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Manufacturing Is Officially Coming Home

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Rob Spiegel
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Data says manufacturing is returning
Rob Spiegel   11/22/2013 6:34:12 AM
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It's good to see the anecdotal evidence actually points to a trend that manufacturing is returning to North America.

RogueMoon
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It's called 'on-shoring'
RogueMoon   11/22/2013 10:00:56 AM
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I'm glad there's now a name for the counter-movement to reverse the damaging effects of "off-shoring".   I'll start using it.  "On-shoring". 

Off-shoring was going to be immensely damaging to the American economy in the long term.  This was said after the Cold War ended when the push to Asia began. 20+ years later, it's true.

I'm happy that there's a survey taken and an association to promote on-shoring.  I'm a bit skeptical of the results though.  The categories are right, but the off-shore quality of labor and risk to intellectual property seems to be ranked far too low.  It depends on who was filling out the survey.  If it's the CEO, he'll definitely rank costs above all else.   If it's the guys responsible for the quality, they'll say quality.  If it's the guys in engineering or manufacturing, they'll have a far different take.

At least, the survey got one thing dead-on correct, there's a wealth of trained resourceful people in America struggling to find meaningful work.  Rather than seeking the cheapest labor and tolerating whatever quality comes of it, perhaps its best to invest in the people who stand the most to gain from healthy businesses in their own country making products they use.  

Whatever the reasons be, on-shoring is something to be encouraged.  The pendulum needs to swing back.

Rob Spiegel
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Re: It's called 'on-shoring'
Rob Spiegel   11/22/2013 11:49:47 AM
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Thanks for the comment RougeMoon. One thing to remember about the study is that it focuses on the electronics industry. I think there's a silent benefit to this trend, and that's the number of companies that decide not to move their manufacturing to Asia in the first place. We'll never know how many companies have decided lately not to move. But it may be considerable.

As for the study, IPC expects to update it annually.

Nancy Golden
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Re: It's called 'on-shoring'
Nancy Golden   11/24/2013 5:54:19 PM
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I agree with your observations, RogueMoon - the categories are all valid but how much weight given to each depends on your viewpoint. I think quality control and the ability to implement design changes in a timely fashion are huge issues with off-shore manufacturing based on my observations and stories of industry practices from a friend who works for a company that distributes electronic products made in China. At any rate - it is a great thing to see the return of manufacturing to U.S. soil and hopefully this trend will continue and create a healthy economy based on consumers become the producers of what they consume.

 

 

TJ McDermott
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Now, let's see a curtailment of H1B
TJ McDermott   11/22/2013 10:39:58 AM
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This is good to see; an all-service oriented economy was not healthy.  I'd like to see primary fabrication (metals) come back too.

With that, I'd like to see us stop importing foreign labor - H1B visas need to be curtailed, not expanded as congress did this year.  They cant discuss increases again when unemployment gets below 5%.

naperlou
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Re: Now, let's see a curtailment of H1B
naperlou   11/25/2013 9:01:05 AM
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TJ, I agree with you.  I believe that the IEEE-USA does too.  The issue you have with H1B visa is that they were originally designed for fields, such as medicine and basic research, where the world-wide population of proactitioners may actually be on the low side for what is needed.  They became a way to get cheap engineers and programmers.  I have researched this, and what I saw suprised me.  Microsoft is the biggest user of these visas.  They are hiring programmers!! What?  I even saw that they were hiring purchasing managers through this program.  Even if it is kept, it needs a major amount of reform.  At a minimum, it should be tied to actual statistics.

One reason companies do find it useful is the issue of mobility.  A H1B worker is coming into the country with no ties.  That worker can locate anywhere without disrupting their family, etc. beyond the disruption caused by the decision to come to the US in the first place.  American workers are much more settled these days.  Many may have moved over their careers and found that those moves were not really very fruitful.  Younger workers are generally very willing to move.  My wife and I did early in our careers and my son just did it.  Out demographic make-up is changed, though.  Fewer people are willing to make the move.  Companies like IBM, I have noticed (I worked for them in the past) tend not to move people around.  They have a majority of mobile workers and distributed teams. 

A small company that I talked to recently have a near-shoring site in the middle of the country.  They are based in Silicon Valley and have other distributed offices for services.  Their development shop is in this near-shoring location which is cheaper than Silicon Valley, but still a nice place to locate.  This is the answer, I think.

