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Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

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#1 ·
Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

The Wall Street Journal

Buck Up, America: China Is Getting Too Expensive

October 7, 2011



Article Quotes:

A few years ago in Hong Kong I met a furniture manufacturer from South Carolina who had outsourced production to China and then been crushed by his Chinese partners, who bumped him aside and started selling directly to the U.S. market.

Some surprising U.S. industry sectors may benefit as economic forces prompt more manufacturers aiming product at Americans to consider building in the U.S. rather than China. John Bussey has details on The News Hub.

He no doubt would be intrigued to see the tide turning again today.

In the Great Game of global wage and cost arbitrage, bits of some rather surprising industries are drifting back to U.S. shores, and the pace could quicken. Furniture making—usually labor intensive and low-skilled—is just one shocker. On Tuesday Ford said it will build some auto parts in the U.S. that have traditionally been sourced in China. And there's more.

Currency hawks in Congress are this week promoting legislation to penalize China for manipulating the yuan. They might want to take note of this trend: The jobs they want to bring home may already be trickling back to the U.S.—emphasis on the trickle.

Bruce Cochrane is emblematic of the incipient shift. He's opening a furniture factory in Lincolnton, N.C., a rare event in a region and industry that have been walloped by outsourcing. Employment in U.S. furniture factories fell by 60% over the last decade.

Mr. Cochrane says furniture made in China and sold in the U.S. previously had a price advantage of up to 50%. That's often down to 10% to 15% now, in part because wages in China are soaring—up 15% or more a year in some locales. Shipping costs, he says, have doubled from a few years ago.

"About 2006 I saw a pivot point, especially with labor costs," says Mr. Cochrane, who has spent time in China.

Certain jobs have been dribbling back to the U.S. for a few years. But now the sectors most likely to repatriate production may be coming into focus.

Hal Sirkin of Boston Consulting Group has identified seven industry categories that are most susceptible to relocating production aimed at the U.S. market (production for the Chinese market would stay chiefly in China). They are furniture, transportation goods, computers and electronics, electrical equipment and appliances, plastics and rubber products, machinery, and fabricated metal products.

Mr. Sirkin says products in these categories may be cheaper to make in China now. But with labor, materials and shipping costs rising, the advantage will tip to the U.S. in four years or so.

There have been optimistic prognostications of this sort in the past that fell flat. But a number of forces at work today suggest that this time could indeed be different.

Among the forces: those ever-rising costs in China; more flexibility from some U.S. unions, resulting in fewer work rules and lower labor costs; more subsidies from some state governments; far higher productivity in the U.S.; and pressure from retailers to shorten turnaround time and cut inventories, prompting more manufacturers to abandon long supply chains to China.

And the yuan. After considerable jawboning by governments around the world, Beijing has allowed its currency to rise roughly 30% against the dollar since 2005. Since a stronger yuan makes China's exports more expensive in foreign markets, that's bad for U.S. manufacturers who serve their global customers from factories in China—and for U.S. consumers hooked on cheap Chinese products.

But for those who want to reclaim production to U.S. shores, it's a plus.

"We're in the process of bringing everything back from China," says David Gil, marketing director for Sleek Audio, which makes high-end tunable earphones. Along with rising costs in China, quality control proved a headache.

Full article (with other examples) at link. Subscription required.

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The Wall Street Journal

Otis Shifts Work Closer to Home

October 7, 2011

By TIMOTHY AEPPEL

Globalization has come full circle at Otis Elevator Co.

The U.S. manufacturer, whose elevators zip up and down structures as diverse as the Empire State Building and the Eiffel Tower, is moving production from its factory in Nogales, Mexico, to a new plant in South Carolina.

Fifteen years ago, Otis Elevator joined the stampede of U.S. manufacturers who moved production to Mexico in a bid to save money. Now they're moving it all back. Tim Aeppel explains why on The News Hub.

More startling: Otis says the move will save it money.

What's happening at Otis is part of a broader shift in the way manufacturers tally costs.

Their outlook has been changing as the cost of producing abroad has risen and they have devised more efficient ways to make things close to where they want to sell them.

International companies ranging from Ford Motor Co. to General Electric Co. have started returning to the U.S. some jobs that they had previously shipped offshore, a process sometimes dubbed as "reshoring."

"It's a trickle, it's not a trend—but clearly companies are now thinking more about it," says Paul Scott, executive director of the Alliance for American Manufacturing, a nonprofit alliance of business and labor groups that lobbies for domestic production.


