American Made Manufacturing Flexes its Reshoring Muscle

Drew Greenblatt, owner of Baltimore-based Marlin Steel Wire Products LLC, said the combination of high quality, on-time shipments, and superior engineering gives U.S. companies like his an edge versus overseas competitors.
Photo courtesy of Marlin Steel Wire Products.

Rebecca Carnes
Design-2-Part Magazine

If you want a train to head in the opposite direction, first it has to stop. Around 2003, manufacturing was barreling down the line towards offshoring, but current statistics show that trend has effectively stopped and is now starting to head in the opposite direction—towards a strong reshoring trend with powerful momentum.

Back in 2003, nobody even spoke of reshoring and the U.S. was offshoring an additional 150,000 manufacturing jobs a year. By 2013, offshoring jobs plummeted to about 40,000, while the rate of reshoring was up about 40,000. After ending the net loss to overseas competition, American manufacturing is now growing stronger as reshoring trends rise.

“We have gone from losing 150,000 jobs a year, to losing zero,” said Reshoring Initiative founder, Harry Moser.

And if it weren’t for the positive trend in reshoring and the reduction in the offshoring rate, Moser explained, then the United States would have another million or two million jobs offshored by now.

Statistics from the Boston Consulting Group’s third annual American manufacturing survey, where reshoring is addressed, backed up Moser’s analysis.

Senior manufacturing executives with sales of $1 billion or more said their reshoring rate had risen about 20 percent in the past year, according to BCG. And by a three-to-one margin, respondents also predicted that reshoring would create U.S. manufacturing jobs within five years, saying they expected to boost their U.S. manufacturing workforces by five percent or more. This reinforces a previous BCG estimate that reshored production and rising exports will create between 600,000 and one million direct manufacturing jobs by 2020.

Moser said focusing on total costs rather than price is finally sinking in with company decision makers. The Reshoring Initiative’s Total Cost of Ownership (TCO) estimator is available to companies as a free online tool that helps account for all relevant factors—shipping costs, inventory costs, delays, intellectual property risk—to determine the true total cost of where to produce or source.

Moser recently analyzed 19 TCO cases of China versus the United States and found that the U.S. was only lower in price in five percent of those cases, but lower in total cost of ownership in 53 percent of the cases. Conservatively, about 25 percent of the offshored work might return if companies used the total cost analysis, Moser said.

When companies take a holistic view of cost, the U.S. increasingly comes out ahead, concurred Michael Zinser, a BCG partner who leads the firm’s manufacturing practice in the Americas. “We have long advised companies to look at the total cost of manufacturing in the U.S. and to consider the entire supply chain, not just the obvious factors such as wages,” Zinser said in a statement.

There are some naysayers, however. A recent A.T. Kearney report called reshoring “not all it’s cracked up to be” and offered statistics to contradict the “hype.” The report concluded that imports of offshored manufacturing goods in to the U.S. have increased at a faster rate than any reshoring of manufacturing operations to the U.S. during the past three years.

A.T. Kearney, a global management consulting firm, has an extensive presence in Asia and recently authored a paper entitled, “Offshoring for Long-term Advantage.” It also recently crafted a “Best Innovator China” program.

Moser said A.T. Kearney’s own statistics show reshoring growing at a rate of 100 percent per year, adding that this type of negativity toward reshoring does a lot of harm. The A.T. Kearney report received a lot of press from some major media sources, like The Wall Street Journal and NPR. When companies read negative headlines and articles about reshoring, they are less likely to look into it, Moser said.

“It’s essential to be at least neutral on the subject instead of intentionally getting negative like A.T. Kearney,” he said. “If you keep saying, ‘It’s (reshoring) not happening,’ well, surely it won’t happen. I’d rather be on the virtuous spiral than the death spiral.”

Giving the People What They Want

More and more U.S. consumers are interested in buying American, whether it’s for quality reasons or “feel good” reasons in supporting their country and the economy. There is a pervading “coolness” factor among customers with buying American and even buying local, which is causing companies to meet this demand.

Some major players, both foreign and domestic, are deciding to reshore because it not only makes the best financial sense, but it’s what customers want.

Walmart, which has historically struggled with the perception that the majority of its products are sourced from overseas, has made a concerted effort since 2013 to purchase a total of $250 billion additional Made in USA products over the next ten years.

“Our customers have told us they want to buy products that support their communities,” said Michelle Gloeckler, Walmart's executive vice president of consumables and U.S. manufacturing, in a statement. “And with changes in energy and automation processes overseas, it is increasingly cost effective and efficient to manufacture closest to the point of consumption.”

And Walmart is not all talk. It has hosted two manufacturing summits already, meeting with U.S. suppliers and government officials to discuss creating jobs and sourcing domestically. Last July, 500 U.S. suppliers from across the country were invited to an Open Call at Walmart’s home office in Bentonville, Ark., to pitch their products with 175 buyers from Walmart and Sam’s Club.

Present at Walmart’s 2014 Manufacturing Summit in Denver was The Rodon Group, a Pennsylvania-based plastic injection molder that is active in the promotion of American manufacturing. Rodon President and CEO Michael Araten has participated in several summits and forums, including a Select USA roundtable discussion hosted by The White House last May. The Rodon Group, a subsidiary of K’NEX Brands, L.P., has manufactured more than 34 billion parts for the K’NEX building toy system that is sold at Walmart. And K’NEX also recently announced it has reshored Lincoln Logs production back to the United States from China.

