Rebuilding and Reshoring: Reshoring Initiative Mission & Resources
Category: Supply Chain • Jun 1, 2021
By Harry Moser, Founder/President, Reshoring Initiative®
The mission of the Reshoring Initiative is to bring five million stable, well-paying advanced manufacturing jobs to the United States 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.” The nonprofit organization offers several valuable tools and resources to help American companies benefit from reshoring.
Tools & Resources
1. The Total Cost of Ownership (TCO) Estimator® is a free online tool that helps companies account for all relevant cost factors – overhead, balance sheet, risks, corporate strategy, and other external and internal business considerations – when evaluating sourcing options. Most companies make decisions based solely on price, oftentimes resulting in a 20 to 30 percent miscalculation of actual offshoring costs. Using TCO, companies can better evaluate sourcing, identify alternatives and even make a case when selling against offshore competitors. See part one and part two of the two part series “TCO, a Deeper Dive” and “Impact of Using TCO Instead of Price” for further explanation.
Japanese machinery maker Nissei Plastic Industrial Co., Ltd. found that total cost made manufacturing offshore less attractive. It found that U.S. reshoring created substantial demand for local production, and manufacturing locally yielded higher productivity and faster lead-time and time to market. Nissei invested $20 million to set up a U.S. manufacturing facility for injection molding presses in San Antonio.
SGW Designworks, a full service product development and engineering firm, decided to offshore two cast steel parts to a foundry in China. They thought domestic casting was too expensive at the time. After inspecting the first shipment, they found that the parts were full of bubbles and voids rendering the entire shipment unusable, delaying the product launch by three months. Quality, rework and warranty drove up the Chinese total cost making U.S. manufacturing the better choice.
Siting and Buying Smarter helps OEMs and retailers use TCO to make better plant siting and/or product sourcing decisions. See “Rebuilding and Reshoring: What Can OEMs And Retailers Do?” and this archived webinar.
2. Import Substitution Program (ISP) helps supply chain companies convince and enable importing companies to produce or source more domestically. Import substitution is reshoring. ISP identifies and qualifies major importers of what you produce and helps you convince them to source or produce domestically instead. Customized versions of ISP are available for U.S. manufacturing companies, technology suppliers, trade associations, economic development organizations (EDOs), and Manufacturing Extension Partnerships (MEP) centers.
Technology suppliers, e.g. IMTS exhibitors and distributors, can use ISP to identify importers of products that the suppliers’ latest technologies would make reshorable. Convince the importers to invest or to buy from your job shop customers who then invest. Consistent use of the program would increase domestic manufacturing by about 10%.
For example, ISP enables MEP professionals to accelerate reshoring and Foreign Direct Investment (FDI) in their regions. If the domestic total cost is not quite low enough, the MEP center can provide consulting on lean, workforce training and automation to close the gap. MEP centers in Illinois, New York State, Ohio, and Rhode Island are already offering the ISP program in their regions.
3. The Supply Chain Gap Program (SCG) is designed to identify and fill U.S. supply chain gaps, product categories with large domestic consumption and no or minimal domestic production. Penicillin is an excellent example. The Reshoring Initiative can provide states with a customized list of supply chain gaps to pursue. The national list of gaps can be focused by any of these factors: the imports of major state OEMs; target industries; Trump-tariffed items; heavy Chinese imports; and heavy imports into the state and region. SCG includes, for each product, a list of the current foreign suppliers to solicit for FDI (foreign direct investment).
A public/private partnership will help fill the U.S. pharmaceutical supply chain gap exacerbated by the COVID-19 pandemic. The U.S. Department of Health and Human Services (HSS) is collaborating with Phlow Corporation and a team of private industry partners to expand pharmaceutical manufacturing in the United States. The Phlow team will provide U.S.-based manufacturing of active pharmaceutical ingredients (APIs) and chemical compounds for critical medicines to prevent U.S. drug shortages. This is critical because about 80% of APIs used to make drugs in the United States. come from China and other countries like India.
Other ways the Reshoring Initiative can help. The Reshoring Initiative can help publicize and market your reshoring efforts in several ways.
1. Report your reshoring cases to firstname.lastname@example.org if you reshore. OEMs and job shops that get orders for parts previously offshored are both eligible. The Reshoring Initiative will seek to include your story in its articles and presentations.
2. Consider competing for the National Metalworking Reshoring Award, which garners a fair amount of publicity.
3. I am available for presentations, articles, and podcasts to promote reshoring to your customers. Use the email above (shown in #1) to request more information.
4. Get advice on gaining local media coverage to strengthen skilled workforce recruiting; promoting the “Made-in-America” brand; and
on how to market reshoring on your website, including the core values to project to customers. See Rebuilding and Reshoring: What Can Contract Manufacturers Do?”
Stay current on reshoring
The Reshoring Initiative tracks data on the reshoring trend. Annual reports include the drivers, impacts, and momentum of the trend. The Reshoring Initiative’s annual report contains data on trends in U.S. reshoring announcements by U.S.-headquartered companies and FDI by foreign companies that have shifted production or sourcing from offshore to the United States.
This data helps motivate companies to further reevaluate their sourcing and siting decisions by considering all relevant costs, risks, and strategic impacts flowing from those decisions. Policy makers can use the continued reshoring successes as proof that it is feasible to bring millions of jobs to the United States.
Repeated surveys show that more companies, driven by the coronavirus crisis, have decided to reshore. The Reshoring Initiative expects to see the data respond to this shift in 2021. Also, due to the pandemic, U.S. reshoring is outpacing FDI for the first time since 2014. This trend is consistent with a multi-year slowing in global FDI (Figure 1). COVID-induced business uncertainty is causing companies to emphasize operations in their home countries.
Reshoring is gaining momentum throughout the country. Many companies have already repatriated some of their manufacturing efforts, and the Reshoring Initiative is continuing to spread the “return-manufacturing-home” message to help other manufacturers realize the United States is an advantageous place to produce goods for the North American market.
Continuation of the trend depends on companies reevaluating their offshoring. Acceleration of the trend depends on the government leveling the playing field, making the United States more price competitive. See “Rebuilding and Reshoring: What the U.S. Government Must Do.”
The Reshoring Initiative, founded in early 2010, takes action by helping manufacturers realize that local production can reduce their total cost of ownership of purchased parts and tooling. The Reshoring Initiative also trains suppliers how to effectively meet the needs of their local customers, giving the suppliers the tools to sell against lower-priced offshore competitors. Please contact me at email@example.com for help driving reshoring for your company.