Bringing manufacturing back home By: Sandy D'Amico

1. MEDA - Maryland Economic Development Association
Sandy D’Amico
Media Advisor to
Reshoring Initiative

2. Definitions
 Definitions:
Reshoring/Backshoring/Onshoring/Insourcing:
Bringing back the manufacture of products that
will be sold or assembled here.
 Localization – producing near the consumer!
 We assist companies to more accurately access
their total cost of offshoring with our Total Cost of
Ownership Estimator™

3. Geographic sourcing alternatives

4. The Concept also Works
in other Countries

5. Why offshoring occurred
• Cheap labor
• More efficient container shipping
• Improved communication and data sharing
• Herd mentality in which companies followed
each other offshore
Corporate expectations of offshoring:
• Achieving lower prices for customers
• Pursuit of greater gross profit margins

6. Flawed Company Economic Model
using PPV and landed cost
 As many as 60% of companies made the
decision to offshore based on miscalculations,
never taking into consideration the total cost of
ownership (TCO) including all of the hidden costs
and risks of offshoring
 60% of manufacturers:
 Apply “rudimentary” total cost models
 Ignore 20% or more of the total cost of
offshored products
Source: Archstone Consulting survey, American Machinist Mag., 7/16/09

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

8. “Manufacturing Expected
to Return to America”
 “Majority of Large Manufacturers Now Planning or
considering Reshoring from China to the U.S.”
 “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”
Top three factors
 Labor costs (cited by 43 percent of respondents)
 Proximity to customers (35 percent)
 Product quality (34 percent)
Source: Boston Consulting Group

9. The Industry-Led Initiative Provides
 Free Total Cost of Ownership (TCO)
Software for companies and suppliers
 Companies for sourcing
 Suppliers of parts and equipment for selling
 Online Library of 1500+ reshoring articles
 Statistics from TCO and Library databases
 Case Study template for posting cases
 Solutions to major supply chain problems
 Economic development plan based on local
sourcing
 Motivation for skilled manufacturing careers

10. TCO Estimator benefits
 Provides a single TCO for each source
 Flexible: values are 100% user selected.
 Broad:
 29 cost factors.
 Via pull down menus you automatically insert:
 Freight rates for 17 countries
 Duty rates for parts or tools, e.g. molds
 Current value and 5 year forecast of TCO.
 Easy to use:
 Explanations and references to help select values.
 Instruction Manual.
 Free

11. TCO Comparison Example

12. Why Reshoring Is Happening
 Higher wages in China
 Higher global energy prices driving up shipping cost
 Increased use of Total Cost of Ownership (TCO) –
Includes costs, risks, and strategic factors that were
ignored over the past few decades
 TCO = more obvious costs + “hidden” costs
Total Cost = True Cost
Reshoring is the logic of local sourcing
TCO is the methodology you use to decide what to
reshore

13. Example: Locks
 Reshored from China to Milwaukee, WI in 2010
 100 jobs
 Productivity 6X as high as China
 Plant operating at capacity for first time in 15 years
 Reasons:
 Total cost and more competitive overall cost
structure
 Control
 Customer service
 Economic benefit to Wisconsin
Sources: “Master Lock Highlighted in State of the Union Address for Moving Jobs Back to U.S.” January 24, 2012.
http://www.masterlock.com/about_us/Master_Lock_Highlighted_In_2012_SOTU_Address.jsp.
Uttara Choudhury, First Post. “U.S. firms ‘reshore’ manufacturing as costs rise in China, India.” March 29, 2013. http://www.firstpost.com/world/us-firms-reshore-
manufacturing-as-costs-rise-in-china-india-678613.html.
MSNBC.com 6/29/11 Scott Malone

14. Reshoring More Effective
than Exporting:
U.S. is Much More Competitive at Home!
Where Sold
U.S. China
Where
Made
U.S. $100 $115
China $100 $85
Difference 0 30%
Based on TCO being 15% higher for exports

15. Advantages of Reshoring for
Businesses
 By using TCO companies can reshore about 25% of
what they offshored and improve profitability
 Refocusing on the world’s largest consumer market
 Our companies are 30% to 40% more competitive
here in the U.S. vs. e.g. in China
 Appeal to consumer demand for “Made in USA”
 Better long-term corporate stability

16. Advantages of Reshoring for the
Nation
 When those companies bring back 25% of
what is offshored = 1 million manufacturing
jobs!
 Reshoring improves U.S competitiveness by
strengthening R&D, promoting innovation and
reducing IP loss.
 What can the nation do? Focus as much on
reducing imports (reshoring) as increasing
exports

