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Reshoring

Reshoring. Cynthia Dickens Ling Huang. The purpose of this paper . Consider reshoring. Outsource. Reshoring. Economic Background. in the early 1990’s : outsource: focused on reduced labor costs 2000 – 2011 :

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Reshoring

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  1. Reshoring Cynthia Dickens Ling Huang

  2. The purpose of this paper

  3. Consider reshoring • Outsource • Reshoring Economic Background in the early 1990’s : outsource:focused on reduced labor costs 2000 – 2011 : the U.S. lost 5.8 million manufacturing jobs and closed 57,000 manufacturing firms. Outsourcing became a major cause of slow economic growth and high unemployment.

  4. What is outsourcing? A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. 

  5. What is reshoring? Reshoring Reshoring is the reversal of outsourcing. (Imberman, 2013) It is defined as the transfer of a business operation back to its country of origin. The popular press (Hagerty, 2012) deems reshoring to be "bringing manufacturing back home..." from a current location that is, de facto, not home.

  6. • • 34% of larger companies surveyed “are considering bringing manufacturing back to the U.S.” (MIT Forum for Supply Chain Innovation 2012) • 40% of contract manufacturers have done reshoring work  this year (MFG.com 4/12) • U.S. consumers who view products Made in America very favorably: 78%  (2012) up from 58% (2010) (AAM June 28July 2, 2012) • More likely to buy U.S. product 76% • Less likely to buy Chinese product 57% 　　(PerceptionResearchServcesInt. survey 7/12, 1400 consumers) Reshoring is happening!

  7. Data from published cases research Source: TheReshoring Initiative

  8. Data from published cases research Source: TheReshoring Initiative

  9. Data from published cases research Source: TheReshoring Initiative

  10. Data from published cases research

  11. Data from published cases research Source: TheReshoring Initiative

  12. Oil and natural gas in the United States. • Innovation. • Rule of law. • Human capital. • De-complexity. • Public policy and abundance. • Currency. Why reshore? (economic drivers)

  13. 1. Inexpensive oil and natural gas This factor increased energy production has created a significant advantage for U.S. energy-intensive industries. such as chemicals and fertilizer, steel and aluminum, and plastics.

  14. The U.S. still remains the global innovation leader and has maintained that position for 50 years. (Welsh, 2013) Welsh (2013) pointed out, “Research and development spending in the U.S. comprises 31% of the total global outlay. (Welsh, 2013) That's more than twice China's 14% share, well ahead of Japan's 11% share and 17% for the Euro zone. (Welsh, 2013) 2. INNOVATION

  15. US: Enforceability of Intellectual Property and Property Rights are legally protected • Other country: “Protectionist rules” limited U.S. companies 3. Rule of Law

  16. 4.Human Capital

  17. Productivity US productivity is greater, even while other nations have dropped.

  18. 5. De-complexity Time zone cultural differences, inadequate infrastructure business ethics issues quality reliability and traceability concerns threats to brand equity all pose challenges manufacturer Market

  19. The federal government President Barack Obama Push for individual technology development centers on Youngstown, Ohio. • Would like to take this opportunity to promote job growth 6.Public policy and abundance This policy coupled with American abundance in natural resources such as water, agricultural products, timber, minerals and other materials

  20. 7. Currency As the U.S. dollar continues to weaken, the Chinese RMB, or Yuan, has been appreciating at a 4% annual clip. Many believe this will accelerate in the near future. Continued depreciation of the dollar will further bolster U.S. manufacturing and exports.

  21. Defined as the total of all relevant costs associated with making or sourcing a product domestically or offshore. • Overlooked costs can account for 20%-30% of a company’s total cost. Total Cost of Ownership

  22. According to Harry Moser, Founder and President of the Reshoring Initiative, “recent trends have made analyzing and evaluating the hidden risks and cost of a company’s supply chain an important component to making the right sourcing decision According to Harry Moser, Founder and President of the Reshoring Initiative, “recent trends have made analyzing and evaluating the hidden risks and cost of a company’s supply chain an important component to making the right sourcing decision

  23. Hidden Cost LABOR Carry cost for in-transit product Carrying cost of inventory on-site Prototype Cost End of Life or Obsolete Inventory Travel Costs Title 3

  24. Lack of flexibility for product customization or customer change orders • Damaged parts upon delivery • Rigid and burdensome financial terms • Increased minimum order sixe • Counterfeiting of products • Delays in getting product to market U.S. Manufacturer’s Struggles

  25. Political stability of the country • Geographic Risk • Logistical Risk • Loss of Intellectual Property • Reputation Risk • Quality Risks • Insurance Risks • Compliance Risks • Opportunity Costs • Lack of skilled workers Risks:

  26. According to Harry Moser, Founder and President of the Reshoring Initiative, 60% of manufacturers use only rudimentary cost and ignore 20% or more of the true cost of offshoring. Moser emphasizes that all relevant costs associated with making or sourcing a product domestically should be considered when making a sourcing decision When all costs and risks are taken into account, more companies are finding that manufacturing close to the point of consumption is the best choice.

  27. 3 AREAS: • Mainting the U.S.’s established culture of innovation • Nurture the institutions that have made the U.S. a leader in Software • Raise the quality of Education and Training Future actions

  28. LEAN MANUFACTURING: FOCUS on eliminating waste and producing only to meet customer demand. Entails eliminating inventory buildup Producing closer to consumer Eliminating hidden costs and risks Agency Cost Agency costs arise because of core problems such as conflicts of interest between shareholders and management. Shareholders wish for management to run the company in a way that increases shareholder value. But management may wish to grow the company in ways that maximize their personal power and wealth that may not be in the best interests of shareholders. In my opinion, this occurs when having to take on a partner with different interest than that of the corporation. Relation to Cost Accounting

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