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A factory construction boom fueled by reshoring is surging in the U.S. The growth is being driven by a U.S. policy push to boost domestic clean-energy manufacturing, by global supply chain risk, and by the total cost of ownership (TCO) equation. Almost 60 percent of the spending is attributed to construction for chips, EV batteries and other electronic manufacturing.' Manufacturing’s share of construction spending hit 30-year highs in April and May. U.S. construction spending by manufacturers has more than doubled in the past year, reaching an annual rate of almost $190 billion in April compared with $90 billion in June 2022. Read full article on Assembly Magazine

Localization, producing near the consumer, often reduces total cost due to shortened supply chains that con tribute to a lean and agile strategy. The savings on non-manufacturing costs as a result of producing in the market in which the products will be sold can often overcome a 15-20% manufacturing cost gap caused by an 80% wage gap. Using the Total Cost of Ownership Estimator® (TCO) instead of manufacturing cost or Free on Board (FOB) price when companies make siting and sourcing decisions is the best way to recognize these savings. This is part one of a two-part series on the benefits and use of TCO. Read Rebuilding and Reshoring: TCO, A Deeper Dive (Part 1)

Corporate decisions are (hopefully!) made based on business case deliberations. It is critical that the metrics and considerations applied are indicators of significantly increased competitiveness. The above being said, a business case for both domestic sourcing and overseas sourcing can be made. As per everything in business, the primary factor in both cases is related to the customer. In other words, can a product be provided to a customer when they want to buy it, and if not, can it be provided within the time frame that the customer is willing to wait before purchasing an available competitive product? An underlying factor that drives cost in the sourcing decision is waste. In other words, how much does it cost an Original Equipment Manufacturer (OEM) to ensure a sale is consummated? Essentially, the tie to the customer is best understood by a thorough understanding of the dynamics of the market and the end-use of the product. This drives the manufacturing flexibility and agility needed to support acceptable customer fill rates. Since most OEMs have high inventory turns - which are in effect “true” critical-path lead-times - the essential factor in assuring this flexibility is the response agility of suppliers to changes in market demand from what was forecast. Thus, a significant factor in selecting a source should be whether or not they are capable of supporting the market dynamics as described above. Over the years in my interactions with OEMs a capability for agile response is not considered during the supplier selection process. Instead, the primary selection criteria is piece-price. As a consequence, at least in my mind, piece-price becomes the dominant but inadequate driver in building the business case for sourcing. I recognize that piece-price will always be a factor in source selection, but it should also be recognized there are other important factors that should be part of the decision, and these are not just associated with getting a purchased part to a customer’s receiving dock. All the above leads us back to the premise that both domestic and overseas sourcing decisions can be justified through business case analysis. For instance, when market dynamics are very predictable - enabling forecasts to be generally more accurate - sourcing overseas may be the best overall financial decision. Along the same lines, when market dynamics are highly variable, forecasterror will invariably increase, sometimes significantly. Supplier agility and lead times become more important, and domestic sourcing may be a valuable competitive advantage. Supply management’s sourcing decisions affect not only a product’s cost-of-goods sold but can also impact profits resulting from product availability and incremental sales. The supply management team are hailed as heroes when supply availability enables incremental sales, and they are generally blamed when supply constraints lead to lost sales, but I have yet to see an OEM take this into consideration when selecting a source. It is also important to note that consumer expectations are becoming increasingly variable and increasingly urgent as cultural trends of instant gratification become the expected norm. Tracing this backward through the supply chain suggests a greater need for supplier agility and responsive lead times. About the Author: Paul Eriksen Paul D. Ericksen is a founding member of The Onshoring Project. He retired from John Deere in 2006 after holding several managerial-level positions in the supply chain area over his 30 years of service. His last assignment at Deere was as process-owner of the company’s supplier development function. He later went on to serve a stint as Chief Procurement Officer at a Fortune 300 company. Ericksen has written widely on supply chain issues. Paul advises companies and organizations on supply management strategy and practice, as well as promoting progressive changes in supply management strategy.

