Reshoring: It’s About Dang Time

About 10 years ago, corporate America got the brilliant idea to relocate U.S. manufacturing off-shore to low labor cost countries. This would save them money, increase margins and please shareholders. So off they trotted to China, India, Vietnam, Malaysia, Indonesia and the Philippines to have parts, subassemblies and often fully fabricated goods manufactured in these foreign lands.

The proud American plant worker was then displaced to toil at your local Wal-Mart, McDonald’s or fast food joint for a fraction of his former wages and benefits. What’s more, product quality was thrown out the window. But corporations proved they could save money. These savings were seldom passed onto consumers but rather funneled it to executives and stockholders. Perhaps a bit unscrupulous, but all perfectly legal.

Clever moves such as these contributed to the great recession and the erosion of real wages for manufacturing labor. What these great decision makers apparently didn’t foresee was the precipitous decline in quality of their products and an eventual increase in manufacturing costs due to major wage increases in places like China. Combine that with extremely long delivery intervals and ever increasing shipping costs and these management wunderkinds recognized they had a problem

In addition, a very interesting behind- the-scenes development occurred during this movement. Not only were American line workers displaced, but engineers and scientists were let go. Many were laid off and a number retired. Within 10 years, large corporations found they lost the neural center of their technology—the people.

Fast forward to 2014 and look what’s happened. U.S. corporations are bringing manufacturing back home. A new term has entered our lexicon: “reshoring.” Merriam- Webster has yet to define the term; however, americanmadematters.com provides this : “Re-Shoring—Reversal of outsourcing; the transfer of a business operation back to its country of origin.”

This trend has been in the news a lot lately. GM is moving the E-150 Econoline van production from overseas to their Avon Lake, Ohio, plant. Apple is moving IPhone components production from China to Mesa, Ariz. GE Appliance division is moving a high-tech water heater manufacturing operation from Asia back to Louisville, Ky. Jobs will be created and local economies will be revived.

One of the fallouts has been the loss of technical knowhow. I have been in contact with some large corporations and their remaining engineers have confided that there is scant knowledge of finishing technology (including powder coatings) left in their corridors. The industry has spent the last decade ignoring innovation as it shed engineers and technologists. We now find ourselves in a bit of a bind. Paths to new technology are unclear and knowledge of recent technology has left the building. Engineering managers have found themselves trying to track down former employees to engage them as consultants to help them get back on track with their new productions lines.

Regardless, there is much reason for optimism. We now have an opportunity to reinvigorate our manufacturing base and with it a resurgence of innovation. The time is ripe to expand your technical departments and with it the mining of more efficient and higher performance technologies. A successful renewal of our manufacturing base should include the vitality of the youthful technorati and their new methodologies with the careful guidance and mentoring by veteran technologists. This is a golden opportunity to engage new paradigms with the sagacious knowledge of the past.

If you are not sure of the value of reshoring your operations back to the United States, there are numerous resources that will help you calculate the Total Cost of Ownership (TCO). The Reshoring Initiative is one of them. They can be reached at www.reshorenow.org.