17. Reshoring Enables Innovation
 Profs. Pisano and Shih of Harvard Business
School recently reaffirmed that U.S. innovation
declines when manufacturing is offshored
because the partnership of manufacturing and
engineering is weakened.
 The TCO Estimator factors in innovation, keeping
manufacturing close to U.S. engineering.
 Keeping manufacturing local helps keep
engineering local

18. Example: Water Heaters,
Refrigerators, Washing Machines,
Dryers
 1300 jobs and $800 million invested to renovate
facilities in Appliance Park in Louisville, KY
 Reasons:
 Redesign made reshoring possible: Energy efficiency
improved, warranty costs down and retail price down
 Tax incentives
 High-tech new model: IP risk
 Ease of design collaboration with workers: retail price -
20%
 Chinese cost: -30% becomes +6% considering inventory
and delivery problems
Sources: Steve Minter, Industry Week. “Witnessing a Rebirth.” July 11, 2011. // Charles Fishman, The Atlantic. “The Insourcing Boom.”
November 28, 2012. // General Electric Company, R&D Magazine. “Debunking the Myths About Outsourcing.” July 20, 2012. // Paul
Davidson, USA Today. “”Some manufacturing heads back to USA.” August 6, 2010.
Sources: Steve Minter, Industry Week. “Witnessing a Rebirth.” July 11, 2011. // Charles Fishman, The Atlantic. “The Insourcing Boom.”
November 28, 2012. // General Electric Company, R&D Magazine. “Debunking the Myths About Outsourcing.” July 20, 2012. // Paul
Davidson, USA Today. “”Some manufacturing heads back to USA.” August 6, 2010.

19. Electric Motors for Chevy Spark EV
● Reshored production and development to White
Marsh, MD and Wixom, MI from Europe
● Total investment in MD ~$250 million
● 20 employees, projected 190
● Reasons:
● Proximity to market
● Technology
● Skilled workforce
● Design and process control
● Quality, reliability, and performance
Source: Gus G. Sentementes, The Baltimore Sun. “Made (once again) in America.” February 27, 2011.
Jamie Smith Hopkins, The Baltimore Sun. “General Motors unveils its new electric motor in White Marsh.” April 16, 2013.
Area Development Online News Desk. “General Motors Begins Manufacturing Electric Vehicle Motors at its White Marsh, Maryland,
Production Plant. April 16, 2013.

20. Example: Electronics Contract
Manufacturing - PCB
 Many companies switching from Asia
outsourcing to Zentech in Baltimore, MD
 Reasons:
 Rework, Warranty, Quality
 Travel Cost/Time or Local Onsite Audit
 Wages up overseas
 Total cost = cheaper in the U.S.
 Many American companies specialize in highly
technical electronics, or biomedical diagnostic
equipment where quality control and engineering
collaboration are more significant factors.
Source: The Baltimore Sun Made (once again) in America Woodlawn electronics maker sees growth this year as effect of "re-shoring"
debated in U.S., and Made in USA (Again): Why Manufacturing Is Coming Home BY ERIC MARKOWITZ www.inc.com

21. Sleep Apnea Diagnostic Kits
(Kept from Offshoring)
● Contracted ZenTech in Baltimore, MD
● Reasons:
● Quality control
● Lead time/time to market
Source: Gus G. Sentementes, The Baltimore Sun. “Made (once again) in America.” February 27, 2011.
http://articles.baltimoresun.com/2011-02-27/business/bs-bz-zentech-maryland-manufacturer-20110227_1_michael-galiazzo-maryland-manufacturers-
american-contract-manufacturers.

22. Candles
 Production moved from China to
Mexico to Vietnam to Glen Burnie, MD
 $5 million capital investment in Maryland
 Reasons:
 Rising labor costs
 Shipping and freight cost
 Time to market
 Inventory
 Technology
 Customer demand for Made in USA
Sources: Chris Morris, CNBC. “Re-Shoring: Manufacturers Make a U-Turn.” May 23, 2012. http://www.cnbc.com/id/47535355.

23. Pharmaceutical Development
and Investment (Transplant)
● Brazilian pharmaceutical investment company opened U.S.
headquarters in Montgomery County, Maryland
● $200 million planned investment in MD and US
● Reasons:
● Skilled and educated workforce
● Proximity to federal labs
● “access to one of the U.S.’s top life sciences communities”
● Infrastructure, synergies
● Late-stage clinical development of pharmaceuticals with
potential for near-term commercialization
● R&D investment to help complete clinical trials and win
FDA approval
Source: Source: PR Newswire, “Governor O’Malley Announces $200 Million Investment in Maryland by Top Brazilian Pharmaceutical
Company.” December 3, 2013. http://www.prnewswire.com/news-releases/governor-omalley-announces-200-million-investment-in-maryland-
by-top-brazilian-pharmaceutical-company-234282821.html

