Is Reshoring a Real Opportunity


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Presentation at 2011 IEDC Annual Meeting on Reshoring

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Is Reshoring a Real Opportunity

  1. 1. Riding the Re-Shoring Wave: Strategies for Attracting Overseas Business Operations to Your Community: Ohio Efforts<br />Mark Barbash, FM<br />Finance Fund / Economic Development Consulting<br />Columbus, Ohio<br /><br />
  2. 2. Why are firms considering reshoring now? <br />
  3. 3. Some firms are moving work back because the US is becoming relatively cheaper on costs that they measure: <br />Rising shipping costs<br />Increased wages in China, stagnant wages in US<br />Other firms are discovering “hidden costs” of off-shoring that are significant; ie: costs that they can’t measure or have never measured before<br /><br />“Re-shoring” considerations<br />
  4. 4. Offshoring may not reduce costs, but rather shift costs to different budgets<br />Piece price falls (good for purchasing)<br />Travel costs rise (bad for engineering?)<br />Product development costs may stay with US plant (and not be charged to foreign plant)<br /><br />Hidden costs of reshoring<br />
  5. 5. Worst case (real example):<br />A US plant worked overtime fixing quality problems from a Chinese plant belonging to the same company. The overtime made the US plant look expensive, hastening its demise<br /><br />
  6. 6. Some costs are hard to monetize (but that does not make them unimportant):<br />Opportunity cost of CEO time de-bugging supply chain<br />Slower ramp-up to full production due to communication difficulties<br />Lost opportunities to see potential product or process innovations, because of separation of customers, product designers from production.<br /><br />Hidden costs-2<br />
  7. 7. Increased costs due to greater variability<br />Need to hold more inventory due to ‘just-in-case’ and ‘just in time’ scenarios<br />Potential for loss of intellectual property<br />Assumption that the value of the product made in the US and abroad is the same<br />Not true if US product is made with better materials, has more reliable delivery, provides better opportunities for innovation<br /><br />Hidden costs-3<br />
  8. 8.<br />Dr. Susan Helper<br />Case Western Reserve University<br />Cleveland, Ohio <br /><br />
  9. 9. Polymer /Composites <br />Automotive Supply Chain<br />Advanced Energy Supply Chain<br />Open-source research collaboration linking university researchers with business researchers<br />Hubs of Innovation and Opportunity<br /><br />Supply Chain Initiatives<br />
  10. 10.<br />Technology Based ED Group Focused on Polymers (an Edison Center)<br />Worked with Polymera, a new business startup that was open to the reshoring opportunities<br />Development of specific case studies with fiscal and operational analysis<br />Goal: Develop an industry focused tool that can be applied BEFORE a company makes an offshoring decision<br />
  11. 11. Wayne Earley, PolymerOhio:<br />(614) 776-5720<br /><br />
  12. 12. Survey of 500 North American Suppliers and OEMs:<br />The percentage receiving “queries or actual work from companies suffering supply chain disruptions” has increased from 36% to 42% in the past four quarters.<br />21% of North American firms surveyed have “returned a portion of [their] production into or closer to North America from a low-cost country” in the past three months, up 9% from the previous quarter.<br /><br />Reshoring in the Auto Industry<br />
  13. 13. Center for Automotive Research & University of Michigan<br />CAR’s Automotive Communities Initiative<br />Inventory of vacant auto facilities, both OEM’s and supply chain<br />Working with communities to develop an international marketing effort<br /><br />
  14. 14. University of Michigan / EDA Center<br />Larry Molnar<br /><br />Center for Automotive Research<br />Kim Hill Director <br /><br /><br />
  15. 15. What can the Economic Development industry do to advance the Reshoring Opportunities?<br /><br />
  16. 16. Begin to understand the issues<br />Find ways to measure what hasn’t been measured before; Become familiar with the work of Harry Moser and others<br />Engage your Universities and Trade Associations<br />Identify potential case studies for evaluation by Harry Moser, Sue Helper or others<br /><br />Develop a Basic Understanding of the Issues<br />
  17. 17. Reluctance of businesses to have their decisions “second-guessed”<br />Challenging how decisions are made within a company and who makes the decisions<br />Reluctance to provide specific decision-making data or performance data<br /><br />Challenges to Understanding<br />
  18. 18. MFGWatchnotes that <br />“much more [re-shoring] activity must take place for meaningful economic or employment improvements to be seen” among U.S. manufacturers.<br /><br />
  19. 19. Jobs in the Making: The Role of Mfg in the U.S. Economy and the EDO’s Role<br />Report to be issued later in 2011<br />Manufacturing Productivity increasing through innovation and technology<br />Build Innovation Infrastructure<br /><br />IEDC / Economic Development Research Partners<br />
  20. 20. Regional Reshoring Webinar, April 2011<br />Sponsored by IEDC and the Economic Development Administration<br />Discussion among EDPs in Ohio, Indiana, Michigan and Pennsylvania<br /><br />Regional Reshoring Webinar<br />
  21. 21. Your Strategy: <br />Using the re-shoring logic (and software) <br />Help your companies see the advantage of keeping production and other functions local<br />Show non-U.S. companies how much more competitive they will be if they locate a facility in the U.S., preferably near a major customer. <br /><br />Business Technical Assistance<br />
  22. 22. Engage your businesses as part of your Business Retention and Expansion (BRE) Program<br />Sponsor seminars to plant the seeds of Reshoring<br />Identify businesses considering off-shoring and help them quantify costs<br />Advocate for Reshoring at the Federal policy level<br /><br />Business Technical Assistance<br />
  23. 23. Partner with Industry Trade Association to conduct “Re-Shoring Fairs” <br />The National Tooling Machine Association held the first of these fairs, on May 12th of 2010 in Irvine, California, <br />The Fair attracted 45 OEMs and 113 contract manufacturers.<br /><br />Re-Shoring Fairs<br />
  24. 24. NIST<br />Manufacturing Extension Partnership<br />Reshoring Initiative: Harry Moser<br /><br />Michael P. Collins <br /><br /><br />Other Important Players<br />
  25. 25. Businesses should make the case based on value, not just on cost<br />Value may be harder to measure<br />Efforts to measure it pay off for forms and communities in high-wage, high-skill regions<br />Offshoring often means:<br />One very visible cost falls (direct labor)<br />While many hidden costs rise<br />Often, hidden costs are greater than visible costs<br /><br />The case to be made is: <br />
  26. 26. Thank you. <br /><br />