A number of forces are behind the modest influx. Wages and other costs are going up in foreign countries—especially China—while pay in many industrial sectors inside the U.S. has risen slowly or even fallen in many cases. Transportation costs have grown, as have the costs of holding large stocks of inventory, a common precaution when producing goods far from their end market.

Full article (with other examples) at link. Subscription required.
 
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#3 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

We should FORBID them tying the yuan to the dollar. Apply tariffs.
Of course our government has no pair so now you have Occupy Everything.
The next year is gonna be interesting.
 
#4 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

with the price of oil the shipping costs are a lot more now also
 
#5 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Sounds good to me. I think we're all getting tired of the off shoring of our jobs. In addition, I like to buy products made in the USA. I don't mind paying a little more either, but with some products it is just impossible.
 
#7 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Boeing found this out when they outsourced so much of their 787. Delays were specifically attributed to outsourcing. C'mon America, let's build more at home. We do it smarter, cleaner and we treat our people like human beings.
 
#13 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Boeing found this out when they outsourced so much of their 787. Delays were specifically attributed to outsourcing. C'mon America, let's build more at home. We do it smarter, cleaner and we treat our people like human beings.
The unions aren't the ones who shipped our jobs to China. It was the greedy "job creators" who were interested in ever higher profits, even if it hurt the US.
While we can't control what China does, we can control what we do.
We should impose import duties on all essential products that are already made in the US.,
we should impose a "lost-jobs" tax on goods that were built here, then moved to China, for worker retraining. This lost-jobs tax would stay in place until unemployment dropped below 5%.
We should impose a 20% Intellectual Properties Theft charge on all Chinese imports. And we should impose a surcharge of whatever percentage the juan is under-valued versus the dollar. If the juan is 10% under valued, that surcharge should be 10%.
After we have done the above, China may try to retaliate, but our home markets would be the stronger for these actions, while China could lose several million jobs that they poached from us.:yup:
 
#8 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Plus, now that we've destroyed our economy at home we don't have to go as far to find a cheap workforce. Who said 9% unemployment was a bad thing?

Seriously, I'm glad for jobs to come back. I'm sad that some of this is made possible by bad circumstances.

I'd feel better if Uncle Sam would resolve some of the real issues. I still feel it's CRAZY to keep GM and Chrysler (post Bankruptcy) and also Ford saddled with the UAW while the transplants can build cheaper in the South. Either require all manufacturers to be married to the UAW or kill them off.
 
#57 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Plus, now that we've destroyed our economy at home we don't have to go as far to find a cheap workforce. Who said 9% unemployment was a bad thing?

Seriously, I'm glad for jobs to come back. I'm sad that some of this is made possible by bad circumstances.

I'd feel better if Uncle Sam would resolve some of the real issues. I still feel it's CRAZY to keep GM and Chrysler (post Bankruptcy) and also Ford saddled with the UAW while the transplants can build cheaper in the South. Either require all manufacturers to be married to the UAW or kill them off.
What happen to workers choice
 
#9 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA



:clap:
 
#11 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Bring em back! Free enterprise zones, restore devasted neighborhoods in the industrial cities. Why Gary, South Bend, Milwaukee, Detroit, Flint, and other manufacturing towns have to suffer while our major trading partners' cities thrive and proper?
 
#15 · (Edited)
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

I read a book about this by Jeff Rubin called "Why Your World Is About To Get A Whole Lot Smaller". The catalyst for this in the book is that shipping/production costs just won't be worth it, albeit oil prices have not been robust lately. Regardless his thesis looks to be playing out slowly.
 
#16 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

These business geniuses have to learn everything the hard way, stuff anyone with a half a brain already knew. I guess better late then never. Can't wait for this to gain momentum and for Made in the USA to have the meaning around the world it used to have.
 
#19 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

These business geniuses have to learn everything the hard way, stuff anyone with a half a brain already knew. I guess better late then never. Can't wait for this to gain momentum and for Made in the USA to have the meaning around the world it used to have.
YOUR part in this is to not buy anything made in China.
I always look at place of origin/manufacture, and buy American if it is a choice. I'd rather buy American than pay for their unemployment.:)
 
#18 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

If the Chinese quit buying our debt, the rates would rise and other people would buy it. When a 10 year is bouncing between 1.8% and 2.2%, and the 30 year around 4%, higher rates would bring more buyers out of the woodwork, even if China bought no more.
 
