Manufacture This

The blog of the Alliance for American Manufacturing

The founder of the Reshoring Initiative on the effort to bring manufacturing back to the US.

As president of the nonprofit Reshoring Initiative, Harry Moser works with U.S. companies, government officials and others to bring manufacturing jobs back to the United States. A friend of the Alliance for American Manufacturing (AAM), Moser authored a chapter on reshoring in the 2013 book, ReMaking America.

Moser recently visited AAM’s offices and chatted with Manufacture This about the progress that has been made thus far in the reshoring effort — and what needs to be done to encourage more of it.

1. It’s been about five years since you launched the Reshoring Initiative. Where do things stand?

Say 10 years ago, reshoring was essentially nothing, a couple-thousand-a-year jobs coming back, and offshoring was an additional 150,000 jobs a year roughly leaving: so net-losing about 150,000. Now in 2014, the reshoring and the offshoring are about in balance, around 40,000 each. So we’ve gone from a net annual loss of about 150,000 to a net-zero. And if you add foreign direct investment -- foreign companies investing in the U.S. -- you might add another 50,000. So if you do that, you’re up to a net-positive 50,000 a year.

So, I’d say very good progress. Nothing ever goes quite as fast as you hope it will, but I think it’s gone a lot faster than most people thought it would.

2. What do you think the greatest successes have been since the initiative launched?

Well, I’ll talk about the greatest successes of reshoring rather than of the initiative, because the initiative is my group. So for reshoring, the greatest success, I’d say, is GE. They have Appliance Park in Louisville, Ky., and they brought back water heaters, refrigerators and one other appliance. The division had been declining, and they tried to sell it; couldn’t sell it. So they invested about a billion dollars — with a B — and hired about 1,300 workers, so lots of jobs and more jobs out at suppliers.

The way they did it, they brought back the product that was being made over in China for them at a contract manufacturer, and put it in a big room. And they had the design engineers, the marketing people, the factory workers, the foremen, everybody worked on ‘em. Tore ‘em apart, put ‘em back together. Because of that cooperation, when it was done the product's thermal efficiency was improved, the warranty costs were reduced, and even though the wages here are five times what they were in China, the retail price of the Made in U.S.A. product is 20 percent lower than the retail price was when it was a Made in China product.

Better efficiency, better quality, lower price, and largely because of the workers and engineers working together, innovating and making a better product. That’s a wonderful story. That’s my favorite case.

3. What has surprised you over the years about reshoring?

I’d say that it’s picked up as well as it has. Four or five years ago, it was hard to get anybody to even to talk about it — the media, the companies, the trade associations — and now everybody’s talking about it. A few people still disagree that it’s as big as we think, as we’ve measured.

You could say we were very fortunate to get started just before the [reshoring] surge, or you could say the surge was fortunate that we got started to make it happen.

4. Where are some of the areas where the most work needs to happen? What can policymakers do to make things happen?

Let me start first with companies, because the companies have to make the decisions. Our user data says that about 25 percent of what’s offshored now would come back if the companies did the homework there, did the math, used something like our Total Cost of Ownership system, looked at all the costs of offshoring instead of just price. That’s what the companies have to do.

But it won’t solve the whole problem. To get the other 75 percent back, that takes currency and addressing currency manipulation, to keep the dollar from going up like it’s doing now. Skilled workforce, that's an absolutely huge issue. The U.S. produces about 60 percent more university graduates than it needs, and many fewer tool makers, precision machinists, and welders than it needs. So an entire misallocation of resources and it results in unemployment. So currency, skilled workforce, corporate tax rates, regulations, I’d say those areas need work.

The other thing the government can do is encourage the companies. It’s not easy to get them to pick up and use the right math, so the government can help encourage them, can talk it up. The president has been helpful, but he tends to talk in general about what he calls insourcing. But if he specifically could tell all the big companies to call Harry to help them, then it would move faster. (laughs)

5. Groups like the Boston Consulting Group are among those saying that the U.S. is becoming a more favorable place to have manufacturing. If that’s the case, why haven’t we seen more manufacturing jobs? Why are we stuck?

From a longer-term perspective, stuck isn’t bad. About two months ago, we did an analysis in which we took the trend in manufacturing jobs, and even if you take out the last couple of recessions, the current manufacturing employment is higher than what the 10 or 15 year trend would suggest.

And so why has there been a downward trend? Because of offshoring, but also because of productivity improvement. So the productivity improvement is continuing, and that would tend to drive manufacturing employment down. So the fact that manufacturing employment is not dropping but is instead rising, we’d say is fairly good sort of circumstantial evidence that reshoring is actually happening. Instead of employment dropping at 1 or 2 percent a year, that it’s actually rising at a half a percent or 1 percent, something like that.

Moser invites managers and employees of larger companies that have offshored to use the Reshoring Institute’s resources to help convince their companies to reshore. Smaller companies, meanwhile, can use the tools to convince their clients to buy from them rather than from a competitor that offshores, while government officials can find support to motivate companies to reshore.