Home' AME : AME Target Fall 2015 Contents 42 TARGET AME.ORG/TARGET
Some companies started producing
in China to enter the 1.3 billion person
Chinese market. For many, this was a
good decision. Increasingly, however,
companies are finding that China is not
as hospitable as it seemed 15 years ago.
Some reshoring case studies
Some AME member companies have ex-
perienced the benefits of reshoring. Ac-
cuRounds reshored precision high-tech
metal products from China and Europe
to Avon, Massachusetts. It cited delivery,
freight cost, IP risk, rising wages, labor
concessions and U.S. energy prices
as reasons for the return to the U.S . It
has doubled its workforce over the last
decade and reported that its customers
The benchmark case of reshoring is
GE Appliances in Louisville, Kentucky.
GE had been outsourcing appliances
in China. It brought in sample product
and had a team of design engineers,
manufacturing engineers, foremen,
assemblers and suppliers come up
with a better design. When they were
done with the water heater, the thermal
efficiency was improved, warranty costs
were reduced and, even though the U.S.
wages are four or five times as high as
at the Chinese supplier, the Made in U.S.
product sells at retail in the U.S . for 20
percent less than the product that had
been imported from China. The Chinese
ex-works price was still substantially
lower than that for the U.S. product, but
a correct accounting showed GE that
it could sell the U.S. product for less,
demonstrating the importance of decid-
ing based on total cost.
The Reshoring Initiative has data on
close to 1,000 companies that have
chosen to produce locally over offshore,
including a broad range of company siz-
es and products. The largest move yet is
by Walmart, which has committed to buy
$250 billion of additional Made in USA
products over 10 years (2013-2022).
The Reshoring Initiative estimates that
the $50 billion per year increase in the
10th year will create about 300,000 U.S.
manufacturing jobs, about a 2.5 percent
increase. Manufacturers interested in
offering Walmart a Made in USA prod-
uct can do so at Walmart JUMP (www.
Reshoring goes far beyond the obvious
Figure 4 defines the parameters of
Figure 4. Reshoring examples
The OEM again assembling the end product domestically.
The OEM shifting the sourcing of components and tools
from offshore to domestic, while keeping assembly here.
The OEM reshoring assembly and sourcing components and
The molder buying its molds domestically again.
The mold maker buying domestic components for the mold
The exact same product or component that was offshored.
A later revision.
A Made in USA product that replaces a product previously
imported by a different company.
An entirely new product that fills the same market space as
a previously imported product.
The role of continuous improvement
Continuous improvement and lean are a
means to achieve the competitiveness
that enables reshoring and a means
to convince companies to re-evaluate
their offshoring. In Out of the Crisis, W.
Edwards Deming’s “Fourth Key Prin-
ciple for Management” is to “end the
practice of awarding business on the
basis of price tag. Instead, minimize total
cost.” James Womack and John Shook
have carried on that logic with articles
exhorting companies to “do the math.”
The popular Toyota Production System
(TPS) helps companies easily identify the
wastes that are made worse by offshor-
ing. (See Figure 5.)
Figure 5. TPS and Offshoring
TOYOTA WASTES HOW OFFSHORING
CONTRIBUTES TO THE WASTE
Overproduction Large batch shipments, filling containers
Uncertain delivery/Inconsistent quality,
port, customs, shared “a wake time”
windo w for discussions
12,000 mi. inbound, 6,000 return (boat
Over-processing More packing and unpacking, customs
In transit, cycle, safety stock, uncertain
delivery and quality, less ability to check
Increased cost over time – repetitive
motion injuries or additional labor to
Much higher than local sources, extra
inspection of materials and tolerances,
customers unhappy longer
Companies that reshore are finding the
benefits that the lean experts and theory
would predict. The list of reasons given
by companies that reshored includes the
• Explicit mention of lean: 27
• TPS related factors: 422
• Impact on innovation: 27
• U.S. skilled workforce and training: 34
• 58 percent of all reasons given for
reshoring: freight, quality, inventory,
travel, communications, rework, burden
on staff, etc.
Despite the ongoing appeals by the
leaders of continuous improvement and
the proven experience of the hundreds
Links Archive AME Target Summer 2015 AME Target Winter 2015 Navigation Previous Page Next Page