Few US manufacturers are starting to move mfg back stateside
Posted in the Paris Forum
#1 Dec 11, 2012
It's ABOUT TIME, too!
Globalization has come full circle at Otis Elevator Co.
The U.S. manufacturer, whose elevators zip up & down structures as diverse as the Empire State Building & the Eiffel Tower, is moving production from its factory in Nogales, Mexico, to a new plant in South Carolina.
More startling: Otis says the move will save it money.
What's happening at Otis is part of a broader shift in the way manufacturers tally costs.
Their outlook has been changing as the cost of producing abroad has risen & they have devised more efficient ways to make things close to where they want to sell them.
Intern'l companies ranging from Ford Motor Co. to GE have started returning to the U.S. some jobs that they had previously shipped offshore, a process sometimes dubbed as "reshoring."
"It's a trickle, it's not a trendbut clearly companies are now thinking more about it," says Scott Paul, executive director of the Alliance for American Manufacturing, a nonprofit alliance of business &labor groups that lobbies for domestic production.
A number of forces are behind the modest influx. Wages & other costs are going up in foreign countriesespecially Chinawhile pay in many industrial sectors inside the U.S. has risen slowly or even fallen in many cases. Transportation costs have grown, as have the costs of holding large stocks of inventory, a common precaution when producing goods far from their end market.
Companies also recognize how moving jobs to the U.S. at a time of high unemployment can enhance their image. "A lot of companies still don't publicize plant closures in the U.S.-which they're still doing," says Mr. Paul, while going out of their way to tout moving jobs back into the country. But longer term, he says, there should be genuine gains for the American economy &workers.
Fr many goods, the numbers are shifting. In new study, Mr. Maurer found that it's still cheaper to make a long list of basic industrial goods in places like Vietnam, Russia or Mexico, but the gap has shrunk. Some analysts say this trend is accelerating & will eventually make the US the cheapest place to produce a wider range of goods. Otis thinks that's already the case for its elevators.
When Otis moved production down to Mexico in 98, "it clearly was for cost-oriented reasons," says Didier Michaud-Daniel, CEO of the United Technologies Corp. unit. "But since then, logistics costs have increased."
Otis declined to disclose all cost calculations, but it said the new South Carolina plant will undercut the costs of producing in Mexico.
Among other things, the plant will be closer to many of the company's customers, about 70% of whom are on the East Coast of the US.
The company figures that will lower its freight & logistics costs 17.3%.
Another 20% of savings will come from "efficiencies" of having all its white-collar workers associated with elevator design & production located at the new factory.
The company, based in Farmington, Conn., had only final-assembly operations in Mexico, keeping design & engineering jobs in the US.
That meant toolmakers from Dallas & engineers & designers based in Indiana & Arizona had to travel.
"We really needed to rationalize our supply chain & the way to do that was to have everything in 1 place," says Mr. Michaud-Daniel.
At the new Florence, S.C. plant, designers & engineers will be close at hand, helping with a planned launch of a new generation of elevator designs.
It also will be easier for customers to visit the plant. Nogales is 65 miles from the nearest US commercial airport, in Tucson, Ariz.
The new factory will have 360 workers, about the same number as the Nogales plant, though that will include white-collar jobs & fewer factory-floor positions.
The facility will use more automation, including designs developed in Otis's European factories, to reduce the need for production workers, says Mr. Michaud-Daniel.
#2 Dec 11, 2012
there's a few more articles discussing this with other manufacturers.
Though they're not often publicized, it's easy to find examples of more and more companies returning to the United States within the last year. Peerless Industries, a United States-based maker of audio-visual mounting solutions, recently moved back to Illinois. Outdoor Greatroom, which makes outdoor furniture, moved its manufacturing back to Eagan, Minnesota. Otis Elevator Company has returned to South Carolina, Buck Knives came back to Idaho, Karen Kane relocated to Southern California, G.E. opened a new plant in Kentucky, Caterpillar reshored to Texas, and Coleman has moved back to Kansas. The list goes on.
When I ask Harry Moser--founder of The Reshoring Initiative, a group promoting the return of American manufacturing--about the reshoring phenomenon, he laughs.
"You know, that's the very question President Obama asked me just a few weeks ago," he says.
Moser was recently invited to take part in Obama's "insourcing" initiative, which encourages American companies to manufacture locally. Essentially, this is what Moser told Obama: The costs of going overseas have been wildly underestimated, and American firms are beginning to realize that the total cost of going abroad don't justify offshoring in the first place.
"Looking only at only price, which is what most companies do, all the work would stay offshore," says Moser. "But if you looked at total cost of ownership, that's no longer true."
Moser believes the main problem of offshoringand one of the reasons that manufacturing is returningis because costs of going overseas have been profoundly miscalculated for decades. Supply chain managers have long postulated that lower labor costs abroad, especially in China, have been enough reason to justify outsourcing. But improvements in automation in the last few years mean that labor costs are becoming a much smaller percentage of the overall cost of most products.
