This document discusses strategies for attracting overseas business operations back to communities in Ohio. It outlines reasons why some companies are considering re-shoring work, including rising shipping costs, higher wages abroad, and hidden costs of off-shoring like quality problems and loss of innovation. It recommends that economic developers understand these issues, identify potential case studies, and help companies quantify total costs of off-shoring versus domestic production to promote re-shoring.

1. Riding the Re-Shoring Wave: Strategies for Attracting Overseas Business Operations to Your Community: Ohio Efforts Mark Barbash, FM Finance Fund / Economic Development Consulting Columbus, Ohio Mark.barbash@gmail.com

2. Why are firms considering reshoring now?

3. Some firms are moving work back because the US is becoming relatively cheaper on costs that they measure: Rising shipping costs Increased wages in China, stagnant wages in US Other firms are discovering “hidden costs” of off-shoring that are significant; ie: costs that they can’t measure or have never measured before susan.helper@case.edu “Re-shoring” considerations

4. Offshoring may not reduce costs, but rather shift costs to different budgets Piece price falls (good for purchasing) Travel costs rise (bad for engineering?) Product development costs may stay with US plant (and not be charged to foreign plant) susan.helper@case.edu Hidden costs of reshoring

5. Worst case (real example): 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 Mark.barbash@gmail.com

6. Some costs are hard to monetize (but that does not make them unimportant): Opportunity cost of CEO time de-bugging supply chain Slower ramp-up to full production due to communication difficulties Lost opportunities to see potential product or process innovations, because of separation of customers, product designers from production. susan.helper@case.edu Hidden costs-2

7. Increased costs due to greater variability Need to hold more inventory due to ‘just-in-case’ and ‘just in time’ scenarios Potential for loss of intellectual property Assumption that the value of the product made in the US and abroad is the same Not true if US product is made with better materials, has more reliable delivery, provides better opportunities for innovation susan.helper@case.edu Hidden costs-3

8. Mark.barbash@gmail.com Dr. Susan Helper Case Western Reserve University Cleveland, Ohio Susan.helper@case.edu

9. Polymer /Composites Automotive Supply Chain Advanced Energy Supply Chain Open-source research collaboration linking university researchers with business researchers Hubs of Innovation and Opportunity susan.helper@case.edu Supply Chain Initiatives

10. susan.helper@case.edu Technology Based ED Group Focused on Polymers (an Edison Center) Worked with Polymera, a new business startup that was open to the reshoring opportunities Development of specific case studies with fiscal and operational analysis Goal: Develop an industry focused tool that can be applied BEFORE a company makes an offshoring decision

11. Wayne Earley, PolymerOhio: wayne.a.earley@polymerohio.org (614) 776-5720 Mark.barbash@gmail.com

12. Survey of 500 North American Suppliers and OEMs: The percentage receiving “queries or actual work from companies suffering supply chain disruptions” has increased from 36% to 42% in the past four quarters. 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. susan.helper@case.edu Reshoring in the Auto Industry

13. Center for Automotive Research & University of Michigan CAR’s Automotive Communities Initiative Inventory of vacant auto facilities, both OEM’s and supply chain Working with communities to develop an international marketing effort Mark.barbash@gmail.com

14. University of Michigan / EDA Center Larry Molnar kallen@umich.edu Center for Automotive Research Kim Hill Director khill@cargroup.org Mark.barbash@gmail.com

15. What can the Economic Development industry do to advance the Reshoring Opportunities? Mark.barbash@gmail.com

16. Begin to understand the issues Find ways to measure what hasn’t been measured before; Become familiar with the work of Harry Moser and others Engage your Universities and Trade Associations Identify potential case studies for evaluation by Harry Moser, Sue Helper or others susan.helper@case.edu Develop a Basic Understanding of the Issues

17. Reluctance of businesses to have their decisions “second-guessed” Challenging how decisions are made within a company and who makes the decisions Reluctance to provide specific decision-making data or performance data susan.helper@case.edu Challenges to Understanding

18. MFGWatchnotes that “much more [re-shoring] activity must take place for meaningful economic or employment improvements to be seen” among U.S. manufacturers. Mark.barbash@gmail.com

19. Jobs in the Making: The Role of Mfg in the U.S. Economy and the EDO’s Role Report to be issued later in 2011 Manufacturing Productivity increasing through innovation and technology Build Innovation Infrastructure Mark.barbash@gmail.com IEDC / Economic Development Research Partners

20. Regional Reshoring Webinar, April 2011 Sponsored by IEDC and the Economic Development Administration Discussion among EDPs in Ohio, Indiana, Michigan and Pennsylvania Mark.barbash@gmail.com Regional Reshoring Webinar

21. Your Strategy: Using the re-shoring logic (and software) Help your companies see the advantage of keeping production and other functions local 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. Mark.barbash@gmail.com Business Technical Assistance

22. Engage your businesses as part of your Business Retention and Expansion (BRE) Program Sponsor seminars to plant the seeds of Reshoring Identify businesses considering off-shoring and help them quantify costs Advocate for Reshoring at the Federal policy level susan.helper@case.edu Business Technical Assistance

23. Partner with Industry Trade Association to conduct “Re-Shoring Fairs” The National Tooling Machine Association held the first of these fairs, on May 12th of 2010 in Irvine, California, The Fair attracted 45 OEMs and 113 contract manufacturers. Mark.barbash@gmail.com Re-Shoring Fairs

24. NIST Manufacturing Extension Partnership Reshoring Initiative: Harry Moser www.reshorenow.com Michael P. Collins www.mpcmgt.com Mark.barbash@gmail.com Other Important Players

25. Businesses should make the case based on value, not just on cost Value may be harder to measure Efforts to measure it pay off for forms and communities in high-wage, high-skill regions Offshoring often means: One very visible cost falls (direct labor) While many hidden costs rise Often, hidden costs are greater than visible costs susan.helper@case.edu The case to be made is:

26. Thank you. Mark.barbash@gmail.com