"Modern Machine Shop’s “Made in the USA” blends its nearly century-long expertise in manufacturing with a unique audio storytelling experience to produce a show unlike any other, shining a spotlight on the past, present and future of American manufacturing." Season 2 explores manufacturing issues through the experiences of companies that have made intentional choices to manufacture in the U.S. With its signature focus on high-quality audio production and documentary style, Season 2 of “Made in the USA” will feature exclusive commentary from OEM leaders who have made a commitment to U.S. manufacturing, defined by a recent change in production or sourcing that aims to keep or shift manufacturing operations within or back to the U.S. Listen here: https://www.mmsonline.com/madeintheusapodcast

Published on IMTS.com "Manufacturing Pivots to the United States as Imports from China Plummet" Manufacturing is pivoting to the United States as imports from China plummet. China’s mounting challenges include the impact of prolonged COVID restrictions, inflation, high youth unemployment, and U.S. companies reshoring in an effort to de-risk supply chains amid geopolitical tensions and uncertainty Published in Assembly Magazine "How to Reshore Profitably: Closing the Cost Gap" Strategies to cut the cost gap and reshore profitably, including examples of shops that are doing just that.

The Onshoring Project (TOPs) has laid its primary objective in its initial 4 October 2021 Press Release, as described in an 18 October Industry Week article A sentence from the article is provided below; “… shift the focus of original equipment manufacturer executives from an almost sole reliance on piece-price in sourcing decisions, a practice that has led to disastrous impacts to the health of U.S. manufacturing, the country’s overall balance of trade and employment,” Some may interpret this statement as saying TOPs advocates both disregarding piece-price and resourcing all goods and services current provided by over-seas suppliers to domestic cases. This is not the case. Corporate decisions are (hopefully!) made based on Business Case deliberations. It is critical that the metrics and considerations they are based are on are significantly increased competitiveness. The dangers of not doing so were outlined in a 25 April 2014 article entitled “Management by the Numbers.” The above being said, Business Cases for both domestic sourcing and overseas sourcing can be made! As per everything in business, the primary factor in both is related to the customer. In other words, can a product be provided to a customer when he/she wants to buy it and if not, can it be provided within the time frame that the customer is willing t o wait before moving on to a competitive product. Also in this decision is the element of waste. In other words, how much does it cost to ensure a sale is consummated. Essentially, the tie to the customer is best understood by a thorough understanding of the dynamics of the market the end use product will be used on, and the associated manufacturing flexibility needed to support acceptable Customer Fill Rates. Since most OEMs have high Inventory Turns --- which are directly related to “true” lead-times --- the critical factor in assuring this is the response agility of suppliers to changes in market demand from what was forecast. Thus, a critical factor in selecting a source should be whether or not the suppliers are capable in supporting those same market dynamics as described above. Over the years in my interactions with Original Equipment Manufacturers (OEMs) this is not taken into account during the supplier selection process. Instead, the primary criteria selections are based on is piece-price. It must be recognized that piece-price will always be a critical factor in source selection, but it should also be recognized there are other important factors that should be part of the decision (as Harry Moser outlines in his Total Cost of Ownership (TCO) Estimator Total Cost of Ownership (TCO) Estimator which is a fundamental part if his Reshoring Initiative and my book “Better Business: Breaking Down The Walls Of The Purchasing Silo” (which is available by contacting me at ericksenpc@olympus.net) A bottom line in all of the above is that in addition to TCO, market dynamics should be taken into account in sourcing decisions. Which lead us back to the premise that both domestic and overseas sourcing decisions can be justified through Business Case analysis. For instance, when market dynamics are very predictable --- making forecasts accurate --- depending on TCO analysis, sourcing overseas may be the best overall financial decision. Along the same lines, when market dynamics are highly variable, it will usually make sense to source domestically since forecast will invariably have error, sometimes significant. Based on this conclusion, supply management not only affects a product’s cost-of-goods sold, but can also affect profits through supporting both hitting forecasts and also making incremental sales possible when demand exceeds what was anticipated. It is important to note that consumer demand is varying more and more as instant gratification becomes the expected norm. At the same time supply uncertainty is increasing with climate change and geopolitical tension. The is a message that needs to given visibility and a primary tenet of The Onshoring Project. The members of The Onshoring Project are available to advise companies on this issue.

