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On the face of it, bringing electronics manufacturing jobs back to the US from more affordable foreign locations is all the rage. At EBN, though, the debate remains evenly split.
In our recent poll (and it's not too late to weigh in here), our readers remain pretty evenly divided on the question of whether electronics OEMs will bring jobs back to the US. In fact, the “yes” votes and the “no” votes have each drawn 38 percent of respondents.
Another 24 percent, nearly one quarter, are taking more of a wait-and-see approach. Still others wished we had offered an “It depends” option. “With increasing logistics costs, onshore manufacturing becomes a better option for heavy and bulky items (cars are an example),” commented EBN blogger Ken Bradley. “For smaller lighter items, offshore still wins.”
There's a lot to be said for domestic manufacturing, and there is an increase in OEM efforts. In fact, onshoring efforts have created between 250,000 and 500,000 jobs in three years, claims Michael Rackley, senior director of product completion for Ryder Supply Chain Solutions.
The benefits range from an opportunity to shorten the distance between manufacturing and the end consumer, to better quality, lower costs in some situations, and potential tax credits, Rackley contends.
Our readers saw some “softer” benefits of re-shoring for OEMs. Commented a reader who posts as Supply Network Guru:
[There's] also the opportunity to sell the American pride of saying the product was made in the USA. That has an impact on most buyers – they associate it with better quality but I'm sure they will pay a few extra bucks just to help. It won't apply to all products but there's room for it.
Of course, balancing that out is the reality of higher wages, higher setup and retooling costs, and a need for workforce training.
“I don't think companies can derive any benefits by re-shoring their production/development facility to US,” said one EBN site member called Jacob. “More than logistic issues, cheap manpower and availability of raw materials/skills are important.”
Others say that these concerns are overrated. For example, in an October 2012 report, the Boston Consulting Group (BCG) estimated that the US is short between 80,000 and 100,000 highly skilled manufacturing workers. That sounds like a big number, until you consider that it is only about 1 percent of the total number of US manufacturing workers, BCG said.
“Shortages of highly skilled manufacturing workers exist and must be addressed, but the numbers aren't as bad as many believe,” said Harold L. Sirkin, a BCG senior partner and coauthor of the research in a press statement. “The problem is very localized. It's much less of an issue in larger communities, where supply and demand evens out more efficiently thanks to the bigger pool of workers.”
Clearly, it's a complicated issue. Let's keep the discussion going, whether you are optimistic or pessimistic about the future of US manufacturing. Share your favorite examples of success and failure. We'd like to hear from you.
Way back Mark Andressen predicted that increasing share of software in electronics devices will bring them back for manufacturing in the USA. Some of these devices are still under development–wearables comes to mind.
Google is establishing very good example for this and making thier best effort to make products in USA. I will purchase all products made in USA, price difference does not matter.
Organization can provide training to prepare work force they need. It does not need so much of time and effort.
Let us look forward to bring back good old days.
From a purely economic standpoint. It stands to reason that in a contracting economy profit margins contract, and controlling costs drive the decision on where to manufacture.
In an expanding economy, profit margins increase and there is room for higher costs as long as quality and convenience can be demonstrated.
This has been a tepid expansion. I believe that when the business cycle hits true lift off, on shoring will become even more attractive.
Yes, I agree with you that Reshoring will become even more attractive as the economy gets better. Other reasons include: a growing U.S. market will attract more local manufacturing and a stronger mfg. sector will improve recruiting of the needed skilled professionals, tool makers, precision machinists, etc.
Much of the offshoring occurred because companies looked only at wages or prices and not total cost. The not-for-profit Reshoring Initiative's free Total Cost of Ownership software helps corporations calculate the real P&L impact of reshoring or offshoring. Current research shows many companies can reshore about 25% of what they have offshored and improve their profitability. Reshoring is far from the whole solution to the trade deficit problem, but it is one important and growing part.