#25 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

If the Chinese quit buying our debt, the rates would rise and other people would buy it. When a 10 year is bouncing between 1.8% and 2.2%, and the 30 year around 4%, higher rates would bring more buyers out of the woodwork, even if China bought no more.
If the rates rise, that throws a HUGE bucket of cold water on an already struggling economy. Don't forget that one of the first ways to stimulate an economy is to cut the cost of capital... Which right now is at all time lows. Bumping the rate from near zero to 4% would be DEVASTATING right now.
 
#20 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Woohoo! A trickle is a start.

Both articles mention Ford bringing jobs back but not GM. It seems that GM is the one building or planning to build more new models in USA, unless I'm mistaken. Didn't Ford even recently announce that the next Fusion will still be built in Mexico, with only overflow construction approved for USA? Wish GM could get a little more credit than they do in the media.
 
#31 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

There is another factor in play here I havent seen. Time to market has always been a key competitive advantage. In tech this is becoming especially critical where designing/prototyping/testing needs to happen fast which means waiting for things to come from China takes too long.

There def will be some manufacturing coming back due to alot of reasons in the first post and this one.
 
#56 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

It maybe a start, but not enough to save the ecomony, I Have a feeling that we are heading for a big crash.
I was more suspecting a slow fading away that we might never even know was happening until it was entirely too late. Of course, to listen to some, that has been happening in some form or other since I was a chile...

Don't tell all the anti-American fools and morons that American manufacturing still has life (and always has, I've been saying this for years on this very board.)
There are some who seem to live in America while genuinely hating it. This is sad and unnecessary, as most of the places they seem to favor have relatively liberal immigration policies, don't they? Besides, we are among the most likely people in the world to be able to pack up and leave if we don't like it, right? I wouldn't confuse it with those people who think America can be easily improved. Some of this is quite funny, however. I recall how pissed we all were when Thomas Friedman of the New York Times suggested that GM would be better off if it were run by Toyota. The funny thing here is that the quality we were so envious of was the result, at least in part, of them adopting principles put forth by an American.

Some tasks cannot be outsource such as: secretive information technology, specialize equipment manufacturing, patented manufacturing and manufacturing that requires a high degree of knowledge/education/skills. Plus, as developing countries become more developed, their labor costs will goes up as well their demand for durable goods. That translates into a higher costs for the end user. Either the firm will move to a cheaper location to produce their goods or use more automation and technology, which in turn provides more jobs to the host country.
You'd think that things like military uniforms would be among the things that aren't outsourced. Would you like me to show you the "Made in China" tag on one of my coat liners?

Can you afford not to support the home team ??
BUY MADE IN USA
Unfortunately, too many of us have been convinced that we can't. I'd just spent a sizable amount of time searching for a quote that I knew perfectly defined what I was trying to say. It also describes the conditions of the people who make things like my Chinese made coat liner. Here is the quote, and the photograph in an abandoned American textile factory that puts it in very sharp context. http://www.abandonedamerica.us/photo11069036.html

I was going to add a small story about my own made in America purchases that perhaps I've related before. Not too long ago, I went to purchase some things for the condo I was moving back to. One of these were a pitcher and some large drink tumblers to go with them. Interestingly enough, three tumblers were included in the pitcher itself, and when I got home with these items, for which I surely spent less than five dollars, I got quite a surprise. Instead of the "Made in China" labeling I was expecting to see, it said "Made in U.S.A.". I was astonished. It does say a bit about American productivity and such that this can be done. Or does it say more about some people's greed that it isn't the case more often?

When I think about such things, which is often, I look to buy stuff made in America first. This means that when I go to the gym, quite often at least my shirt and pants are made in this country, as I sought out shorts and t-shirts made in the U.S.A. It isn't impossible, but it is difficult. Trade problems with China would do the same thing to store shelves at a military exchange as it would anywhere else.

I was kind of suspecting a day would come when it would be too expensive for some things to be made overseas, and this shows it to actually becoming the case, if slowly.

This issue brings me back to the reason I started posting to this forum in the first place. What I wanted to see back then was for an American car company to remove every reason one would normally have to buy a foreign car, aside from if one truly likes the way that foreign brand does things so much. I wanted to see a Corvette that gives away nothing to a 911, for example. Because the mid sized sedan is (or was) the heart of our car market, I wanted to see a Chevrolet Malibu that leaves me with no reason to look at a VW Passat. I wanted to see a sports car that left no reason to buy a Miata, and so on across the various market segments. And on top of this, I wanted these cars to be the product of American intellect and American hands on the assembly line. I didn't want to buy something made in Mexico, or even Canada, for that matter. I've bought only one new car in my life, and it was American made. That Escort was disgusting to drive, but it was American made. If I were willing to buy a smaller car again, a Cruze or Volt (if I can afford it) would now be excellent choices...
 