"What used to be done in 50 parts is done with one part," explains Matt Turpin, the president of Zentech. "And the automation within the assembly area has grown by leaps and bounds. It's light years ahead. So now, when you compare the U.S. to Asia, if your raw materials cost the same, if your cost to buy the automation equipment is the same, if your cost to finance the capital is the same, and your labor is down to 5 minutes or 10 minutes, well, then, you may as well manufacture here.
Recently, manufacturing analysts have begun to echo Moser's claims. In one Accenture study last year of 287 manufacturing executives across a variety of industries, the researchers noted a significant underestimation of overseas manufacturing costs.
"Our study found ... that many manufacturers who had offshored their operations likely did so without a complete understanding of the 'total costs,' and thus, the total cost of offshoring was considerably higher than initially thought," concluded John Ferreira and Mike Heilala, authors of the report. "Part of the issue is that not all costs of offshoring roll up directly to manufacturing; rather, they impact many areas of the enterprise."
They continued: "This overreliance on direct costs to the exclusion of other legitimate cost factors distorts the business case for offshoring, and likely many decisions to offshore were incorrectly made."
there's more to the article, if you're interested.
#3 Dec 11, 2012
Well we don't have to Worry about EPA regulations there. And the profit on the world market is so much more than the Amrican profit even though American's are losing their buying power rapidly and enflation is eatting up our money. I gues we should just nuke all the plants that don't move back. Joking but you know they say we only have 9 more days till Dec 21 the end of the world and the first day of Winter. How can you make them come back? Perhaps you should make all the stock holders in those plants move and live in the country they run their facilities in. Many wouldn't do it. They want the best of both worlds and money rules and government doesn't. Perhaps it is time for government to crack the whip on some coorporations which have got so damm wealthy. I know Insurance companies own almost as much as Wall Mart. We have bleed our selves out.
#4 Dec 12, 2012
The grass is not always greener on the other side. Every coutry has regulations. Those companies that moved out of the US have to deal with not only their regulations but also the huge diversity in the workforce, quality issues, security for their employees from drug cartels, etc. Of course they want to come back. But, they want things their way. Miserable wages, busted unions, lawsuit reform so th workers can't sue them, and as Romney said a new way of training. No liabiliy for the employer. They can do what they want when they want and nothng can be done about it. Those contract workers will soon be the new workforce of the USA. Say goodbye to the middle class.
#5 Dec 12, 2012
you touched on something - the issue of contract workers.
over the past couple of decades, i've noticed a greater reliance upon them in many areas and many industries.
some friends even prefer to do contract work - they like the diversity and the challenges.
some people are more cut out to do that type of work and others not so much. i'm not one that prefers to work that way. consistant income and insurance are two key points that keep me from contracting.
is this a good solution for corporations to accomplish long term goals and long term products? is this something that is desirable when you (you in general to everyone reading this thread) look for a job? how do you feel about contracting?
#6 Dec 12, 2012
They're mistreated, under paid and the insurance stinks. No retirement/pension.
#7 Dec 12, 2012
They (big business) brought and supported all the mexicans coming to the U.S. to drive down labor prices.Labor prices now cheap like foreign countries.thnaks to the mexicans. So now businesses have the best of everything.Lower the cost of manufactoring so the CEO can get huge fat checks.
#8 Dec 13, 2012
i think that depends on the contracts....some engineering guys get $40-$50 an hour and the insurance depends on the contract house they work through (some contract houses offer insurance for the people they have working on contracts).
savings, retirement / pension - that's a risk, true. but more and more companies are doing away with all pensions, unless it's negotiated into a union contract or similar.
#9 Dec 13, 2012
i'm glad to see more companies bringing manufacturing back to the US. it's important to our economy - the idea that we were slipping into a service type economy where all that was available were delivery or food service jobs or similar was just a hard thing to grasp. a strong economy needs diversity and opportunity. a strong economy hires more people and has more money flowing through hands.
companies like catepillar, otis and even ford bringing manufacturing jobs back are a great sign of confidence in america - her economy and her workforce.
recently apple even announced they'd be "reshoring" some of it's manufacturing lines. if they're successful with those, then i would hope to see more returned.
has anyone watched the show "Sharks" with the billionaire investors having ideas for investment pitched to them? everytime someone comes in with a proposal that needs some sort of assembly or manufacturing, their first reaction is "go to china". that reaction just galls me. it robs americans of jobs. it shows a doubt on the ability of americans to perform jobs and to make quality products. there was one guy that reacted ver strongly to the "sharks" suggestion to move manufacturing to china - he flat out said no, that he wanted to bring jobs to his community, end of story. i wanted to stand up and applaud him. yes, it'd be a small "mom & pop" type shop to begin with, but it sure would offer some opportunities for his community and for him. it expressed a faith and eagerness and an understanding of the American worker.
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