It’s been decades, but Harry Moser still remembers the good old days, working alongside his father at Singer Sewing Machine Company’s factory in Elizabeth, N.J.
Manufacturing runs in the family. Grandpa was a foreman, and Dad was an engineer turned manager who ran about a third of the factory. Year after year, summer after summer, from high school through college, Moser worked at the factory.
He was determined to follow in his family’s manufacturing footsteps. He did, eventually moving from the Singer factory to various managerial roles at stops including General Electric, DISAMATIC, Acme- Cleveland, Roto-Finish, and GF Agie Charmilles.
“It was my father,” Moser recalls in an interview with Leo Rommel of Industry Today. “He loved what he did, and I respected him and what he did. And being at the factory and helping things get produced made a difference, seeing pieces of steel turned into something that somebody could actually use. It was the tangibility of it, in comparison to what so many people do today, which is more intangible.”
That’s part of the problem, Moser says. Tangible Americans, like Moser, aren’t common anymore. American manufacturing, consequently, has taken a hit. Just look at the Singer factory he worked at, Moser says.
“It’s all gone,” he says. “Nothing’s made here in the United States anymore. It’s all made offshore. In fact, the brand is largely gone.”
That’s the driving emphasis behind his latest undertaking, the not-for-profit Reshoring Initiative organization, founded during his last year as chairman emeritus at GF Agie Charmilles. Enough with Americans buying so much from offshore, especially from low wage countries such as China, Moser says. It’s time to bring high-quality, well-paying manufacturing jobs back to the U.S.
His Kildeer, Il.-based organization does this largely by assisting companies to more accurately assess their total cost of offshoring – and shift collective thinking from offshoring is cheaper to local reduces the total cost of ownership.
“Formally, our mission is to bring manufacturing back to the U.S., and our method is to educate companies on the costs that they’ve been ignoring when they offshored,” Moser, 69, says.
TOOLS OF THE TRADE
Moser explains that his Reshoring Initiative promotes its message via a variety of outlets. It documents the nation’s well-reported and well-discussed reshoring trend; in particular what industries are returning how many jobs to what states and for what reasons. He estimates that about 30,000 manufacturing jobs are now returning annually.
“We do that because the best way to convince companies that they should think about reshoring is to see that other companies are doing it,” he says.
Moser highlights these findings via hundreds of presentations countrywide each year. We’re talking about one television and radio appearance after another, plus webinars and news interviews sprinkled in-between. He also showcases his organization’s conclusions via the Reshoring Initiative Library, a comprehensive web-based list of articles, white papers, and case studies about reshoring, plus examples of companies that have reshored and how successful they have been.
But perhaps the greatest weapon in Moser’s superhero-like reshoring tool belt is his Total Cost of Ownership (TCO) Estimator, a complimentary, web-based tool that enables aggregation of all cost and risk factors into one cost for simpler, more objective decision making.
“Companies can use it to calculate all of these what we call hidden costs, the costs that they have traditionally ignored, and thereby see that some percentage of what they’ve offshored, they’d be more profitable if they brought it back,” Moser explains.
He clarifies with this explanation: the majority of manufacturers make sourcing decisions based on price alone. This, he says, results in a 20 to 30 percent miscalculation of actual offshoring costs. What the TCO Estimator allows its users to do is effectively account for all relevant factors when determining their total cost of ownership. This includes under-the-radar dynamics like overhead, balance sheet, corporate strategy, intellectual-property risk, inventory-carrying costs, the complexities of having a lengthier supply chain, innovation, and other external and internal business costs.
In all, the TCO Estimator incorporates 29 cost factors, according to the organization’s website, including:
- Calculations of each source’s cost;
- An accumulation of all costs into cost categories;
- A grand total cost;
- Line charts showing each source’s current price, total cost of ownership, and 5-year forecast;
- Line charts showing your cumulative cost by category.
Even better, the Estimator can be used by manufacturers and distributors of all sizes and industry sectors, and it’s designed specifically to sway the executives and supply chain managers who manage the budget daily and decide whether to keep the bulk of operations domestic.
In addition, Moser soon looks to expand its current model by including tidbits to manufacturers about how their decision on whether to reshore impacts the domestic economy.
“Part of this is an increasing recognition by companies that these other costs exist,” Moser says. “Where before they felt pretty safe making a decision based just on wage rates or prices, their own experience has told them that they’ve missed a lot. As that wage rate overseas gets closer, they say, ‘Huh, there are not enough savings on their wages alone to make up for all the factors that they were fairly safe in ignoring before.’”
Could a manufacturer use the TCO Estimator and still come to the realization that offshoring operations remains a remarkably better option? Of course, Moser says.
“But the important thing is to know all of the relevant factors – the risks, the costs, the inventory, all of these elements, and then quantify them into a total cost,” he says. “Do what you have to do – more automation, better training, go lean – to overcome a small residual gap. Just don’t assume it’s automatically cheaper to offshore, and don’t just go by the price or the wage rate. There’s a lot more involved than that.”
AN UPHILL BATTLE
Perhaps that’s one of the biggest reasons offshoring became the fad in recent decades. Numerous manufacturers copycatted one another. If they’re doing it, we should do it too, they thought.
“It was simply Company A seeing their competitors at Company B and Company C go overseas under the belief that they would reduce their prices in the U.S. market,” Moser says. “Therefore, Company A just had to offshore also. A bit of lemming-like herd behavior.”
They had good reasoning, he says. It all came down to lower costs. The labor rates in many of the nations where production was offshored, in particular China, were just a fraction of what they were in the U.S.