#34 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Don't tell all the anti-American fools and morons that American manufacturing still has life (and always has, I've been saying this for years on this very board.)
 
#35 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Some tasks cannot be outsource such as: secretive information technology, specialize equipment manufacturing, patented manufacturing and manufacturing that requires a high degree of knowledge/education/skills. Plus, as developing countries become more developed, their labor costs will goes up as well their demand for durable goods. That translates into a higher costs for the end user. Either the firm will move to a cheaper location to produce their goods or use more automation and technology, which in turn provides more jobs to the host country.
 
#40 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

I actively try to buy "Made in the USA", but it is most of the time impossible. Not only do I want to support my neighbor and keep MY nation strong, but I have yet to find a single thing made in China that was not a total piece of ****. If it says "Made in China", you can count on it either arriving dead, or dying after a few uses. I'm sick of it. EVERYTHING is disposable now. I'm from the Old School who wants to spend the money and buy something ONCE and use the damn thing forever!
 
#43 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

I try to buy 'made in New Zealand' but that seems to be getting increasingly harder by the day. A sucession of governments has removed pretty much every single duty / tarriff. We've even sold off vast quantities of forests to Chinese companies. Result - trees get cut down, loaded onto a ship and then processed in China. Jobs for NZ - not many.
 
#50 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Just before 2000 you could buy gas for about 1.00 to 1.25. So it was cheap to build things overseas and bring them here. Now gas is 3.50 to 3.75 about 3 times higher. I seems to make sense that you build things closer to where you need them, with the price of fuel so high.
 
#51 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

New found efficiencies at ford and GM, reduction of debt load and making quality vehicles buyers want.

All of that adds up to a sustainable business plan, success builds success whne you see Ford investing $16 B
in US plant and infrastructure, increasing jobs and capacity after being on its knees back in 2006.
GM is going with them and will grow much bigger, I see this ending badly for Toyota and Honda.

Now it's time for Ford and GM to start regaining lost market share in their home country....
 
#67 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

an interesting blog on the expenses of running a business, the author also writes fun novels with lots of guns:

http://larrycorreia.wordpress.com/2011/09/30/the-president-says-were-soft/

"The President says we’re soft

Yep. That’s it, Mr. President. We’re soft. We’ve lost that competitve edge. We need to get back on track.
Let’s see, business is noncompetitive… Yet, during the last two years of my professional finance career, we have been through 6 different audits from 6 different government agencies. (total dollar value found to be owed to the government? Zero). As far as finance managers go, I’m not that weird.
Wow. I wonder what value I could’ve been adding to my company during that instead of creating multiple phone book sized reconcilliations that no government employee will actually ever read. However, if I’d failed to spend hundreds of hours producing these useless documents, we’d have gotten fined and put out of business."
 
#70 ·
Re: Word Of The Day: "Insourcing"; Some Manufacturing Starts To "Trickle" Back To USA

Yet, during the last two years of my professional finance career, we have been through 6 different audits from 6 different government agencies. (total dollar value found to be owed to the government? Zero). As far as finance managers go, I’m not that weird.
Wow. I wonder what value I could’ve been adding to my company during that instead of creating multiple phone book sized reconcilliations that no government employee will actually ever read. However, if I’d failed to spend hundreds of hours producing these useless documents, we’d have gotten fined and put out of business."
It's pretty obvious that the government has some very serious inefficiencies, many of which waste taxpayer money and place a burden on the business community. Your story is a perfect example of this. That said, my first instinct when I read things like this is to encourage lawmakers to take steps to improve the efficiency of government rather than strip it down or eliminate it. Plenty of people would choose the latter of the two arguments, which honestly puzzles me.

I come from a family of auditors and accountants, many of which have worked as federal employees. They nearly all agree that most governmental waste could be eliminated if we had a federal audit agency (one with teeth) whose job was solely to identify government inefficiencies and eliminate them. Nearly every person I've mentioned this to simply rolls their eyes about "additional government to fix government", yet no one has presented me with a reason why it wouldn't work.

My mom worked as an Air Force Auditor for twenty years and saved the AF millions upon millions of dollars in waste-all while making less than $60,000 a year. That's an absolutely insane cost/benefit ratio. Yet just last year her pharmacist of all people derided her for being a wasteful federal employee who was "bleeding taxpayers dry." This kind of attitude absolutely baffles me...
 
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