TJ McDermott
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Re: Now, let's see a curtailment of H1B
TJ McDermott   11/25/2013 9:39:33 AM
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WELL stated, Naperlou.

I've gone to the extent of writing my representative and senators, but have only gotten back form responses.  Their responses have steered my voting away from them as a result.

http://www.youtube.com/watch?v=TCbFEgFajGU#t=75

This video, while dated, demonstrates what happens to complex issues.  As you stateed Naperlou, H1B started out with good intents, but has been perverted far beyond what it meant to do.

I'm REALLY glad to see the jobs coming back.

Greg M. Jung
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On Shoring Trend
Greg M. Jung   11/23/2013 9:21:33 PM
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I especially appreciated the point that 'manufacturers are now considering the costs of transportation when they look overseas'.  Not only is this the transportation of personnel to the Asian factories, but also the higher costs of frequently expediting air shipments due to production part shortages in the factory.  As corporate accounting models evolve and better capture these hidden costs, on shoring becomes more attractive.

far911
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Re: On Shoring Trend
far911   11/24/2013 12:14:01 PM
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true

NadineJ
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Re: On Shoring Trend
NadineJ   11/24/2013 10:56:06 PM
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Manufacturers have always included the cost of transportation.  It was still less expensive to manufacture overseas.  It's even cheaper to produce in multiple locations for some products.

With labour unions diminishing and stagnant minimum wages in the US, labour costs are now lower.  Manufacturing in the US is cheaper than in the past.

The real issue is the lack of manufacturing skills in the US.  Those jobs left decades ago.  Younger generations don't have to the same abilities and experience in manufacturing in the US labour force.

Nancy Golden
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Re: On Shoring Trend
Nancy Golden   11/26/2013 3:03:23 PM
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"The real issue is the lack of manufacturing skills in the US.  Those jobs left decades ago.  Younger generations don't have to the same abilities and experience in manufacturing in the US labour force."


Hmmm...not sure I agree with this statement. It was the drive for cheaper labor that closed down manufacturing plants in the U.S. I think their return would both be welcome and would have jobseekers applying immediately that would do well. The abilities and experience mentioned come with training and time on task - regardless of where the plant is located.


NadineJ
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Re: On Shoring Trend
NadineJ   11/26/2013 5:13:12 PM
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@Nancy-I agree that there are several people in North America looking for jobs and willing to try. 

But, research into this issue has already shown that the capabilities aren't here anymore. Accenture and Harvard Business School have done extensive research on this, amoung others.  For the last few decades, people have been trained up to manufacture goods in other parts of the world, but nt here.  The number of OEMs able to take on large orders in the US has dimished greatly across disciplines. 

It's a barrier that can be overcome as the research shows.  It will take time, likely decades.  But, ignoring it won't bring jobs back to the US quickly.

If you have any research to site for your disagreemnt, I'd love to take a look.  It's an interesting topic to read about.

Nancy Golden
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Re: On Shoring Trend
Nancy Golden   11/26/2013 6:44:20 PM
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Nadine, here's an interesting article that touches on some of the issues we are talking about:

Reshoring: Are Manufacturing Jobs Coming Back to the United States

It does mention training obstacles and you make a valid point, but they are certainly not insurmountable...

NadineJ
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Re: On Shoring Trend
NadineJ   11/28/2013 3:55:52 PM
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@Nancy-I think we're in agreement.  I never said that the lack of skills in the U.S. was insurmountable.  Just that it would take years before we saw any significant change.  If that point isn't address seriously, it could take decades.

Nancy Golden
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Re: On Shoring Trend
Nancy Golden   11/28/2013 6:38:34 PM
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I guess I am just more optimistic about the time frame, Nadine - the learning curve shouldn't take years if we bring expertise that already exists to bear. The example in the article does mention that training was necessary but recognizing the issue and implementing known solutions should shorten the learning curve.

NadineJ
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Re: On Shoring Trend
NadineJ   11/29/2013 5:40:06 PM
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It's not the learning curve that I question.  I think that if the real problem isn't address, the opportunity to learn viable skills won't be present for years.

The possible delay I see is from U/S manufacturers acting like the proverbial ostrich and just sticking their heads in the sand.  Or even worse, using the excuse of lack of affordable skills in the U.S. to go or stay off-shore.