“Fifteen or 20 years ago, the differences were so big that most of the companies, even if they didn’t do their homework, made the right decisions – not necessarily for the country, but for their company’s profitability,” Moser says.
But that labor advantage has been steadily shrinking in recent years, he adds. In many locations throughout China, where the lion’s share of reshoring is coming from, wages have seen double-digit percentage increases for well over a decade, Moser says.
“The wages are up substantially, much more than their productivity is up, and therefore, the labor content of the component is up dramatically too,” Moser says, adding that total cost of ownership in China and the U.S. are likely to converge around 2015.
But he acknowledges that upping the ante on the reshoring phenomenon is going to take a lot more than highlighting wage increases throughout offshored regions. There’s more to bite off than you think.
Take, for instance, regulations. They’re frequently getting in the way, and the blame goes all around. “Even the Republicans put them out,” he says. “Democrats are undoubtedly worse.”
A good example, he says, aside from high corporate income taxes, is the U.S.’s lack of a value-added tax. “Other countries have it,” he says. “It’s a disadvantage to our country not to have a value-added tax because when we export there, they tax us. They tax our products. When they export here, we don’t tax their product. It puts us at a relative disadvantage.”
China is also a heck of market, with some 1.3 billion in population, according to Moser. It’s simply hard to compete with that – or flat out ignore it.
He explains: “Boards said, ‘We have to be in China. We must be there. We must have a presence there, and we must make things there that supply that market. And as long as we’re doing that, why don’t we ship them back to the U.S. because they’re going to be that much cheaper?’”
But arguably an even bigger problem is the nation’s apparent skills gap. “Not apparent. I’d say real,” Moser clarifies. Plain and simple, U.S. manufacturing – particularly once-offshored jobs returning to the mainland – lack qualified workers. We’re talking welders, technicians, engineers.
Moser acknowledges that a greater effort is underway to reverse this trend. Manufacturers nationwide are working with local high schools, technical schools, community colleges, and universities to establish ways of recruiting and attracting future workers via factory tours, internships, fellowships, and apprenticeships.
Moser, who serves on the board of the National Institute for Metalworking Skills (NIMS), says the credentialing organization has seen a steady increase in the number of credentials awarded over the last several years. Similar organizations, he adds, are seeing comparable gains.
“I have a fair number of cases of companies starting apprenticeship programs again,” he says. “Apprenticeship programs are the right way to do it.”
Manufacturing also suffers from something of a bad image problem, he says. Young workers don’t see it as the high-rewarding, high-tech line of work it is today. They think it’s tedious, mundane, and ideal for those who aren’t academically gifted. How wrong they are.
The Reshoring Initiative is working on a plan to reverse that way of thinking, Moser says. It’s pushing for a panel made up of trade associations, colleges, and unions to stop referring to manufacturing careers as “vocations” or “trades.”
“In Germany and Switzerland, one never says ‘vocation’ or “trade”,” Moser says. “They only talk about ‘profession.’ Call it a profession.”
This idea, he says, would dramatically alter manufacturing’s image. “It’s a very low-cost, high-impact solution,” he adds. “Mother is much more likely to send their kid to become a precision-machining professional than to go to trade school.”
There’s another idea his organization is working on: encourage communities to report every case of reshoring via various media outlets. The thinking behind this initiative, Moser explains, is to counteract the common misconception that all manufacturing jobs are heading overseas. This, he empathizes, will help younger generations see manufacturing as a worthy career that’s not going anywhere.
Will all of this work in the end? His organization, its initiative, its various resources and agendas? Yes, Moser says. It’ll just take time – and a bit of patience on everyone’s end.
“We’ve essentially stopped the tide of jobs being offshored, and now we’re pushing it back,” he says. “It’s taken 50 years to get the offshoring up to roughly 3 million, 4 million manufacturing jobs, and it’s going to take decades to bring it back. It’s not going to happen in one year or five or ten years. Those other countries where offshoring went are going to compete. Some companies have poor policies and fail to see the benefits of reshoring.”
But there’s been some major impact he says, not just by his organizations, but by dozens and dozens of others. Tens of thousands of jobs have returned. He says this is just the beginning.
As evidence, he offers this following example: “I was talking to somebody recently, a professor, about how he’d been doing some work with one of the big industrial companies, and he said how supply-chain managers have been getting huge bonuses for buying materials at a lower price, while the rest of the company has been devastated by poor quality, poor delivery, and excess inventory. He said the management got fed up with it, and now they’re making decisions that are good for the whole company instead of just good for the supply-chain bonuses.”
He adds that when he hears stories like this, he feels “great,” like he’s making all the difference in the world.
“This is why I do this. Cheerleading for manufacturing is part of my job,” he says. “I could be retired. I don’t need to work 80 hours per week at this, but everywhere I go, I talk to people in this industry and outside this industry who are convinced I’ve got the most important job in the country. Getting the word out is the most important thing, and that’s what we’ll continue to do.”
About Harry Moser
Harry Moser founded the Reshoring Initiative to bring manufacturing jobs back to the U.S. after working for GF AgieCharmilles, starting as President in 1985 and retiring Dec. 31, 2010 as Chairman Emeritus. Largely due to the success of the Reshoring Initiative, Moser was inducted into the Industry Week Manufacturing Hall of Fame 2010 and was named Quality Magazine’s Quality Professional of the year for 2012. Moser participated actively in U.S. President Barack Obama’s Insourcing Forum on Jan. 11, 2012 at the White House and won the Jan. 2013 The Economist debate on outsourcing and offshoring. He received a B.S. in ME and an M.S. in Engineering at MIT in 1967, and an MBA from U. of Chicago in 1981.