Import Substitution Program

Economic Development Proposal

This program is available to help Economic Development Organizations (EDOs) and Manufacturing Extension Partnerships (MEPs), trade associations, manufacturing companies and equipment suppliers. The version below is for EDOs and MEPs. Similar versions for the other groups will be posted soon.

Purpose:

The Import Substitution Program (ISP) enables economic development professionals to replace imports with local production by helping U.S. companies decide to reshore and foreign companies decide to do FDI (foreign direct investment)in your region. ISP is a unique tool that can make your region economically stronger and your organization a nationally recognized innovator.

Executive Summary:

The impact of offshoring on the U.S. economy has been significant. Jobs offshored to China and elsewhere have diminished American employment opportunities, helped contribute to wage erosion and had a dramatic and negative effect on workers and the economy in every state. Communities have lost, on average, 27% of their manufacturing workforce since 2000. Sixty-three percent of the job loss is due to offshoring of jobs.

Today, especially with the Tax Cuts and Jobs Act in effect, U.S. and foreign companies are reevaluating their facility plans and considering increasing U.S. investment and shifting manufacturing to the U.S. They are seeing the benefits of proximity, i.e. producing in the market, especially when the home market is the U.S., still the world's largest. ISP will help you identify and attract the best opportunities for your region.

The Import Substitution Program (ISP) is a customized action plan that is a catalyst for FDI and reshoring. Your ISP will be custom-built to: help larger OEMs in your region decide to produce or source more locally; help local companies compete against imports; and attract FDI. ISP will help strengthen your region with minimal incentives, fortify local supply chains around OEMs and bolster your skilled workforce program.

ISP will provide detailed data on imports by regional companies and assist them in reevaluating offshore sourcing decisions. On-site help and training are also available. Select the support level that is right for you.

ISP could make your region a model for the rest of the country.

Local Needs:

  • Restore: Your region's manufacturing job mix. Gain from manufacturing's higher pay and 1.5 to 5-multiplier effect.
  • Retain: Build supply chain moats around existing manufacturers. Help local companies compete against imports.
  • Grow affordably: Achieve growth while reducing the need for incentives since the work comes back in the self-interest of the involved companies.
  • FDI: Focus on specific niches to attract foreign investment.
  • Competitiveness: Prove that your region is competitive.
  • Focus: Helps you focus on reshoring and FDI: the substitution of local production for imports. Both processes are excellent growth drivers since U.S. products are 30% more price competitive here on our home field than they are competing in foreign markets.
  • Skilled workforce: Strengthen the #1 criterion in site selection by making local reshoring and FDI visible to the community, affirming that local manufacturing is a strong, long-term career choice.
  • Program Objectives:

    Accelerated local reshoring: Both in-house and outsourced locally by companies that are now importing. ISP will help you accelerate local reshoring and FDI by:

  • Identifying FDI opportunities based on regional and national supply chain gaps: Product categories that have large regional and national imports and no or minimal exports, suggesting a lack of domestic suppliers. These categories become targets for promoting local investment via FDI or horizontal manufacturing extension by related domestic companies or via venture capital.
  • Identifying the leading offshore suppliers of the gap product categories to create a target list for FDI.
  • Providing detailed data on imports by regional companies.
  • Inviting companies to reevaluate offshore siting and sourcing decisions.
  • Creating opportunities for local companies to compete with imported products.
  • Your Input:

    Your input on some of these will help us to customize our deliverables for you.

  • A clear definition of your geographic region: state(s), counties or mile radius from a specific location.
  • Your choice of product categories from our list of regional highest volume import categories.
  • Who are the largest manufacturers in your region?
  • What are the largest categories of products manufactured in your region?
  • What product categories were formerly produced but significantly lost to offshore and the companies that offshored are still local?
  • What product or supplier categories are present locally and could expand to produce products now imported?
  • What product categories/industries would you like to attract?
  • Who are the largest offshore suppliers of relevant products?
  • Our Deliverables:

    The Reshoring Initiative's Import Substitution Program will help you achieve the Program Objectives, above.

    Level I: The Reshoring Initiative will provide data on annual imports into the region:

  • Supply chain gaps: Up to five
  • For target products: Ten HS codes and/or product descriptions
  • By target companies: Ten regional importers
  • From target offshore suppliers: Ten offshore suppliers. Good FDI prospects
  • By overall highest volume: Ten top import categories selected from a list that we will provide
  • Data will include for each product category:

  • Company names and addresses
  • Number of containers of each product imported by each company
  • Approximate $ value
  • Standard written instructions for Implementation including use of our TCO (Total Cost of Ownership) Estimator for use with the companies.
  • Archived training webinar.
  • Level II: Additional help via phone and email

    Level III: Field support

  • On-site help, training and presentations, e.g. using our TCO Estimator as a:
    • Siting and sourcing decision tool by the importers

    • Sales tool by local suppliers

  • Customized implementation plan
  • Joint articles on past and future local reshoring successes to promote your region's competitiveness.
  • Pricing:

    Level I:

  • Data and basic support as described in Deliverables
  • Ten hours remote support, e.g. customized training webinar, phone and email support
    • Cost: $5,000

    Level II: Additional remote support, 20 hours: $2,000

    Level III: Field Support:

  • $1,000 per day remote preparation and follow-up
  • $2,000 per day onsite
  • $100 per hour travel en route
  • Travel expenses: actual and reasonable
  • Note: Consider inviting the local suppliers to help fund the program

    Implementation Outline:

    1. You provide Inputs, as above.

    2. Reshoring Initiative provides Deliverables, as above.

    3. Your team and other interested parties contact the importers.

    4. Educate the importers with the Reshoring Initiative's free Total Cost of Ownership Estimator® (TCO) to reevaluate offshoring vs. reshoring. Use our program TCO - Getting a Company Started.

    5. Help the importers see that there is often no or only a small TCO difference when they shift to local production or sourcing.

    6. For work that the importer decides to outsource domestically, introduce the importer to local suppliers.

    7. Identify any remaining TCO gaps vs. offshore. Apply: automation, skills training, lean, ED assistance.

    8. Recruit new facilities by other U.S. companies or FDI (Foreign Direct Investment) to fill large regional or national gaps.

    Background:

    For decades companies have been chasing cheap labor offshore and then importing products to sell in the U.S. market. Now is a good time to reevaluate the choice of domestic vs offshore production. Favorable trends include: lower corporate tax rates and regulations; better understanding of the costs of offshoring; increased U.S. competitiveness; new technology; and consumer demand for customization, quick delivery and Made in USA.

    Some companies feel the conditions are already right to consider U.S. manufacturing due to global economic conditions and new technology. Others are now considering a U.S. location as part of a management strategy due to lower corporate tax rates. According to research by the World Bank, new technologies are fueling domestic manufacturing and sourcing. As labor begins to represent a smaller share of total costs, companies that once offshored due to inexpensive labor costs are beginning to favor close proximity to the markets they serve.

    The potential is huge. Our user data suggests that about 25% of offshored work would come back if TCO (Total Cost of Ownership), instead of wage rates or purchase price, is consistently used to make sourcing and siting decisions. Substituting domestic production for 25% of imports would increase domestic manufacturing by about 10%. It is time to obtain that growth in your region!

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    Reshoring Initiative | 21110 Buffalo Run | Kildeer, IL 60047 USA

    Phone: +01 847 867 1144 | Email: harry.moser@reshorenow.org