The Onshoring Project Co-Founder and Reshoring Initiative President, Harry Moser, participated in the recent U.S.-China Economic and Security Review Commission's discussion on "U.S.-China Competition in Global Supply Chains". A complete list of testimony transcripts and meeting summaries are posted at: https://www.uscc.gov/hearings/us-china-competition-global-supply-chains The following visit links directly to Moser's testimony: https://www.youtube.com/watch?v=IcGjlhf2S-g

This recent Wall Street Journal article highlights how continued reshoring is translating to continued job growth. Read the full report here: https://www.wsj.com/livecoverage/stock-market-news-today-03-23-2023/card/u-s-companies-reshored-364-000-jobs-last-year-report-says-HOBgp4ivbIvZ32FRHgFC

IRA and Chips Act Boost Reshoring to Another All-Time High, Up 53% DOWNLOAD THE FULL REPORT HERE: https://reshorenow.org/blog/reshoring-initiative-2022-data-report/#

Conducted and written by Supply Chain Adviser and Author, Paul Ericksen, this interview focuses on fellow author Michael Collins recent book "Dismantling the American Dream" Michael Collins spent 35 years in manufacturing, having served at both the vice-president and general manager levels for a large corporation. He is also a prolific writer, having contributed articles to many trade journals including Forbes and IndustryWeek. He has previously written four books on manufacturing related topics, including government economic policy. His most recent book --- “DISMANTLING THE AMERICAN DREAM: How Multinational Corporations Undermine American Prosperity” is the focus of the following interview. Q: A basic premise of your book is that corporate America fundamentally changed its’ focus in the late 1970’s/early 1980s, to the detriment of the U.S. economy. Can you explain this assertion? A: The tipping point was associated with a single pronouncement by a single individual. In 1978 Milton Freidman --- at the time a respected, conservative economist --- made the following statement: “An entity’s greatest responsibility lies in the satisfaction of the shareholders,” i.e., owners.” Shortly afterwards, the U.S. Business Roundtable further developed Mr. Friedman’s statement into the pronouncement that: “The point of any business is to generate economic returns to its owners, period.” Both of these statements were contrary to the previously generally accepted corporate strategy of striving to deliver equal economic benefits to three primary stakeholders which while it included owners, also focused on customers, employees and suppliers. This change in corporate focus has had a severe negative economic effect on the last two of those stakeholders and, in general, the U.S. economy. In addition during this period Ronald Reagan delivered a significant reduction the corporate tax rate under the presumption that any resulting economic benefits to corporations would “trickle” down to the benefit of all. We know now that the economic benefits related to a corporate reduction in taxes goes almost exclusively to corporate shareholders and their executives. Q: Those are pretty strong assertions. Can you give any examples of this? A: Sure. From 1948 to 1979 the productivity of American industry increased 108.1 % and corporations shared much of this financial gain with their employee, increasing compensation by 91.2 percent. Over a similar period from 1979 to 2012, comparable numbers were a 69.6 % increase in industrial productivity yet only an 11.6 % increase in employee compensation. Another way of saying this is that since 1979 corporations have greatly reduced manufacturing costs due to increased productivity, short-changing their employees who delivered those increases. Q: That’s an interesting insight. Are there other examples of post-1979 changes in corporate strategy that have negatively influenced employee and supplier stakeholders? A: What has probably been the most visible change in corporate strategy has been the overseas outsourcing of purchased material, moving their material purchases away from domestic Small Manufacturing Enterprises. The premise was that the lower wages and reduced regulations available overseas would results in lower material costs, which they did. On the other hand --- and this was, for the most part, not taken into account relative to purchase prices --significant overhead costs had to be assumed as a result of working with those overseas suppliers. For instance, due to the drastically longer lead-times of overseas suppliers, corporations had to inventory significantly increased pre-built product to support Customer Fill Rates when customer demand varied from what was forecast. And these additional costs contributed to the need to reduce employee compensation in order to realize the anticipated economic benefits to corporations sourcing overseas. Q: Can you quantify the impact on the U.S. economy of corporations chasing lower piece-prices overseas? A: Yes. Sourcing to overseas suppliers led to employment reductions and reduced the manufacturing where-with-all of the country as a whole. For instance, machine shops are one of the basic underpinnings of a country’s economic wealth. From 2002 to 2020, 5,295 (21 %) of all U.S.