USA Reshoring

Bloomberg is reporting that more and more USA companies are coming back to have the products made here.  The article is light on facts and heavy on opinion.  But here are some anecdotes:

As costs in China rise and owners look closely at the hassles of using factories 12,000 miles and 12 time zones away, many small companies have decided manufacturing overseas isn’t worth the trouble. American production is “increasingly competitive,” says Harry Moser, founder of the Reshoring Initiative, a group of companies and trade associations trying to bring factory jobs back to the U.S. “In the last two years there’s been a dramatic increase” in the amount of work returning.

I wish it were true, for most of what we import is often matter money laundering and tax avoidance, except at the small business level.  Every instance in the article features a small business that went overseas without doing due diligence and then finding out they made the wrong choice.

For LightSaver, the decision was simple. Neither of the founders has ever been to China, which made communicating with manufacturers difficult. Components that were shipped from the U.S. sometimes got stuck in customs for weeks. And Anderson had to spend hours on the phone to explain tweaks in the product. “If we have an issue in manufacturing, in America we can walk down to the plant floor,” Anderson says. “We can’t do that in China.” Anderson says manufacturing in the U.S. is probably 2 percent to 5 percent cheaper once he takes into account the time and trouble of outsourcing production overseas.

You did not check out their communications capabilities before you started working with them?  This is why agents are so important in int'l trade.

Since 2008, Ultra Green Packaging, one of Olson’s clients, has used manufacturers in China to make compostable plates and containers from wheat straw and other organic materials. By yearend, Ultra Green expects to start producing the bulk of its wares at a plant in North Dakotato cut freight costs and protect its intellectual property. “They’re infamous over there for knocking [products] off,” says Phil Levin, chairman of the 10-employee company. “All anybody needs to do is find a different factory and make a mold.”

And then what?  Steal your market?  Is it that easy?  The won't it be even easier here in USA?

Although the company used Chinese manufacturers for earlier offerings, syringes preloaded with medications are subject to stringent U.S. Food and Drug Administration rules. So in March 2011, Unilife began making its syringes at a $32 million, 165,000-square-foot plant it built in York, Pa. “The very thing in the U.S.A. that oftentimes we complain about—the complexity of the rules and the regulations—works for us,” says CEO Alan Shortall. “FDA compliance is the main reason we’re here.”

So in this case the FDA creates a barrier to entry that can be used against the USA consumer?

Pigtronix’s move back, completed three years ago, has helped improve cash flow. While manufacturing pedals in the U.S. can cost anywhere from three to six times as much as it does in China, Bethke says Pigtronix benefits from not having capital tied up in products that spend weeks in transit and then pile up in inventory. “In China, you have high minimum quantities you have to order, so you’re building a couple thousand of every guitar pedal,” Bethke says. “Your carrying costs start to get huge.” Today the company only makes those pedals it’s confident it can sell quickly.

That should have been figured out before you went to China.

The interesting thing will be to see if any of these companies do any better once they re-shore.  I doubt it.  If they fail to do due diligence on something so fundamental as sourcing, I imagine the problem is congenital.  China and outsourcing got a longer term view here...

Thanks to Anthony for the heads up...

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