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Machining Company Helps OEMs Understand Hidden Costs of Offshoring

SPRINGFIELD, Ohio-- For a variety of reasons, America's OEMs have begun bringing work back from overseas manufacturers. Carmichael Machine Corp. (www.mcgregormetal.com), a machining company in Springfield, Ohio, has seen several OEMs bring work back from foreign countries during the past year. Carmichael Machine utilizes automatic, multi-spindle screw machines, CNC lathes, and machining centers, both vertical and horizontal, that can produce parts up to 12 inches in diameter.

Carmichael also offers precision secondary and finishing processes, such as broaching, tapping, grinding, and honing. The company specializes in mid-range production runs from 500 to 500,000 custom, tight-tolerance parts. Carmichael, a division of The McGregor Metalworking Companies, offers metal stamping, metal spinning, machining, welding, assembly, and tool and die design and construction.

"We've seen about four companies who have reshored--two that came back from China, one from Mexico, and one from India," says Mike Browning, sales account manager at Carmichael Machine. "It's not work that we lost that came back from China; it was work that was being done in China and then we were able to bring it into our company."

The situation in Mexico was not a pleasant one for the OEM's management team. "The company felt that there was a physical danger to working in a Mexican border town," says Browning. "They lived in the U.S. and had to be chauffeured across the border into Mexico every day. There was a lot of political corruption that they had to deal with, so the OEM had trouble getting managers to stay there."

When Carmichael Machine found out about their predicament, the company decided to find ways to justify bringing the work back to its plant. "We were able to invest in some better equipment to run their parts, which were complex, custom electrical connectors," Browning remarked. "We were able to make the parts more economically after we purchased the new equipment. So in this case, they could make the cost justification to bring the parts back to the United States. You have to listen to these companies, and then give them some possible solutions."

According to Browning, common issues caused the OEMs to return their work to the U.S., delivery issues being one of them. Many felt the need to keep an emergency inventory of parts as a precaution. "We helped one OEM overcome that by going to Just-in-Time deliveries," Browning explains. "And ever-increasing freight charges were common to all of them. I've been told that labor rates are going up in China, which will also make them less competitive. They used to say that business was like a three-legged stool. Quality, delivery, and price had to be even for it to work. Now it's like an inverted triangle, with quality and delivery on top, but it's all based on price."