To Offshore or Reshore: How to Objectively Decide

1. To Offshore or Reshore: How to Objectively Decide TCO: A Key to Justifying Advanced Manufacturing Reshoring: A Key to MA Supply Chain and Workforce Recruiting Harry Moser President Reshoring Initiative MA Advanced Manufacturing Summit

2. Definitions • Reshoring/Backshoring/Onshoring/Insourcing: Bringing back manufacture of products that will be sold or assembled here. • Transplants: Similar logic • Producing near the consumer! • Localization

3. Flawed company economic model 60% of manufacturers: • Apply “rudimentary” total cost models • Wage Arbitrage • PPV (Purchase Price Variance) • Landed Cost • Ignore 20% or more of the total cost of offshored products Source: Archstone Consulting survey, American Machinist Mag., 7/16/09

4. Indexed Unit Labor Costs in the Manufacturing Sector of Selected Countries

5. “Manufacturing Is Expected to Return to America” “Renaissance in Manufacturing” • “We expect net labor costs for manufacturing in China and the U.S. to converge by around 2015” • “take a hard look at the total costs” Source: Boston Consulting Group press release 5/11 & 4/12 Source: Michelle D. Loyalka, 2/17/12 NYT Chinese no longer “just thankful not to go hungry.”

6. The Industry-Led Reshoring Initiative Provides Free Total Cost of Ownership (TCO) Software for companies and suppliers Online Library of 1,000+ reshoring articles Case Study template for posting cases. Solutions to major supply chain problems Motivation for skilled manufacturing careers

7. TCO Comparison Example

8. Some Reshorers

9. Water Heaters Bringing Production back from China: • Water-heaters, fridges, and washing machines • Unionized facility in Louisville, KY • 1300 jobs, renovated facility, $800 million invested • Reasons: • Tax incentives • High-tech new model • Ease of design collaboration with workers: retail price -20% • 2 tier contract • Chinese cost: -30% becomes +6% considering inventory and delivery problems • Will move a “significant piece” of appliance production back

10. Electronics Manufacturing Systems (EMS) Partnering with ZeeVee Inc. • ZeeVee Inc. moved production of high definition video distribution products from China to Methuen, MA • As a result, Suntron has added 20 new employees, with more expected. • Reasons: • Partnership significantly improves its time to market • ZeeVee’s business has doubled Source: Tuesday, July 03, 2012 | Suntron Corporation

11. Suits & menswear • Bought plant in Haverhill, MA, in 2008 • Reshored 70% of suits, as well as dress shirts, overcoats, pants form offshore locations • Employment in MA plant increased from 300 to 475 • Reasons: • Rising wages • Quality • Lead time • US made goods are luxury items abroad Source: Paul Davidson. “Some apparel manufacturing ‘reshoring’ to USA.” USAToday. July 5, 2013. http://www.usatoday.com/story/money/business/2013/07/04/some-apparel-manufacturing-returns-to-us/2454075/.

12. Aviator Sunglasses • China to Southbridge, MA • 15 jobs • Reasons: • MassDev assistance/government incentives • Skilled workforce • Image/brand • Delivery Source: Jeremy Shulkin, “An American Icon Returns to Southbridge.” Worcester Telegram, April 20, 2014. Marty Jones, “Why reshoring is the coming thing.” The Telegram. April 8, 2014.

13. Paper Stock • China to Clinton, MA • 12 jobs • Reasons: • MassDev assistance • Lower operating costs • Better customer service • Better sales and profit margins Source: Marty Jones, “Why reshoring is the coming thing.” Worcester Telegram. April 8, 2014.

14. Robotics • India to Cambridge, MA • Reasons: • Freight cost • Inventory • Rising wages • Tariffs • Higher productivity • Proximity to customers Source: Marty Jones, “Why reshoring is the coming thing.” Worcester Telegram. April 8, 2014.

15. Bleeding has stopped! *Estimated ** Calculated ***Feasible

16. Industries of published cases Library, July 2012 Source: Reshoring Library, March 2013

17. Reasons for reported cases Reshoring Library 3/13

18. 61% of reshoring cases are from China Source: Reshoring Library 3/16/13

19. Gaining support in Washington, DC • Commerce Dept: • 2012 budget specifies TCO. • Links: • http://nist.gov/mep/reshoring.cfm • http://business.usa.gov/program/reshoring-initiative • http://www.manufacturing.gov/other_orgs.html • Major new site: http://acetool.commerce.gov/ • 6 rounds of free MEP webinars • Testified at Congressional hearing on 3/28/12 • Working actively with SelectUSA • Calls from: • United States-China Economic and Security Review Commission • White House National Economic Council

20. 1/11/12 Insourcing Forum

21. Investment in Adv. Mfg. • By understanding: • the advantage of producing near the consumer, and • the small TCO gap instead of the large price gap • U.S. companies can: • justify domestic investment, process improvement, automation, training, etc. • And do not have to sacrifice quality, delivery, time-to-market, or employees to be competitive and profitable.

22. What can you do? • Use the tools for sourcing and selling. Free at www.reshorenow.org • Train your sales force and marketing • Use our archived webinars to inform staff and customers • Post a link to the Initiative • Call on me to speak at: open houses, webinars, customer industry conferences • Submit customer cases of reshoring for publication and posting using our template. • Sponsor

23. But how do apprenticeships and credentials pay?

24. Local Skilled Workforce Recruitment

25. Economic Development Program Available

26. A non-profit with 35 sponsors, including Platinum Gold Silver GoldGoldG Silver

27. Help slow the offshoring flood now! Contact: Harry Moser Founder and President 847-726-2975 harry.moser@reshorenow.org www.reshorenow.org Recruiting trainees for the skilled manufacturing workforce: http://tinyurl.com/33vpz9k