Here are a few reasons to consider reshoring
1. Higher offshore wages, e.g. China up 500% since 2000.
2. Recognition of many costs previously ignored
3. American consumers starting to prefer Made in America products
4. Quality and delivery
5. Need to respond to customers
6. IP
For example, Motorola Mobility, which is owned by Google, is opening a factory in Fort Worth, Texas. The company plans to manufacture its top-of-the-line Moto X cell phone at the facility, which was previously used to produce Nokia cell phones. Motorola will employ 2,000 workers at the Fort Worth factory. The company cites lean practice, proximity to customers, R & D and consumer preference for Made in U.S. as the main reasons for bringing manufacturing back to the U.S.
You can reach Harry Moser, founder/president of The Reshoring Initiative, at
http://www.ReshoreNow.org
@Kishore: I think still USA is behind the technological manufacturing sector. Im not sure why but they are still behind the ladder to many which does not have that kind of resources like USA does.
@Hash: USA's biggest advantage is its lead in 3D printing and an innovation culture. Manufacturing is not the same anymore. Backyard manufacturing is springing up for hundreds of niche products. For example, you can now produce parts for the 1925 Ford cars for vintage car freaks.
@Kishore: Good point but don't you think it will not be a bad idea to start it all over again ?
Hailey, onshoring and out shoring are hot topics in industry for a long time. eventhoug governments are very keen for onshoring, most of the time they are failing to provide necessary infrastructure and facilities, to promoting internal industrialization
kishore, most of the politicians talk about onshoring, as part of grab the attention or as a part of poli-tricks. But how many of them will really want to establish companies in their home land? will they provide necessary amminities for them? very rairley
A company must only settle for offshore markets if 1. Raw materials are cheap and easy to get. 2. Market production value. Most of the onshore production work benefits from having locally available raw materials and familiar markets.
US car manufacturers control a healthy fraction of total output of cars in a financial year. Why would they risk their share without having defining logistics among offshore markets? Moreover relocating employees abroad proves costly, and the output in the starting years are low as the employees get accustomed to the market, which brings down the output value.
@Rich: Ohh I thought when you said that DeusM Is involved. Anyway it's a good move regardless whether its been done by inside or outside.
onshoring and out shoring are hot topics in industry for a long time
@Jacob, true people are discussing merits of onshoring and outsourcing. But these days more and more companies are preferring onshoring over outsourcing because cost saving because of outsourcing is not that significant.
For example, you can now produce parts for the 1925 Ford cars for vintage car freaks.
@Kishore, thats a very good point. I totally agree with you 3D printing has enabled people to print things themselves all jus they need is the design which they can feed into 3D printer.
I think still USA is behind the technological manufacturing sector.
@hash.era, i.e bit surprising to hear. Which country do you think is leading in technological manufacturing sector ?
The USA must show the way, if don't then soon we will be front of the biggest unemployment crisis in the world. The signs are very clear, the unemployment rate is going up year by year almost in every country. The outsourcing joke must be stopped before is too late.
I am surprised too , as far I know the USA is the leading country especially in the technology sector. Probably @hash.era means there are not many factories, and that is true China is ahead (the factory of the world).
@Nemos I second that. The unemployment rate is indeed going up and that is
mainly because of factors like below quality employees, market
crunches, a step in a wrong direction by the company: for eg Google
invested a huge sum of money in its X-labs for the Google Glass
Project. So far, they haven't been able to get enough handlers and
sponsors who would be interested enough to carry on with this project.
Although, this did not result in a wave of firing employees inside the
company, mainly due to its fantastic HR and Management departments,
had this been some less significant company, it was bound to have
problems getting back up.
“people are discussing merits of onshoring and outsourcing. But these days more and more companies are preferring onshoring over outsourcing because cost saving because of outsourcing is not that significant. “
Tirlapur, you may be right but my question is, whether the internal market is equipped for accommodating more business/production unit with necessary infrastructural facilities and manpower
“A company must only settle for offshore markets if 1. Raw materials are cheap and easy to get. 2. Market production value. Most of the onshore production work benefits from having locally available raw materials and familiar markets.”
Tirlapur, the condense of all such factors are profit. For any company the final intension is maximizing the profit
Wearables is a hugely hot topic and one that we'll hear more about in the future. The software component is an interesting piece of the puzzle. Many US software companies are outsourcing all or part of their software development to engineers in other countries.. The question then would be, is it then really being manufactured in the US? some portion of the intellectual property is being developed elsewhere.
