?

121 KEEP ASKING…. WHY?…

END

122