Reshoring Is Here—Are You Ready?

There’s lots of good stuff going on in the area of reshoring—i.e., bringing back manufacturing work to America that had previously been outsourced to other parts of the world. The evidence is more than just anecdotal.

Mitch Free is founder and CEO of MFG.com, an online marketplace where buyers of made-to-order industrial goods post RFQs, complete with their engineering CAD files and technical specifications. The RFQs are automatically matched to suppliers—molders and extruders like you, as well as job shops in metalworking and other industries—around the world that have the right equipment, expertise, and capacity to fill the order.

Free had heard the buzz about reshoring, so he conducted a survey of the job-shop members of MFG.com in late April. The results were encouraging for U.S. manufacturers. He published them recently in a column he wrote for Forbes.com. Some tidbits:

•Some 40% of the companies surveyed indicated that they have won new manufacturing business this year that previously had been offshored. Free discovered that OEMs, still wary of the uncertain economy and demand for their products, are ordering in smaller lot sizes. These companies understand that in most cases it costs more to reshore the work and produce in smaller quantities, but they balance the extra cost against risk mitigation and supply flexibility.

•Free further concluded that digitization of manufacturing is playing a role in bringing the point of manufacturing closer to the point of consumption. This lets companies save on logistics, take advantage of local economies, tweak products for local market preferences, build goodwill in the local market, and mitigate the risk of a single, far-distant production factory.

•Moreover, Free determined that with OEMs pressured to reduce the time to introduce new products, it makes more sense for them to locate part production near their engineering/marketing teams to facilitate the collaboration that is crucial for innovation and short time-to-market. Free also concluded that product customization, born in the world of consumer goods and gourmet coffee, is migrating to the industrial side. To play in that game, it doesn’t make much sense to manufacture on the other side of the world. These OEMs need to be close and nimble.

Meanwhile, our sister publication, MoldMaking Technology, held its annual Amerimold show and conference June 13-14 in Novi, Mich. The keynote address was delivered by Harry Moser, founder of the Reshoring Initiative, whose total-cost-of-ownership (TOC) model has been discussed on this page before (Dec. ’11). Moser said 60% of OEMs use a flawed economic model that considers only the quoted price and the labor costs. “Looking at all costs of molds purchased from China and brought to the U.S., we have the advantage,” he stated. His website contains a free TCO calculator that provides more than two dozen cost factors that OEMs need to consider when making sourcing decisions. It also contains links to hundreds of articles about reshoring in various industries.

Moser also observed that labor costs in China have risen. He projects that labor costs between China and the U.S. will actually converge in 2015.

Free said to me, “This is a good time to have a job shop.” From all indicators, there is going to be considerable opportunity coming your way. You need to be ready. Ready with engineering and processing talent to take on new projects. Ready with the latest, most capable and efficient equipment, materials, controls, and automation technology.

So what are you waiting for?