Harry Moser, founder of the Reshoring Initiative, was recently invited to participate in a daylong Insourcing Forum hosted by President Barak Obama at the White House. Featuring a cross-section of American industry leaders, Vice President Joseph Biden and experts and cabinet-level officials, the event included a roundtable discussion and a speech by President Obama on the insourcing (reshoring) of jobs, as well as two panel meetings focused on bringing jobs back to the US. After many years of appearing to be indifferent to manufacturing and its problems, the political community has begun to appreciate the importance of maintaining a vibrant manufacturing base in this country. The very highest levels of the US political system now understand that many companies have moved production offshore, with serious consequences for our economy. Today the question asked by political figures is: “What can be done to return offshore manufacturing jobs to the US?”
Speaking as an expert on American manufacturing and how to revitalize it, Moser was joined by another expert on reshoring, Hal Sirkin, consultant and senior partner at the Chicago office of the Boston Consulting Group. All participants explained their own experiences in bringing manufacturing and service jobs back to the US, and offered advice on the changes needed to accelerate this process. “It was an incredible honor to be included in this event, and I am grateful to the President and his administration for taking time to focus on this topic,” says Moser.
“During the discussions at the Forum, a common theme emerged: many American companies make sourcing decisions based on price, and ignore the total cost of sourcing,” Moser observes. “Increasing these companiesʼ awareness of the Total Cost of Ownership has been one of the Reshoring Initiativeʼs key objectives, and the Insourcing Forum represents a major milestone for us in our work.”
In a morning roundtable, President Obama asked Moser to outline for all attendees the costs often overlooked by American companies when making their sourcing decisions. Referencing the Reshoring Initiativeʼs extensive research on that subject, Moser stated that the most significant factors typically overlooked were emergency airfreight, travel, and the negative impact on innovation caused by separating manufacturing from engineering. Surveys by Accenture and Archstone Consulting actually demonstrate that about 60% of companies fail to recognize 20 to 30% of the cost of offshoring.
In addition, analysis by the Reshoring Initiative of a ten-case sample of the group's user data shows that, at the price level, the US is on average 108% higher than the quoted Chinese price. When Total Cost of Ownership (TCO) is examined, however, the US is, on average, 12% high. And in 60% of cases, the US TCO is lower than the Chinese TCO. (The Reshoring Initiative intends to survey the users to confirm that they input their best available data for this study.)
President Obamaʼs remarks after the roundtable discussion focused on what could be done to bring additional jobs back from overseas, and were carried live on C-SPAN. After the President’s comments, participants in the Forum took part in panel meetings, and discussed tactics and policies that could strengthen the US jobs market. During his panel participation, Moser focused on the absolute need for companies to recognize the hidden costs of offshoring, and insisted that the US must find solutions to the skilled workforce shortage.
Supported by 27 companies and trade associations, the Reshoring Initiative strives to bring manufacturing jobs back to the US. The group does so by helping manufacturers become aware of the profit potential that can be accessed by using local sourcing and production, as well as the critical role manufacturers can play in strengthening the nation's economy. Part of the mission involves the Initiative’s free Total Cost of Ownership Estimator software, which is available to manufacturers 24/7 at www.reshorenow.org. With the Estimator software, users can account for all relevant factors when determining their TCO, including overhead, balance sheet, corporate strategy, and other internal and external business costs. The Reshoring Initiative also engages companies that have brought work back to the US to help publicize their successes.
“The Reshoring Initiative’s Total Cost of Ownership Estimator provides a free, powerful online tool that can quickly and easily help uncover costs that might not otherwise come to light,” says Moser. “Large companies can use the tool to aggregate their costs and risk factors to truly compare apples-to-apples in their sourcing decisions. Smaller companies can use the software as a sales tool, harnessing it to more accurately reflect their ability to compete with overseas manufacturers. The ʻInsourcing American Jobsʼ forum brought substantial attention to this software, and it's our hope that an even greater number of US manufacturers will now benefit from it.”
The Total Cost of Ownership Estimator is a complimentary tool provided by the Reshoring Initiative. Unlike standard sourcing that is predominantly driven by price, the Total Cost of Ownership model enables aggregation of all cost and risk factors into one cost for simpler, more objective decision making.
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