‘Right-shoring’ our manufacturing knows no boundaries
Harry Moser is an articulate voice for American manufacturing. A former manufacturing executive himself, Moser is omnipresent in promoting his Reshoring Initiative at events ranging from IMTS in Chicago this past fall to the White House Insourcing America Jobs Forum earlier this year.
His Website says the Reshoring Initiative has a goal of bringing manufacturing back to the U.S. “by assisting companies to more accurately assess their total cost of offshoring, and shift collective thinking from ‘offshoring is cheaper’ to ‘local reduces the total cost of ownership’.”
In order to demonstrate this idea, Moser has condensed the discussion to a mathematical equation through his Total Cost of Ownership Estimator. You plug in your various costs and risk factors and the Estimator delivers a quantitative way to evaluate the issue of keeping your manufacturing here or moving it somewhere else.
And if those were the only two choices, this would be a simple issue. The world of manufacturing, just like the world of anything, is not a simple place.
John Deere makes it sound simple, though. On its corporate Website pointing to its manufacturing and distribution operation spread across more than 30 countries, the company states, “To understand and respond to our many customers’ needs and requirements worldwide, we must live where they live. Work where they work.” So John Deere manufactures not just in the U.S. and Canada and Mexico, but also China and Russia and Brazil.
Then there is Volkswagen. In Chattanooga, Tenn., VW invested $1 billion, created an estimated 12,000 jobs and built a new manufacturing plant from scratch. In May 2012, after just nine months of operation, the 100,000th Volkswagen Passat came off the assembly line.
VW answered the question of reshoring by building the Passat in the U.S. instead of shipping them from Germany. John Deere answered it by making its products locally sourced instead of centrally produced. Other manufacturers who chased low wages got caught in a global energy price hike, then a global recession. They are reshoring today with a better understanding of that Total Cost of Ownership concept that Harry Moser’s calculator tries to point to.
I’m no longer sure that ‘reshoring’ is the right word any more. I think ‘right-shoring’ (although a little more awkward) might be the right way to look at the issue of global manufacturing.
Some products are manufactured close to their end users to preserve freshness, to reduce time to market or to minimize transportation costs. Some products can be made anywhere because the cost of shipping any individual unit is so small as to make its other costs (wages, in particular) the overriding consideration.
Multi-national manufacturers must do both. It’s not a betrayal of American manufacturing when Ford, GM, Caterpillar or John Deere build manufacturing plants overseas. It is an extension of American manufacturing. As we actively pursue foreign investment in American manufacturing, we also must export our manufacturing where it makes the most sense.
Just as manufacturing costs change, so has the market. The middle class growing in the BRIC countries are driving up demand for goods. Manufacturers must decide whether to deliver those goods from their native country or to expand manufacturing operations closer to the customer.
We’re doing the latter. Plant Engineering China publishes its first issue this month in a partnership between CFE Media and CE China. We’re sharing content in China both to reach this vast new market and to contribute in some small way to the expansion of manufacturing excellence worldwide. Control Engineering China already has a well-earned reputation among Chinese manufacturers and suppliers as a trusted source. We’re confident Plant Engineering will be as well-respected and valuable in China as our publication is to our U.S. readers.
The goals of global published and global manufacturing are consistent with each other. We see the world not as perfectly equal, but as borderless. With no boundaries, we see the potential for greater cooperation and collaboration.
This new venture continues to expand CFE Media’s global reach, and it won’t be our last reach beyond our own borders. No matter where this information lands, and in whatever form you choose to receive it, we end this, our 65th year of publication, with the belief that manufacturing benefits from getting the right products to the right place with the right costs. In the end, that is what ‘right-shoring’ is all about.