Ready for the Great Onshoring?
Onshoring is trending and we’re glad about it.
Manufacturing looks a little sexier than it did a decade ago. We recently attended the Made in Colorado awards ceremony for companies who manufacture the top products within the state. Sitting among companies in the manufacturing categories of electronics, aerospace, clean-tech, medical and bioscience, beer (of course), and several other largely producing categories, Denver Mayor Michael Hancock delivered a keynote address on the critical importance of shifting manufacturing’s appearance. No longer does manufacturing mean grimy walls and grease; today, it’s white lab coats, intelligence, and cleanly knit wires. If we are able to shift the mentality of what manufacturing is, we are concurrently able to bolster the US economy and its workforce.
Denver, like many other cities, is expanding its trade routes to Asia and parts of Europe not to more readily receive products, but to more readily deliver products. Seattle-Tacoma-Belevue, WA, Oklahoma City, OK, and Salt Lake City, UT are doing much the same to increase manufacturing jobs, according to Forbes’ list of Cities Leading the U.S. Manufacturing Revival. And to that, we give a boisterous hallelujah.
What’s behind these strategic moves? Onshoring, or in some cases, reshoring. What some observers may consider a trend, others are making significant moves in support of the idea. Companies like Ford, Apple, Lenovo, and Caterpillar are making large investments in their US facilities. General Electric, according to a statement CEO, Jefferey Immelt made in the Harvard Business Review, says that outsourcing “is quickly becoming outdated as a business model for GE appliances.”
The implications of these decisions for large-scale companies are not menial in scale. They extend to the reaches of small and medium sized companies since we know that the smaller tiers if U.S. businesses tend to mimic what larger companies do – perhaps the most illustrious example being the process of Six Sigma, made famous (but not invented) by GE.
Because of this, it is reasonable to think that implications of onshoring will extend to the small and medium sized manufacturers. It’s not exclusively because larger companies engage the idea, but also because our national economy is reverse engineering its tactics to compete with Asia in several capacities:
- Affordable Energy: Natural gas is both accessible and affordable, costing 60-75% less than it does in Asia. In early June, Bloomberg reported that spot cargoes delivering to Northeast Asia cost $14.50 per million Btu when U.S. natural gas traded at $4 per million Btu, and with Asian importers paying about $10.60 per million Btu.
- Accessible capital: It’s both easier and less expensive to secure capital in the U.S. Low national interest rates, while rising slowly, have hedged the risks of U.S. companies with outstanding results.
- Labor Costs: No, labor is not less expensive in the U.S. than Asia, but the delta between the wages is rapidly closing with Chinese wages increasing from 350-500% over the last 11 years, depending on the report. In March of this year, the Wall Street Journal reported that in 2012, minimum wages increased in Zhejiang and Guangdong by 12% and 19%, respectively, and that the central government’s inequality plan will “lift minimum wages to 40% of the average” in the coming years.
Additionally, the many other reasons such as IP protection, environmental benefits, quality control, and simpler supply chain management are re-attracting U.S. manufacturing companies to invest and produce on our own soil.
There’s just that one thing that we’re lacking: a vocationally trained workforce.
The U.S. all but relinquished our vocational training when we became a services-based economy. As a result, we left Asia and Europe ripe with opportunities to educate their workforce on the skills we threw out with the press brakes.
Now, when the very face of manufacturing jobs has changed and we compete with the world for a piece of market share, we’re looking for a comparable work force to do the work.
This position reveals forethought on DEC and SEC portion of the detention industry that already manufacture their final products in the United States. This does not exclude the industry from the same labor problem, however, though its solution is readily available when we consider how to prepare for the repatriation of resources.
The responsibility of SECs and DECs is to meet this trend with vocational training. This is easy enough accomplished by creating apprenticeship programs with local technical schools, offering career days at facilities, and hiring interns to work side by side with in-house engineering teams. Soon a workforce will emerge from the sharing of information and from there, the companies in this sector are only limited by the risks they’re willing to take.
But it must be done quickly. When other companies decide to retool their operations to meet manufacturing demand, and as the corrections industry moves more toward IT manufacturing, that sacred space becomes smaller and the competition from external markets moves in.
Now is the time to understand the trends and begin preparing for the shift in the markets. “Made in the U.S.A” may never mean everything it used to, but the new definition can be shaped by our industry’s involvement in the next wave of manufacturing.