The headline “Dog Bites Man” wouldn’t draw as much attention as “Man Bites Dog.” After all, dogs bite people every day, but it’s not often that people bite dogs.
Similarly, until recently news about manufacturing moving overseas would not have been as big a news story as overseas manufacturing moving back to the United States. But that’s what’s happening and hopefully will happen a lot more in Northeast Ohio with the help of two local organizations dedicated to growing regional manufacturing: WIRE-Net and MAGNET.
It’s called “reshoring,” and it’s a national trend. Although no one can say for sure how much previously “offshored” manufacturing is moving back to the United States — and the overall number of jobs coming back is small compared with those expected to stay overseas — there’s no doubt that reshoring is a reality.
“Manufacturers offshore to reduce costs and/or to establish offshore supply in support of a larger export strategy,” says Robert Schmidt, a senior consultant with MAGNET, (Manufacturing Advocacy & Growth Network). “They reshore for the same reasons. What is happening now is that manufacturers are seeing the hidden costs of offshoring — lost staff productivity due to extensive travel, IP [intellectual property] protection issues, growing inventories and loss of flexibility in dealing with changing customer demands.”
“Reshore” comes from The Reshoring Initiative, an industry-led effort to bring manufacturing back to the United States by demonstrating the competitive value of doing so. The initiative works with manufacturers to help them to recognize the business benefits of reshoring, as well as how using domestic suppliers and production workers strengthens the national economy because it increases demand for the very products being made.
Retired manufacturing CEO Harry Moser founded The Reshoring Initiative in 2010. Manufacturing is in Moser’s blood — both his father and grandfather worked for the Singer Sewing Machine Co. factory in Elizabeth, N.J. Moser spent summer vacations during high school and college working at the plant. He later worked for almost six years at Acme-Cleveland.
These days, Moser travels the country to speak about reshoring, works with individual companies to evaluate sourcing options and maintains a website with costing tools that companies can use to objectively calculate the total cost of sourcing (www.reshorenow.org) here and abroad. The Reshoring Initiative does not promote protectionism. Rather, its aim is to educate manufacturers about how much it really costs to buy goods that have been manufactured overseas that ultimately will be consumed in the United States.
Locally, WIRE-Net now has launched its Making It Here, Localizing Your Supply Chain campaign, which provides consulting, teaching and advising. Working with MAGNET, WIRE-Net hopes to eventually do more. The groups have yet to help a regional company actually reshore work back to Northeast Ohio, but combined, their potential to do so is increased, says Ed Weston, director of supply chain services for WIRE-Net.
“The news here is that MAGNET and WIRE-Net are joining forces to make things better for [Northeast Ohio] manufacturers,” Weston says. “There’s a really good fit between the two organizations. MAGNET specializes in new product development, helping small to middle-size manufacturers grow their businesses by developing new products. WIRE-Net’s focus is on supply chain and sourcing as an important part of new product development. So there’s an excellent synergy that our two organizations have joined together to exploit.”
What global economics are behind reshoring?
According to Weston, “the cost of energy, the cost of transport and increasing prices and trade disputes with China and Asia.” The cost of labor in China has gone up about 20 percent a year for several years, and wages likely will continue to rise as China’s economy expands. Additionally, the value of the Chinese yuan has risen significantly over the last 12 months, and inflation has been rising and is currently at 6 percent.
“Add those things together, and the products of China are not as cheap as they used to be,” Weston says. “When you throw in potential quality issues and the cost of product change or quality resolution — where you may have to fly someone to China to work with that factory — many manufacturers are taking a second look at their sourcing and deciding that America is the first choice.”
Suarez Manufacturing Industries could be the poster company for the reshoring movement. It’s not a client of either of the groups, but its production and assembly facility in North Canton used to be the home of the now-departed Hoover Co., a vacuum manufacturer as iconic in Ohio as Singer was in New Jersey. When the company left North Canton — where the high school is named Hoover High — it symbolized the downfall of American manufacturing to many Northeast Ohioans. But the Suarez work being done there now tells a different story. It was brought back to the United States from China.
Suarez, which makes high-end EdenPure portable heaters, had been outsourcing part of its production in China to control costs. But the distance made it difficult to introduce product upgrades into production processes; then, when the unusually warm 2011–12 winter depressed demand for heaters, Suarez was hit with another common disadvantage of offshoring: an inflexible supply chain.
In order to keep costs down and manage the long distances required for shipping to North American customers, overseas production-services and parts providers tend to require that product be ordered in large, consistent quantities with lengthy lead times. Suarez had to place orders six weeks in advance and could not order smaller shipments of sub-assemblies to match lower demand for its finished products. If it had kept the production in China, Suarez could have been stuck with excess inventory that may or may not have been usable the next time demand for its heaters spikes. Producing locally, by contrast, lets manufacturers place orders more frequently and in more flexible quantities, so they can better match inventory to demand, and free up cash.
Such cost/benefit calculations increasingly favor places such as Northeast Ohio, which has a rich history of manufacturing, Weston says.
Schmidt concurs: “The MAGNET/Wire-Net cooperative effort will assist manufacturers who are reshoring find and develop manufacturing sources right here in NEO.”