Google is an interesting example. The company is promising to deliver the first smartphone assembled in the US later this summer. Their manufacturing is in Ft. Worth Texas. I read an intersting piece on this recently that said 80 percent of US consumers are willing to pay more for US goods, but the question is how much more? The same Boston Consulting study found chinese buyers were also willing to pay more for US goods. Here's a link if you want to take a look: http://www.theverge.com/2013/7/24/4549624/made-in-america-2-behind-new-tech-patriotism
@Finance Guy, I'd be interested in hearing more about this. If the cycles are fairly short,wouldn't it be hard to shift manufacturing to address them? I'm thinking that a manufacturing facility is a long-term committment. How do you see that factoring into the discussion?
Thanks for the link, Reshore Now. Interesting stuff.
Thanks for the link, Reshore Now. Interesting stuff.
It appears over the last two recessions that the cycle is expanding. The supposed reason is that we do not have t 4-6 % growth rate typical in the recovery part of the cycle. However no one really knows why this is taking place.
The reduced speed of recovery slows the chances of inflation taking hold which bumps up interest rates and supports a recession. If in fact the business cycle does expand at a slower rate, it stands to reason that the shifting of production issues won't be as rapid, and easier to control.
No one really knows if the cycle will structurally lengthen in the years ahead.
One nice thing about the private market, industries expand and contract quite efficiently as economic factors demand. That's what makes it interesting!
As long as the USA maintains the helathy financial status to take care of the country they should probably do not need to build factories. But at the same time there could be lot of scope for new products that are being developed can be definitely built in USA to reduce the logistics costs.
“I read an intersting piece on this recently that said 80 percent of US consumers are willing to pay more for US goods, but the question is how much more?”
Hailey, personally I am against such sentimental business. In globalization era, peoples have to look and think in a broader manner. It's not possible for all companies to start their own production units in all countries. Moreover that's not a fair business too.
>>For any company the final intension is maximizing the profit<<
That's key to the issue/debate. Until companies that are cash-loaded in the last few years show sincerity that may not be easily possible.
@Finance Guy, well you are living up to your handle. that makes a lot of sense… I wonder how much the average supply chain company takes this into consideration as it plans its roadmaps for development and investment. It's important.
US manufacturing will never be a complete panacea. The answer for should we onshore will always be “It depends.” It's a complex recipe that includes costs, lead times, corprote culture, marketing and brand development and a hundred other things. IT's interesting, though, to see how some of these big name players in the electronics industry are making it happen.
By 2025, a fresh global consuming class will emerge, and the mainstream of consumption will take place in developing economies. This will generate rich new market opportunities. In the meantime, in established markets, demand is fragmenting as clients ask for greater variation and more types of after-sales service. A rich pipeline of inventions in materials and processes—from nano materials to 3-D printing to progressive robotics—also promises to generate fresh demand and drive additional productivity gains across manufacturing industries and geographies.
These opportunities arise in an exceptionally challenging environment. In some low-cost labor marketplaces, wage rates are increasing rapidly. Volatile resource prices, a looming lack of highly skilled talent, and heightened supply-chain and regulatory risks create a situation that is far more uncertain than it was before the Great Recession.
@Hailey : Yes but I feel it depends on how well they perform. In the end its all on performance.
“That's key to the issue/debate. Until companies that are cash-loaded in the last few years show sincerity that may not be easily possible.”
Wale, eventhough that's the true factor, they will strive hard for that.
“US manufacturing will never be a complete panacea. The answer for should we onshore will always be “It depends.””
Hailey, agreed and depends up on various factors like availability of raw materials, skilled labors, logistics etc. one cannot easily stop outsourcing and prefer in shoring.
This is really good story. I wish many young students are reading it. Best wishes to upcoming new SCM professionals.
It's heartening to see so much support for the field at the university level, but i can't help but think we have to start raising awareness even earlier. I don't know of any high schoolers for example that are saying “I think i'll go into supplly chain management”… and that's the way to make sure these programs grow.
For those of you who are supply chain managers, who/what brought you into the field? Were you an aspiring SCM in high school?
