After years of rapid globalization, companies are beginning to see the disadvantages of offshore production, including shipping costs, supply chain issues and inferior quality. This trend, known as on-shoring or re-shoring, is gaining acceptance as a weak U.S. dollar and surging wage rates in low-labor cost countries make it more costly to import products from overseas.
Harry Moser, leader of the Re-Shoring Initiative for the National Tooling and Machining Association (NTMA) and Precision Metalforming Association (PMA), recommends companies use a Total Cost of Ownership analysis tool to effectively compare total cost of local and off-shored sources and make informed business decisions. Moser recently led a Webinar focused on this initiative; the Webinar is now available for free replay.
“We are committed to changing the sourcing paradigm from ‘off-shored is cheaper’ to ‘local reduces the total cost of ownership,’” says Moser. “NTMA and PMA purchasing fairs help OEMs find competitive U.S. sources for outsourced work.”
Local companies are also establishing consortia, or clusters, to become more competitive, producing sophisticated items, and reaping innovation benefits better than companies 12,000 miles and 12 time zones away. A shorter supply chain reduces safety stock, inventory and end-of-life obsolescence, and local industry is much more sustainable due to a smaller carbon footprint. Consortia members participate in resolving problems related to workforce training, regulations, resources and infrastructure, including the current re-shoring issue.
“Clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation, which underpins future productivity growth, and third, by stimulating the formation of new businesses, which expand and strengthen the cluster itself,” says Michael Porter, Bishop William Lawrence University professor at the Harvard Business School.
The manufacturing sector focuses primarily on production of sophisticated items to create items of greater value than consumer products made overseas. Businesses looking to bring manufacturing back into North America can receive sizable incentives from state and regional economic development agencies for creating more jobs in their region.
The Association for Manufacturing Excellence (AME) recommends re-shoring as a means of breathing new life into the rebirth of manufacturing jobs, and will offer best practices for growing and sustaining the economy and job market at their 2010 Annual Conference in Baltimore, November 15-19.
About the Association for Manufacturing Excellence
The Association for Manufacturing Excellence (AME) is the premier not-for-profit organization dedicated to the journey of continuous improvement and enterprise excellence. AME’s membership is composed of a trusted network of individuals who are committed to leveraging the practitioner-to-practitioner and company-to-company shared-learning experience. Through engaging workshops, seminars, plant tours and industry-leading conferences, AME members are continually discovering and implementing new continuous improvement strategies and best practices. AME offers its members a multitude of valuable resources to help them stay abreast of current industry developments, and improve the skills, competitiveness, and overall success of their organizations. For more information, visit www.ame.org or email info@ame.org.