24. Economic Development Program
currently working with PA, MS, Central NY
Action Source/Responsibility
Identify local imports
Datamyne
by U.S. or foreign
companies
Suggest to companies
they source locally
EDO/MEP/ etc.
Train companies on
TCO to overcome issue
of higher local price
EDO/MEP trained by
Reshoring Initiative
Needed further cost
reductions
MEP/ Comm. College/
Technology Suppliers/EDO

25. Local Skilled Workforce Recruitment
Issue Solution
“Trades” and
“vocations” image
Call them “Professions”
Manufacturing
career image due to
offshoring
Industry collect and media
report the local reshoring
case of the month. Use
our Case Studies feature.
25

26. But how do apprenticeships
and credentials pay?
26

27. Selling using TCO
 Focus on profit impact, risk management, strategic
benefits such as
 Shipping expenses, supply chain disruptions, IP risks
 Maximize the advantages of proximity
 Time to market, better response to customers changing
needs, eliminate larger production runs and inventory
 Work with natural allies:
 Lean, Green, compliance, quality, line management
 TCO Analysis brings the total cost in line with or
closer to the “Chinese” price.

28. Raising Reshoring Awareness in MD
 Submit reshoring content such as new reshored cases,
blogs, commentary and press releases to:
 Reshoring Initiative
 National media outlets
 Industry media outlets
 Local media
 Utilize social media and content marketing to promote
published content, increase website traffic and raise
awareness to your program.
 Invite the press, political officials, state and manufacturing
associations and chambers of commerce to events.

29. What else can you do?
 Use the tools for sourcing and selling. Free at
www.reshorenow.org
 Have us train supply chain management and
sales force
 Use our archived webinars to inform staff and
customers
 Post a link to our site www.ReshoreNow.org
 Call on us to speak at: open houses, webinars,
customer industry conferences
 Submit customer cases of reshoring for
publication and posting using our template.
 Sponsor

30. Investment
 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 they do not have to sacrifice quality,
delivery, time-to-market, or employees to be
competitive and profitable.

31. Walmart’s U.S. Manufacturing program
 Walmart’s increase in U.S. manufactured
purchases:
 $250 Billion over 10 years
 $50 Billion in the 10th year
 In the 10th year:
 Approx. 300,000 manufacturing jobs*
 Approx. 1 million total jobs**
 Walmart Actions:
 “Increase what we already buy of U.S. manufactured
goods
 Source “new to Walmart” U.S. manufactured goods
 Reshore the manufacturing of goods we currently buy
by facilitating and accelerating efforts of our suppliers”

32. Reshoring Is Happening
 21% of large companies are actively engaged in
reshoring, 2X the rate in 2012 (BCG survey. Press
release 9/24/13)
 Americans respond well to Made in America labels
 Jobs and quality are top-ranked reasons to buy
American, with over 80% of consumer support.
(Consumer Preference Study 3/2014)

33. Example:
Precision Tools and Components
(Transplant)
● Taiwan and China to Harrisburg, PA
● $30 million capital investment
● Will create 500 skilled labor jobs
● Reasons:
● Synergies
● Skilled workforce availability
● Customer preference for domestically made products
● Committing additional $10 million to Carnegie Mellon
University for robotics R&D
Sources: Agence France Presse, Business Insider Australia. “iPhone Maker Foxconn Invests $US40 Million in US Manufacturing.”
November 22, 2013. http://www.businessinsider.com.au/foxconn-invests-40-million-2013-11
Brian Wingfield and Romy Varghese, Bloomberg Technology. “Apple Supplier Foxconn to Invest Millions in Pennsylvania.” November 22,
2013. http://www.bloomberg.com/news/2013-11-21/iphone-maker-foxconn-said-to-plan-investment-in-pennsylvania.html

34. 120,000+ Manufacturing Jobs
since Jan 2010!
 Reshoring yielded:
 About 120,000+ manufacturing jobs*
 ~ 20% of manufacturing job growth since the
Jan. 2010 low
 ~ 240,000 total, including multiplier effect
* Source of estimate: Reshoring Initiative tabulation of jobs listed in 1576
Reshoring Library articles, 90% published since Jan 2010

35. Reshoring Trend
The bleeding has stopped!
Manufacturing Jobs / Per Year
2003 2013 % Change Feasible 2016
New
offshoring*
~150,000* 30-50,000* - 70% 20,000
New reshoring 2,000* 30-40,000** + 1,500 % 70,000
Net reshoring -148,000 ~0 -100% +50,000
*Estimated / ** Calculated

