However, MFG.com released a survey in June that found that 21% of North American manufacturers said they'd brought production into, or closer to, the continent in the past three months, up from 12% in the first quarter; 38% planned to research such a move in the next three months, the study also found. Those numbers, however, include bringing production back from say Asia to Mexico or South America, not necessarily the US itself.
Supply chain speed and integration, especially for new, high tech or complicated products, is also a key factor.
Both intellectual property and supply chain responsiveness, for example, were factors for GE’s decision to re-invest in Louisville. Its new water heaters are expected to be high growth products.
“"We don't want to just park that [technology] with another company to build,” said Jim Campbell, CEO of GE's appliance unit, recently noted. “When you have it in your plant, the cycle time is faster, and you can do launches quicker."
Campbell adds that GE plans to make other advanced products in the US, saying that what was not long ago a 30% Chinese cost advantage likely has changed to a 6% total cost advantage for the US when considering lower inventory expenses, quality, and the smooth flow of goods.
With these changes in supply chain thinking – and the lower labor rates it was able to negotiate, “The biggest difference is the US is in the game now,” Campbell adds.
A smaller company, U.S. Block Windows Inc., came to a similar decision last year. After having outsourced production of some of its molding work to China, last year the company moved the production back to its main manufacturing facility in Pensacola, Fl.
"When we started looking at the costs and complexities of the inventory and lead times, there really wasn't any savings," said Block Windows' president, Roger Murphy.
Indeed, the pattern seems to be that those announcing onshoring moves are makers of arge, complex products. In addition to GE and Ford, for example, construction equipment maker Caterpillar and ATM and retail POS and kiosk maker NCR are among other companies to say they are repatriating production to US soil.
Caterpillar, notably, just announced it is consolidating its global production of excavators in Victoria, TX at a new 600,000 square foot facility that will employ at least 500 workers. Some of those jobs are coming at the expense of similar work in Illinois, however – as many manufacturers find the business and union climate to be more favorable in the Southern regions of the US rather the than traditional manufacturing centers in the Northeast and Midwest.
The Victoria plant is Caterpillar's second major recent investment in Texas, as earlier this year the company moved its engine-manufacturing operations to a new plant near San Antonio, also taking away from some work being done in Illinois.
But other types of companies are also seeing benefits from onshoring. The USA Today recently reported that Diagnostic Devices, which makes blood-glucose testing strips and monitors for diabetics, is moving much of its production to Charlotte, NC from China and Taiwan. The big driver – high inventory levels with offshoring.
The company says that given lead time and delivery challenges from Asian-made goods, it has to keep a total $6.5 million in inventory compared with an estimate of just $1 million if its products are made in the US.
The new production facility in Charlotte will be highly automated, however, to minimize the impact of the labor cost differential.
"We analyzed every angle of our overseas manufacturing and devised a means to bring jobs back to the US, while remaining competitive and even cutting costs by a projected 40 percent," says Diagnostic Devices COO Rick Admani Abulhaj. "The answer to the dilemma is the implementation of cutting-edge automation and robotics technologies that deliver an enhanced bottom-line effect and give us greater control of our operations and our intellectual property.”
Do you believe we will see more production returning to the US? Or do the trade deficits continue to tell the real story? Will it take falling hourly wages in the US to make the move economical? Are we calculating the true costs from Asia right? Let us know your thoughts at the Feedback button below.
SCDigest is Twittering!
Follow us now at https://twitter.com/scdigest