Reshoring Hubbub

Is reshoring fact or fiction? Morgan Stanley thinks the latter, as stated in a 125-page report, “U.S. Manufacturing Renaissance: Is It a Masterpiece or a Fake?” The global financial
firm says there is no data supporting claims that manufacturing is coming back to the U.S. in significant volumes, calling any stories that suggest otherwise anecdotal.

But Harry Moser of the Reshoring Initiative (reshorenow.org) is undaunted. Offshoring is indeed occurring, the former machine-tool executive asserts. According to his group’s numbers, some 50,000 manufacturing jobs were reshored from January 2010 through about July 2012, representing about 10% of manufacturing’s overall job growth in that period. “The annual amounts are not large enough to be visible in national data.” Moser states. “The rate is still moderate, probably about as large as the annual incremental offshoring, but it is dramatically higher than four or five years ago.”

Taking a longer-term view, Moser points out that offshoring took 60 years to unfold, with the help of many consultants, and has resulted in a net loss of about 3 million manufacturing jobs. “Reshoring, conversely, has been under way for only about three to four years and consultants are just starting to get on board,” he states. “The $500-billion-plus trade deficit will eventually come down because our trading partners will stop shipping goods for worthless dollars. The question is whether the deficit comes down now gradually as companies recognize total costs of offshoring and improve domestic productivity, or comes later dramatically when the dollar collapses. I prefer the former.”

Moser adds, “The key to faster reshoring is for companies to reevaluate their offshoring decisions using something like our Total Cost of Ownership Estimator (reshorenow.org/TCO_Estimator.cfm) to see that the true cost gap is gone in some cases and small in others. They can apply lean, automation, training, and other measures to close the remaining gaps as costs continue to rise offshore. Given the difficulty of achieving cultural change, that process will accelerate only if the media consistently report on the reshoring successes. Companies followed each other like lemmings offshore. My job is to shine a light on the cases that will motivate the herd to reevaluate and provide the tools that will help them decide to come home.”

More OEMs need to see the light Harry is shining, in my view. In this issue’s On-Site article, Lynn Momrow-Zielinski, co-owner of custom molder Extreme Molding in upstate New York, notes that she rarely loses molding jobs to China on the basis of piece price. Overcoming mold-price differences is another story, however. “We couldn’t get some business because of mold costs,” she told Executive Editor Matt Naitove.  “Domestic molds can cost three to four times more than Chinese-built tools. Originally it was small entrepreneurial customers that couldn’t afford U.S. tools. But now even giant corporations want cheap tools.”

And lots of times this comes at the expense of quality, she says. The first Chinese mold that came into the Extreme Molding shop in March “looked old right out of the crate,” says Momrow-Zielinski. “We had a lot of problems and had to make a lot of modifications to get it to run consistently. But customers seem willing to spend the money after the mold arrives to get it into shape. And we have another one on the way.”

Who is doing the math at these “giant corporations” anyway? Momrow-Zielinski suggests that accountants are calling the shots. By what calculus is spec’ing a cheap tool, waiting for it to be built and shipped, and spending more money (not to mention time and effort) to get it up and running a smart business decision? Above and beyond the direct mold costs, are not also sales opportunities being lost while the mold sits by idle?

Am I missing something here? Please straighten me out.