-based machines shops went out-of-business, resulting in a 63,342 reduction industrial jobs. One point that is lost in the reduction of domestic manufacturing and employment is the loss of innovation. Many people assume that innovation primarily comes from corporations. Many corporations can be thought of as large ocean liners, where to make a change in direction requires a significant and lengthy turn in direction. This is not the case with Small Manufacturing Enterprises. The bottom line is that much of this country’s competitive advantages are based on innovation and you can’t have strong innovation without a wholistically healthy industrial economy. It would be hard to say that the U.S. economy is wholistically healthy. Examples like this show how present corporate strategy has led to this country’s inability to be self-sufficient in important areas. One only has to see the current situations of U.S. production (or lack thereof) of microchips to understand how outsourcing overseas has undercut this country’s manufacturing viability. And restoring it will likely take --- again, as shown in microchips --- millions of dollars of governmental funding. Q: Has the impacts of the change in corporate strategy changed U.S. culture in any way? A: In many ways. Perhaps the most immediate impact has been to reduce the value this country places on work. As I described earlier, “trickle down” as an economic theory has been dis-credited by the results it has delivered over the last four decades. Instead, the corporate “return on investment” focus has accelerated a rising stock market such that investment return rates returns far outweigh increases in employee compensation. The result has been that those with enough disposable assets to invest have benefited from current corporate strategy while the opportunity of those that don’t to “raise themselves up by their bootstraps” has significantly decreased. Today, the top 10% of all American’s own 88 % of all assets, a significant increase from 1980. This is the highest disparity in wealth ever in this country, including that of the 1890’s “Gilded Age” and led to the largest economic inequality in western nations. Q: Are there any other changes to culture due to the change in corporate strategy? A: Yes. One that is often overlooked is in the area of start-ups. Back in the 1950’s, for instance, if a man started up a business in his garage --- say, a machine shop --- it was likely with the intention of providing a living for his family and creating/developing an value producing entity for passing on to his children. Today, business start-ups are seen more as a “get rich quick” scheme where the created product can be sold to a large corporation, significantly increasing the wealth of the start-up’s investors. This phenomenon has also led to a type of technical outsourcing by large corporations where they lack internal resources to develop their own tools. Q: Can the federal government facilitate a change in the way such that economic benefits are delivered to all corporate stakeholders? If so, why hasn’t it? Yes, the government can and should play a critical role in making this happen. For instance, the 2017 Corporate Tax Reduction Act was passed under the understanding that the increased corporate financial benefits would lead to increased domestic investment and jobs, as well as increased business activity leading to higher tax receipts. But there were “no strings attached” to the benefiting corporations and over 50 % of the revenue windfall due to the tax reduction was spent on stock buybacks, which led only to a positive financial impact for stock-holders. The primary reason the government doesn’t apply a “strings attached” clause to financial assistance such as tax reductions. In a word, this is due to lobbyists. In 1975, only 175 corporations employed lobbyists. In 2011 there were 12,929 registered lobbyists representing hundreds s of corporations and industries, spending $3 billion dollars in lobbying activity. And that figure doesn’t include the donations corporations make to politician election and/or re-election campaigns. But even with government intervention the changes needed to support U.S. industry and jobs cannot take place without the commitment of multi-national corporations. In 2018 181 CEOs of large corporations pledged to change their strategies to benefit all stakeholders, including employees and suppliers. But is this really happening? Instead, a current widely hailed strategy as corporations relocate from their distant Chinese suppliers is “near shoring.” Specifically, this is referring to sourcing from Chinese to Mexican suppliers, which will do virtually nothing to restore U.S. jobs or help raise the economic circumstances of the typical employee --- manufacturing and otherwise. What is needed instead is a strategy of “onshoring.” Final Question: Any overall message you’d like to give the American people and our politicians relative to economic policy? A: Yes. The American Dream is alive but fraying. The corporate performance metrics that Boards of Directors have given their executives have an almost solitary focus on increasing stock price. This needs to change so that all stakeholders share in corporate financial benefit. With all of the momentum focused on providing returns to stockholders, it will take a significant effort to reverse this force. This will require government economic policies and practices that protect American commercial interests by ensuring a level-playing field and channel corporations to have a wider perception on who their stakeholders are an how they should be treated. Businesses need to understand that in the long run, without a middle class, there will be no-one to buy the products they sell. Interviewers Note: Despite my background in business, Mr. Collins new book gave me a much deeper understanding of it. He has both documented and quantified his assertions with governmental numbers and statistics which, in my opinion, make many of them pretty much unassailable. Anyone who has wondered by why U.S. manufacturing employment has dropped by almost half over the last three years and why our country’s trade balance continues to rack up significant debt, year after year, would benefit from reading this book.