36. Industries of published cases
Industry Number
Transportation equipment 50
Electronics/Appliances/Components 47
Energy 33
Other 33
Computer/Electronics 31
Apparel 30
Hobbies 24
Fabricated Metal 23
Machinery 21
Wood Products 20
Plastic/Rubber 18
Medical 16
Chemicals 15
Primary metal 8
Castings, N, on-metallic products 3 each
Source: Reshoring Library, March 2014

37. Negative Issues Offshore
Negative Issues # Cases
Lead time 111
Quality/rework/warranty 109
Rising wages and Currency Variation 88
Freight cost 82
Total cost 49
Inventory 37
IP risk/ Supply chain interruption risk 29 each
Delivery 28
Communications 18
Green considerations/Loss of control 15 each
Travel cost/time 14
Price 5
Difficulty of innovation/product differentiation/Regulatory
compliance
Source: Reshoring Initiative Library, March 2014.
4 each
Burden on Staff, Emergency air freight, Political instability 2 each
Employee turnover, Strained offshore relationships, Natural
1 each
disaster risk

38. Positive Reasons to Reshore
Source: Reshoring Initiative
Library, March 2014.
Positive Reasons to Reshore # Cases
Skilled workforce 87
Image/brand 80
Government incentives 79
Automation/Technology/3D
57
printing
U.S. energy prices 49
Re-design 41
Higher productivity 36
R&D 35
Lean 27
Eco-system synergies 22
Infrastructure 20
Customer responsiveness 14
Lower real-estate/construction 8
Labor concessions 7

39. Countries From Which Reshored
Country
Source: Reshoring Initiative Library, March 2014.
Reshored
Cases Global Regions
Reshored
Cases
China 135 Asia 165
Mexico 20 North America 26
India 11 Western Europe 6
Canada 6 Eastern Europe 2
Japan 5 South America 1
Taiwan 5 Africa 1
Korea 3
Hungary 2
Vietnam 2
Germany, France, Brazil,
Spain, Netherlands,
Italy, Egypt, Indonesia,
UK, Singapore, Malaysia,
Sri Lanka, Australia 1 each

40. Jobs Reshored by State
State Jobs Companies
Avg.
Jobs/
Facility State Jobs Companies
Sources: Reshoring Initiative Library, August 31, 2014.
Cases 2007 through 8/31/14.
Jobs/
Facility State Jobs Companies
Avg.
Jobs/
Facility
SC 7780 7 1111 AZ 700 2 350 RI 200 2 100
MI 6721 13 517 FL 611 12 51 IA 193 2 97
CA 6014 28 215 MA 598 10 60 WA 150 3 50
KY 4612 5 922 MS 540 5 108 MO 150 6 25
TX 3712 12 309 UT 464 6 77 MD 90 6 15
OH 3611 18 201 AL 397 4 99 MN 64 9 7
GA 3005 7 429 WI 342 11 31 MT 25 1 25
TN 2490 11 226 NJ 335 3 112 DE 0 2 0
NY 1089 17 64 IN 320 5 64 VA 0 1 0
NC 1020 14 73 PA 279 11 25 CT 0 2 0
ID 1000 2 500 AR 210 4 53 ME 0 1 0
KS 1000 2 500 IL 205 9 23 VT 0 2 0
CO 738 6 123 NH 200 1 200 ND 0 1 0

41. Reshoring’s Potential Impact
 Balance the $500 billion trade deficit:
 3 million manufacturing jobs
 Cut U.S. budget deficit by about 50%
 Reduce unemployment about 4 percentage points
 25% increase in manufacturing
 If spread over 20 years: 25% extra annual capital
equipment investment

42. Gaining support in Washington, DC
 Commerce Dept:
 2012 budget specifies TCO
 4 Links from the Commerce Dept to the
Reshoring Initiative:
 http://nist.gov/mep/reshoring.cfm
 http://business.usa.gov/program/reshoring-initiative
 http://www.manufacturing.gov/other_orgs.html
 http://acetool.commerce.gov/
 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

43. April 2014 – Congressional Visitors Center

44. 1/11/12 White House Insourcing Forum
44

45. Some Reshorers
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46. A non-profit with 35 sponsors, including
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47. A non-profit with 35 sponsors
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48. Useful Tools
 ACETool
 TCO Estimator
 Using the TCO Estimator: A How-To Guide
 Library
 Submit a Case Study
 Economic Development Program

49. Help slow the offshoring flood now!
Contact:
Harry Moser
Founder and President
847-726-2975
harry.moser@reshorenow.org
www.reshorenow.org
Sandy Montalbano
Media Advisor
sandysgm@optonline.net