A survey by Gartner shows global supply chain is suffering nonmaterial difficulity, such as lack of talent, especially in the opportunity rich emerging markets. So these salary stimulations benefit attracting supply chain talents.
i Had taken a printout of this artcile and pined in out internal notice board. so those who are intrest can join with our community too.
“This is really good story. I wish many young students are reading it. Best wishes to upcoming new SCM professionals”
Hm, apart from reading we can refer such articles to, those who are interested to know more about supply chain. This will help them to build a career in similar line.
“According to the Wall Street Journal, corporations are scrambling to hire supply chain experts and many universities are introducing new programs to meet that demand.”
Tam, that's a good initiative and will help to bridge the gap between requirement and job opportunities,. I had seen that many of the peoples are working in supply chain team without any formal education in same line and such drawbacks can be minimized by this way.
@Lily, i'd be interested in reading more about that. Do you have a link you could post?
@Jacob, thanks and what a great idea! We'd be a great source of mentoring for students thinking of a supply chain career.
It is encouraging to see these new university courses. Once future grads see that there are interesting well paid jobs to be had out there then more will get involved. Companies should set up affiliations with universities and promote this also.
@Hailey: Is it possible to compile list of different programs available for SCM with its links and create web page on EBN? Also, if you can add pre-requisites for this, EBN will help thousands of students and few future CEOs of fortune 500 organizations.
Tam mentioned to Institute for Supply Management. I wanted to share a link to the 2013 Salary Survey results. It's got some interesting results because they parse the information in a variety of ways including by gender, geogrpahic location, experience, title and more.
“thanks and what a great idea! We'd be a great source of mentoring for students thinking of a supply chain career.”
Hailey, that's the simplest way of extending our helping hands to younger generation.
This is very encouraging for students to think seriously about this career. Supply chain management is still of rare choice and the current people in the field (most) were not specialized at the beginning. They were trained in something else and then decided to switch over to SCM.
As I recall Ford made sure that his employees could afford what they made.
Today what is happeneing (with this shortsighted focus on near-term/ quarterly profits and bonuses) that Americans will not be able to afford what we make (or import). That will keep the 'shrinking economy' last longer than usual.
I have not seen in the commenst yet any reference to the closure of the experience loop between R&D-Design-Manufacturing-Development. As the manufacturing is now 'distant' the osmotic sharing-transfer of experince is not as effective, so product improvements are not made with manufacturability in mind. Onshoring will help immensely.
At the risk of being 'nationalistic'/ 'protectionist' I am also concerned for the greater national good. A stronger local economy leads to many other longer lasting benefits, maybe not so much to the best and most immediate quarterly financials.
“This is very encouraging for students to think seriously about this career. Supply chain management is still of rare choice and the current people in the field (most) were not specialized at the beginning. They were trained in something else and then decided to switch over to SCM.”
Alex, you are absolutely right. Now a day's peoples especially engineers are considering supply chain as their last choice because they don't know much about the field. Moreover these is no formal education about this particular profession.
I cant disagree with you on that. I think generally people dont see supply chain as a worthwhile career path in the past but now that markets development in other part of the world are growing, this would boost supply chain sector as another worthy option. Besides, with many universities start offering it as a course of its own, a very welcome development.
In fact I can see in lots of companies the management equate good supply chain manager to someone being able to buy things at extremely low costs, perhaps with good connections to China suppliers, and nothing more than that. Perhaps we should send these management to university courses as well.
It occurs to me that with all the talk about Apple and its supply chain hitting mainstream media over and above the converatoins we have in industry outlets, that general awareness of the importance of the supply chain will only get greater.
“In fact I can see in lots of companies the management equate good supply chain manager to someone being able to buy things at extremely low costs, perhaps with good connections to China suppliers, and nothing more than that. Perhaps we should send these management to university courses as well. “
Alex, now a day's the trend is Engineering degree with a Post graduation in Management side. So the person can have both the technical and management knowledge.
Jacob, yes that would be the best combination of knowledge for such positions. And I believe that would make them great managers too.
“yes that would be the best combination of knowledge for such positions. And I believe that would make them great managers too.”
Alex, am not sure about that 'they can be great managers'. But technically they will be qualified for that job/post.