The case for reshoring
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A presentation made in Hong Kong in March, 2012 to a private equity panel before reshoring was fashionable.
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The case for reshoring
- 1. The Reshoring Case Sarma Vangala, PEng, PhD
- 2. Reshoring is the movement of manufacturing from China back to the United States/Mexico/Canada. Reshoring Sarma’s Bio Past Future Examples Reshoring
- 3. Reshoring is the movement of manufacturing from China back to the United States/Mexico/Canada. Reshoring Sarma’s Bio Past Future Examples Reshoring
- 4. Credentials Reshoring Past Future Examples Sarma’s Bio •!Professional engineer, university faculty and consultant to Fortune 1000 enterprises •!Over 20 years of manufacturing technolgy transfer and supply chain experience gained in China •!Established facilities for large US corporations •!Counsels enterprises on strategic sourcing, QA standards and optimisation of supply chains •!Specialist in Oracle and SAP enterprise resource planning (ERP) implementations
- 5. China of the 1990’s Reshoring Sarma’s Bio Past Future Examples 20 yrs ago (1992) •!Large wage gap vis a vis US •!Co-operative bureaucracy, attractive tax incentives •!Favourable exchange rate (USD1 = RMB10) •!Keen, motivated labour force
- 6. China in 2016 Reshoring Sarma’s Bio Past Future Examples China 5 yrs from now (2018) •!Labour rate convergence •!Supply chain and transportation costs marginally cheaper •!Increasingly opaque bureaucracy •!RMB float against USD (USD1 estimated to be RMB5) •!Unsustainable employee turnover •!Workforce increasingly restive (a la 2010) •!Stringent hukou (household registration system) enforcement •!Militant labour unions •!Likelihood of increasing import tariffs by US
- 7. US in a few years from now Reshoring Sarma’s Bio Past Future Examples US 5 years from now •!Incentives from individual states to attract investments •!Federal incentives for some sectors, e.g., ‘green’ products •!Tax deferrals •!Training and ‘’Earn as you learn’ programmes
- 8. Early adopters Reshoring Sarma’s Bio Past Future Examples Anecdotal •!Nissan: Li-ion battery production reshored to Tennessee •!Electrolux: reshored to Tennessee •!Yamaha Motor Corp: Transferred ATV production to Newnan, Georgia •!Sleek, maker of professional grade earphones, moving its production back to US
- 10. Questions and answers Bio Q & A
- 11. Bio Thank you.