Debuting in spring 2021, season one of Modern Machine Shop's "Made in the USA" podcast tackled manufacturing issues related to trade policy, global supply chains, education, automation and workforce. Just released, Season 2 explores manufacturing issues through the experiences of companies that have made intentional choices to manufacture in the U.S. With its signature focus on high-quality audio production and documentary style, Season 2 of “Made in the USA” will feature exclusive commentary from OEM leaders who have made a commitment to U.S. manufacturing, defined by a recent change in production or sourcing that aims to keep or shift manufacturing operations within or back to the U.S.' In episode 1 - "A Return from China" featuring Entrepreneur Scott Colosimo who found early success in China producing parts for his Cleveland-based motorcycle company in the mid-2000s. The episode chronicles the events that led Colosimo and his team to start over from scratch — and move production back to the United States. Listen here: https://www.mmsonline.com/podcast/episode/made-in-the-usa---season-2-episode-1-a-return-from-china

In March 2019, IndustryWeek launched its Supply Chain Initiative. The initiative’s stated goal is to highlight the importance of small- and medium-sized supplier/manufacturers (SMEs) to U.S. manufacturing, OEM order fulfillment effectiveness and, in general, to the overall U.S. economy We hoped to accomplish this by providing thought leadership in purchasing strategy and practice. The intent was to recognize and optimize supplier financial impact above and beyond material costs, which is often not an OEM consideration For instance, the need for OEMs to build finished goods inventory ahead of demand in order to maintain customer fill rates is due to the lack of capability responding to market variations in original forecasts. The biggest contributors to this lack of capability are extended supply chains. But it is very rare to find OEMs that tie the amount of pre-built finished goods inventory to supply chain strategy and practice. As a result, purchasing departments are not incentivized through both individual and overall performance metrics to dedicate resources to developing a lean supply chain that can routinely respond to OEM schedule changes in short order. To date, IndustryWeek has made good progress toward meeting its goal through the posting of over 100 columns that focus on progressive supply management and practices, as well as through the publishing of my recent book on the subject, “Better Business: Breaking Down the Walls of the Purchasing Silo.” IndustryWeek plans to extend the impact of its initiative by working with several other well-known organizations in a new initiative called The Onshoring Project, which has an overall goal to: Develop and share new metrics, new tools and practices that will shift the focus of original equipment manufacturer executives from an almost sole reliance on piece-price in sourcing decisions, a practice that has led to disastrous impacts to the health of U.S. manufacturing, the country’s overall balance of trade and employment. It makes a lot of sense for IndustryWeek to participate in the Onshoring Project, as the goals of both initiatives align very closely. By working with our consortium’s partners, we increase each member’s impact through complementary and supplementary collaboration. Besides IndustryWeek, the founding consortium organizations include the Association for Manufacturing and Technology (AMT); the American Industrial Acquisition Corporation (AIAC); Helpful Engineering; The Reshoring Initiative; and Gardner Business Media. Any companies, OEMs and/or SMEs, or organizations can learn more about it by visiting www.theonshoringproject.com. If you like what you see and feel that your organization/company can positively contribute, you can sign up to receive more information. And it probably needs to be said: By contribution, the consortium is not talking about funding. There are no membership fees to join. The Onshoring Project is looking for members who can contribute their ideas and any available existing resources to develop project deliverables. (By the way, work on one new tool related to evaluating supplier lean-ness is already in motion.) The COVID-19 pandemic has given visibility to the problems and costs of over-extended supply chains. For this reason, both IndustryWeek and The Onshoring Project feel the time is right for advancing the need for changes in sourcing strategy. And we feel we can justify and validate those changes through our joint efforts. I’ll end by adding one of my favorite observations. Specifically: An OEM cannot be considered a world-class manufacturer unless it works with a world-class supply chain. I truly wonder how many OEMs really believe that their supply chains are world-class.