The Rodon Group is a founding member of the organization “American Made Matters,” whose mission is to “educate consumers that buying U.S. - made products strengthens the American dream.” The company makes every effort to promote the value of American-made products and highlight the contribution that a strong manufacturing sector has on the economy, explained Paula Hynes, communications coordinator for The Rodon Group.

“With rising wages and transportation costs, China and other foreign companies just don’t offer the same value. OEMs can get better quality, more demand, and distribution control when they use near-shore suppliers. And companies understand the inherent value of “Made in America.” They want to be able to promote their products to U.S. consumers who are looking to buy American,” Hynes said.

Who Are Some OEMs That Are Reshoring?

Whirlpool: The company has invested nearly $80 million to expand manufacturing operations in Ohio, Iowa, Oklahoma, along with a $200 million investment in a one million square foot manufacturing plant in Cleveland, Tenn., for premium cooking products.

Caterpillar: The iconic builder of construction and mining equipment recently moved some production from Japan to an 850,000 square foot facility in Athens, Ga., which will become Caterpillar's global source for small track-type tractors and will also provide mini hydraulic excavators for customers in North and South America and Europe.

GE: GE Aviation is building a new $100 million LEAP jet engine facility in Lafayette, Ind., scheduled to open in September. It is the seventh new GE Aviation facility in the U.S. in the past seven years, joining sites in Batesville, Miss.; Auburn, Ala.; Greenville, S.C.; Dayton, Ohio; Ellisville, Miss.; and Asheville, N.C. These facilities support more than 2,500 new U.S. jobs and investment in more than 1 million square feet of new facilities. Between 2013 and 2017, GE Aviation expects to invest more than $3.5 billion in plant and equipment at its sites worldwide, with most of the investment in the U.S.

GE Appliances is also expanding, and recently invested $88 million to support the growth of new product manufacturing at its cooking products operation in LaFayette, Georgia. The expansion accommodates a 1,100-ton power press intended to help the plant increase its metal fabrication capability as it seeks to insource metal parts production to support the manufacturing of GE’s new line of wall ovens. Overall, the business unit is making a $1 billion investment to revitalize its U.S. plants, products, and services.

“The LaFayette production expansion is a perfect example of insourcing the manufacturing of products currently made in other countries,” said Georgia Governor Nathan Deal on GE’s recent expansion into LaFayette, Ga., in a statement. “GE’s investment not only provides inroads toward future growth, but it also creates jobs and fosters a sense of pride among local employees who are making industry-first GE appliance products.”

Volkswagen: The automaker plans to bring some manufacturing from Germany to the United States to build a new SUV at its Chattanooga, Tenn., factory, spending $600 million to expand the factory, hire 2,000 factory workers, and set up a new research center that will employ about 200 engineers.

“With the midsize SUV, the expansion of the Chattanooga plant and the new development center, the focus is on the wishes of the US customer. This is also a strong signal for the U.S . as an industrial and automobile production location. The Volkswagen brand is going on the attack again in America,” said Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, in Wolfsburg, in a statement.

Who Are Some Job Shops That Are Reshoring?

Marlin Steel Wire Products LLC, Baltimore, Md., specializes in custom-engineered products made of steel wire and sheet metal. The manufacturer has recently reshored some high-precision work for automotive, offering high quality, on-time shipments, and superior engineering—something its overseas competitors lack.

“America is going to shine with its massive robots, and great automation, and really slick engineering,” said Marlin Steel owner Drew Greenblatt, who invested heavily in robotics and whose workforce consists of 20 percent degreed mechanical engineers. Where America can’t be competitive is with the low-value, high-volume commodity work that is easy to produce. “The areas where we can rule supreme is with high-precision and high-quality products,” he said.

New England Metalform Inc. Plainville, Mass., offers metal stamping, deep drawing, and CNC machining. Company representatives say they are reshoring some electro-optics from Singapore because of the customer’s quality concerns and the rising costs from an overseas supplier. New England Metalform is able to offer quicker turnaround, higher quality, and closer proximity without any language barrier.

Mercury Corporation Hammondsport, N.Y. , provides sheet metal fabrication, welding, and finishing. The company has reshored some racks, cabinets, enclosures, and integrated assemblies from China, Philippines, and Singapore due to pricing and quality concerns the customers were having with its offshore sources.

“Asia’s claim to fame is low pricing, not customer service,” said vice president Peter Hannan, in an e-mailed response. Mercury Corp. is able to offer improved logistics and quality over offshore competitors, he said, adding that his customers also don’t have to worry about keeping large amounts of inventory as they would with an overseas supplier.

Quality Manufacturing, Inc. Winchester, Ky., specializes in sub-assembly and assembly services, as well as testing and packaging, custom machine automation, tooling and fixture design, and build services. The company is reshoring some work from China due to quality, control, and delivery concerns from customers.

“Our commitment to quality and delivery is paramount. We know we have to do whatever we need to do in order to compete on a cost basis,” said national sales manager, Brian Wilhoit, in an e-mailed response.

The Rodon Group, Hatfield, Pa., known for its high-volume plastic injection moldings, offers higher quality than offshore competition, as well as the ability to respond quickly to market trends.

“When your production facilities are thousands of miles away, you just can’t react quickly, thus making companies vulnerable to shifts in product design or demand,” said communications coordinator, Paula Hynes. “Proximity to your production also increases and eases communication and collaboration. We work with many clients that we meet with regularly to discuss current and future product needs. And we live in a country that protects consumers through several safety regulations. Often, foreign producers don’t meet these requirements. U.S. companies know how to manufacture products to meet the regulatory compliance requirements.”

Ways to Get Involved in the Reshoring Movement:

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