Reshoring becomes a data-driven discussion

Initiative’s TCO calculation determines the true cost of manufacturing

05/09/2011


Offshoring manufacturing jobs to low-wage countries seemed like a good idea at the time. And if all you were calculating were wages, it was a no-brainer.

And that’s the problem, according to Harry Moser, who has devoted the last part of his professional life to a review of offshoring and a second look at whether it makes much sense at all.

Moser’s Reshoring Initiative is supported by a number of organizations, including AMT and NTMA. He spoke last week at the DMG/Seki Mori Customer Days in suburban Chicago and said the short-term look at wages obscured the real business implications of offshoring.

“There’s good reason to believe offshoring occurred with a herd mentality,” Moser told some of the 2,000 attendees at the Seki Mori event. “A lot of companies didn’t do a good enough job of analyzing what the implications would be.”

Companies can enter real costs and see what the full cost of production, shipping and delivery would be for production in the U.S. and elsewhere.

Moser’s goal is two-fold – to bring back more manufacturing to the U.S., and to do that based on an informed decision rather a wild guess. “I want to help change the mindset that offshoring is cheaper,” he said. “Protectionism is putting in major tariffs. This is actually opposite of protectionism. This helps manufacturers see the costs they’re really facing and motivating them to make better decisions with the situation they face. If it succeeds, then there’s less demand for protectionism.

It’s an objective tool, even though I passionately promote it. I’m an engineer who insists on doing things accurately,” he added. “It’s a solution to today’s supply chain problems. There’s fragility with the natural disasters and political instability. Wages are rising 20% a year in China. Low labor cost countries are having higher inflation rates. The U.S. dollar is declining and oil costs are soaring.”

It is the recent spike in oil prices, and the corresponding jump in fuel costs for transportation and shipping that again brought the Total Cost of Operation issue to light. A 30% increase in fuel costs could easily offset any gains initially realized through lower wages.

“Companies should reshore here to satisfy need of a market,” Moser said. “When you offshore, you force yourself to commoditization. Your response time has to be less. If you source locally, don’t have those problems, and you sell on service rather than price.”

Some things don’t fit into Moser’s calculator, however. “There are some things local suppliers can do on the service side,” he said. “You can take advantage of your proximity. You should respond to phone calls in a timely manner.”

www.reshorenow.org

Reshoring Initiative

- Edited by Gust Gianos, Plant Engineering, www.plantengineering.com



No comments
The Engineers' Choice Awards highlight some of the best new control, instrumentation and automation products as chosen by...
Each year, a panel of Control Engineering editors and industry expert judges select the System Integrator of the Year Award winners.
Control Engineering Leaders Under 40 identifies and gives recognition to young engineers who...
Learn more about methods used to ensure that the integration between the safety system and the process control...
Adding industrial toughness and reliability to Ethernet eGuide
Technological advances like multiple-in-multiple-out (MIMO) transmitting and receiving
Virtualization advice: 4 ways splitting servers can help manufacturing; Efficient motion controls; Fill the brain drain; Learn from the HART Plant of the Year
Two sides to process safety: Combining human and technical factors in your program; Preparing HMI graphics for migrations; Mechatronics and safety; Engineers' Choice Awards
Detecting security breaches: Forensic invenstigations depend on knowing your networks inside and out; Wireless workers; Opening robotic control; Product exclusive: Robust encoders
The Ask Control Engineering blog covers all aspects of automation, including motors, drives, sensors, motion control, machine control, and embedded systems.
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
News and comments from Control Engineering process industries editor, Peter Welander.
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
This is a blog from the trenches – written by engineers who are implementing and upgrading control systems every day across every industry.
Anthony Baker is a fictitious aggregation of experts from Callisto Integration, providing manufacturing consulting and systems integration.
Integrator Guide

Integrator Guide

Search the online Automation Integrator Guide
 

Create New Listing

Visit the System Integrators page to view past winners of Control Engineering's System Integrator of the Year Award and learn how to enter the competition. You will also find more information on system integrators and Control System Integrators Association.

Case Study Database

Case Study Database

Get more exposure for your case study by uploading it to the Control Engineering case study database, where end-users can identify relevant solutions and explore what the experts are doing to effectively implement a variety of technology and productivity related projects.

These case studies provide examples of how knowledgeable solution providers have used technology, processes and people to create effective and successful implementations in real-world situations. Case studies can be completed by filling out a simple online form where you can outline the project title, abstract, and full story in 1500 words or less; upload photos, videos and a logo.

Click here to visit the Case Study Database and upload your case study.