Rob Spiegel
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Re: On Shoring Trend
Rob Spiegel   11/25/2013 10:21:53 AM
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Good point, Greg. And you picked up on the hidden cost of time. Travel involves time, and time is a costly factor.

Charles Murray
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Re: On Shoring Trend
Charles Murray   12/3/2013 6:45:56 PM
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Great article, Rob. I particularly like it because it shows that manufacturers of small items -- in particular, electronics -- are staying home. For a couple of years, we've been hearing that makers of big products (cars, trucks) lose their overseas cost advantages when it comes time to ship their big products back to the U.S. This shows that there are advantages to manufacturing here, even if you build small things.  

Debera Harward
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Re: On Shoring Trend
Debera Harward   12/4/2013 5:39:50 AM
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Its really great that manufacturing is again comming back to US, i dont think that employees over there are not capable enough however in the past the wages in China , Bangladesh etc were less as compared to US but now there has been increase in wages and transportation cost has also rised so there is no advantage of placing the industry in Areas other than US.

Debera Harward
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Re: On Shoring Trend
Debera Harward   12/4/2013 7:17:29 AM
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US has lost its manufacturing skills to China, Bangladesh and other less developed Countries like India, Brazil . US has been accused of becooming a service community. However there are certain companies that have started supporting manufacturing some products in US. I have heard somewhere that president of Wallmart US is planning  to manufacture goods in US it would create jobs nd will boost the economy and the national pride.

Rob Spiegel
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Re: On Shoring Trend
Rob Spiegel   12/5/2013 11:13:37 AM
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Good point Chuck. There are a lot of reasons to move manufacturing back to North America. I talked with an American executive in the electronics industry who moved manufacturing from China to Mexico so he could be in the same time zone. He hadn't anticipated spending every night on the phone with his contract manufacturer. 

Debera Harward
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Re: On Shoring Trend
Debera Harward   12/9/2013 5:51:40 AM
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@Rob, Yes working in different time zone is also a very important factor .I can understand the pain of working or staying in touch with the client during the night times thorugh different modes of communication. It totally disturbes your life , routine etc .

Debera Harward
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Re: On Shoring Trend
Debera Harward   12/9/2013 6:02:26 AM
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Other than wages there are certain other reasons of manufacturing moving towards US . For the first  time economic drivers have created competitive advantage for US. Some are mentioned below ;

1. Cheap and large quantity of natural Gas

2.Innovation. In US the innovation rate is much higher than any other country maximum R&D is being done there .

3.Time Horizon Issues

4. Less wages

5.Mergers And Acquisitions

And many more .

Rob Spiegel
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Re: On Shoring Trend
Rob Spiegel   12/9/2013 12:23:57 PM
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Debera, I was surprised when I found the time zones were an issue. But it makes sense. We're human. These executives didn't realize they would end up on the phone with their contract manufacturer every night.

bobjengr
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MANUFACTURING COMING HOME
bobjengr   12/24/2013 12:10:06 PM
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Excellent Post Rob.  I can certainly attest to the fact that time zones present a big problem.  I retired from GE (Appliances).  At that time, GE contracted with Satyam in India for all drafting and CAD work.  It was a real pain for the "state-side" guys.  We would start our communication meeting at 0600 hrs Eastern Time, just as they were leaving for the day.  For me, that would mean leaving at 0515 in the morning to make the meeting on time.  This really gets old in a heartbeat.  Also, I don't want to be overly negative but, Satyam was not all that good because they simply did not understand American cooking products.  India just does not cook like we do.  The dishes are definitely different.  We really struggled with this one.

 I have one client that buys several products from China.   Quality is questionable and you really never know if the product shipped will provide yields necessary to fulfill production demands.   The very best company gives us an 82% yield.  There is a 15% "over-purchase" knowing a significant percentage will be off-quality.  This, to me, is completely unacceptable but the management is locked in to contracts that (apparently) can't be broken.  

 There is a great deal to be gained for bringing it home.

Rob Spiegel
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Re: MANUFACTURING COMING HOME
Rob Spiegel   12/30/2013 9:39:42 AM
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Good point on quality Bobjengr. We've seen tons and tons of items in Made by Monkeys that would indicate there has been a sharp quality drop-off with American products since manufacturing shipped to Asia. It may be anecdotal as we see the complaints flow in, but I'll bet that represents a quantifiable drop.

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