August, 2014
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Page 51 Onshoring: A Complex But Critical Decision Process Continued fromprevious page
and currency rates, among other fac- tors, have dramatically narrowed the gap between manufacturing costs in China and the United States, with the result that several US companies are now bringing manufacturing jobs home to America.” There are notable examples
(
www.econo
mist.com/ news / special- report/21569570-growing-number- american-companies-are-moving- their-manufacturing-back-united), such as GE reshoring their manufac- ture of refrigerators, water heaters, and washing machines from China to Kentucky.
Critical Issues Many reasons are offered for
onshoring, including mitigating the high cost of transportation, lead-time reduction, and improved time-to-mar- ket. Often, business people cite one or two critical (to the situation) issues when discussing onshoring in general, or even when evaluating their own
“…the tide is turning.
Rising wages and currency rates, among other factors, have dramatically nar- rowed the gap between manufacturing costs in China and the
United States, with the result that several US companies are now
bringing manufacturing jobs home to America.”
specific situation. The most com- pelling concept is the fact that ALL of these issues work together. They all add to costs and impediments, or to opportunities for im prov ement. In essence, all benefits of onshoring should be evaluated in a total cost of ownership analysis. IndustryWeek. - com’s review of The U.S. Manu - facturing Renaissance: How Shifting Global Economics Are Creating an American Comeback quotes authors Sirkin, Zinser, and Rose (
www.indus-
tryweek.com/competitiveness/us-mex- ico-are-rising-stars-manufacturing- cost-competitiveness) when they write: “When companies build new manufacturing capacity, they are typ- ically placing bets for 25 years or more. They must carefully consider how relative cost structures have changed-and how they are likely to evolve in the future.” Interestingly, some companies
take a regional view and reshore operations from Asia, for example, to
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Ersa North America, Inc. | Plymouth, WI 53073 |
info-ena@kurtzersa.com Ersa GmbH (headquarters) | 97877 Wertheim |
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Mexico, which is near the US but not the US (
www.ft.com/cms/s/0/ ec164 - 996-ad23-11e1-bb93-00144feabdc0. - html #axzz35US XF25Y). This is re - fer red to as “nearshoring.” The Bos - ton Consulting Group calls both Mexico and the US “rising stars” with regard to global competitive- ness (
www.industryweek.com/com- petitiveness/us-mexico-are-rising- stars-manufacturing-cost-competi- tiveness) and stated: “The manufac- turing cost structures of Mexico and the U.S. have shown marked im - provement over the past decade, fueled by stable wage growth, sus- tained productivity gains, steady exchange rates, and a major energy-
cost advantage that is largely driven by the 50% fall in natural gas prices in the U.S. since large-scale shale gas production began in 2005. Mexico now has lower average manufactur- ing costs than China.” But there are many issues to
consider. Since conditions are con- stantly evolving, it is imperative that any manufacturing location decision not be based on outdated data, be - liefs, or notions. As with most impor- tant business decisions, making a choice is not time for opinions or feel- ings, but rather, a time to optimize profits. Issues such as taxation, ener- gy rates, labor rates, labor availabili- ty, incentives, and efficiencies of
clusters must all be factored into any decision. For any decision about reshoring or onshoring, updated information is available, as are expe- rienced consultants and experts. Because of these numerous fac-
tors, any evaluation of onshoring, reshoring, or nearshoring will be intricate and complex. Maintaining an analysis focused on a business’s bottom line, and assembling facts about the business and the location, is always a solid basis for arriving at a wide decision. Contact: Indium Corporation,
34 Robinson Road, Clinton, NY 13323 % 315-381-7524 Web:
www.indium.com r
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