Re-Shoring: a Key to a Lean Supply Chain
and Robust Manufacturing
AME/APQC Benchmarking CoP
- June 29, 2010
Harry Moser
Chairman Emeritus
GF Agie Charmilles
Re-Shoring Initiative
Customers: Why to Source Local.
Vendors: How to sell Local Sourcing.
Harry Moser
Chairman Emeritus
GF Agie Charmilles
Definitions
Re-shoring: bringing work back to the
U.S.
 Antonym: Offshoring
 Synonyms: Backshoring and Onshoring
 Nearshoring: includes U.S., Canada &
Mexico

Re-Shoring Challenge:
Overcome 40 years of rapidly increasing offshoring!
Initiative Objectives
Promote the re-shoring trend
 Provide tools to help OEMs make better
sourcing decisions
 Help OEMs find competitive U.S.
sources
 Document successful re-shorings
 Offer prospective skilled manufacturing
workers hope for a lifetime career

The Re-Shoring Initiative:
Broad Industry Led Effort
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NTMA/PMA Fairs: 5/12, Irvine, CA & Oct 29, Mashantucket, CT
Media coverage: WSJ, IW, CBS, CNBC, MMS, etc. (80+)
Publishing case histories
Online Library of 49 re-shoring articles
TCO Estimator for customer and vendor use
Support from:
 Organizations: AMT, SME, AME, APQC, NAM, AMTDA,
NIMS, FMA
 Companies: AgieCharmilles, Big Kaiser, TCI Prec. Metals
 NIST’s MEP
Interest from 1 U.S. Congressman
Change the Sourcing Paradigm
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From: “Off-Shored is Cheaper”
To: “Local Reduces Total Cost of Ownership.”
Reduce Total Cost of Ownership (TCO)
Re-shoring’s benefits include:
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Reduce pipeline and surge inventory impacts on JIT
operations;
Improve the quality and consistency of inputs;
Localize manufacturing near R&D and Marketing,
strengthening innovation;
Reduce IP and regulatory compliance risk;
Avoid foreign wage and currency surprises;
Minimize carbon footprint
All while staying cost competitive.
Reduce inventory example
Safety Stock proportional to
LeadTime
Total Cost of Ownership: Steel Gear
$3.00
$2.50
$2.00
$1.50
China
$1.00
U.S.
$0.50
$0.00
Direct Product Cost
Overhead and
Profit
Source: Gibb River Group
Pkg., Freight and
Inventory
Additional Quality
Cost
End-of-life and
prototype costs =
TCO (Total Cost of
Ownership)
TCO Estimator Available

Easily estimate the Total Cost of Ownership
 Compare on-shore to offshore cost
 18 user-modifiable cost factors
 Current and forecast costs
 For parts and tooling
 Status: in Beta test at customers and shops
 Available!
TCO Estimator Cost Factors
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FOB Price
Packaging
Duty
Freight: air, surface, all fees
Inventory: en-route, safety stock, obsolete
Rework/quality
Product liability
IP risk
Impact on innovation
Travel
Prototype
Wage inflation and currency appreciation
Example Assumptions
Chinese unit price
U.S. unit price
# units/year
unit weight, incl.
packaging, lbs
shipment size, units
product life, yrs
Packaging*
Payment on shipment
Quality*
$80.00
$100.00
12,000.00
2.00
1,000.00
Product liability*
0.50%
IP risk*
2%
Innovation*
0%
Trips/yr
2
Prototype cost*
$5,000
5.00
Obsolescence, mos.*
2%
Wage inflation*
8%
Currency appreciation*
5%
0.00
Yes
2%
* Chinese differential vs. U.S.
TCO Comparison Example
Comparison of U.S. and China TCO: Parts
140
COST, U.S. $
120
100
80
60
40
1
2
3
4
5
Year
China TCO
U.S. TCO
China FOB
“As China’s Wages Rise, Export Prices
Could Follow”

24% to 100% wage increases!
Source: New York Times, June 7, 2010
Offshoring contributes to Waste
Toyota Wastes
Offshoring Contributes
Overproduction
Waiting
Uncertain delivery/Inconsistent quality
Transport
12,000 mi. inbound, 6,000 return (boat ½ full)
Overprocessing
Inspection of material and tolerances
Inventory
In transit, safety stock, uncertain delivery and quality
Motion
Travel, e.g. 2-3 weeks, 2-3X/yr
Defects
Much higher than local sources
Other LCC supply chain issues
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Multiple language barriers: English/Mandarin and
Mandarin/local dialect
ISO certificates often close to meaningless
Off-hours phone calls
Big turnover problems: was typically 80% at many
Indian companies in 2008
Re-Shoring Facilitates Clustering
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Innovation
Partnering
Communications
Lean supply chain
DFMA
2010 NTMA / PMA Contract
Manufacturing Purchasing Fairs
A one-stop for OEMs to find competitive U.S.based sources.
50+ OEMs.
100+ job shops - machined, stamped and
fabricated parts, special tooling (dies, molds, jigs,
fixtures and gauges) and special machines.
May 12, 2010 Irvine, CA Fair
Who should attend the
Fairs/consider re-shoring?
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Jobs out parts or tooling
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JIT logistics with variable demand
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Valuable IP
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Tight regulatory and/or quality requirements
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Partners with contract manufacturers
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Committed to minimize carbon footprint
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Committed to strengthening U.S. manufacturing sector
What Work to bring to the
Fair/consider for re-shoring?
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Offshored or U.S. sourced work
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Machined, stamped and fabricated parts, special tooling and
special machines
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Products to be sold in N. American market
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High mix/low volume
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New/quick launch/frequent engineering changes/short life cycle
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Fragile
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High risk, safety parts
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Low labor content
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Shipping cost high vs. labor costs
Results of May 12 Fair
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57 Customers: 64% brought offshored work
 113 shops
 Many of both asked to test the TCO Estimator
 15 existing re-shoring cases reported
Why Re-Shoring is a Hot Topic
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A renewed focus on manufacturing by the
White House and Congress
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High international transportation costs
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High foreign wage inflation
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Expected Yuan appreciation
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Low domestic capacity utilization
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Focus on increasing employment
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Growing awareness of IP and quality risks
Sourcing Moving Home
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Companies are shifting some work home or close to home:
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11 of 20 in N. America
2 of 10 in Europe
Source: 3PL Provider CEO Perspective 2008 survey of major logistics
providers.
Sourcing Moving Home
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51% of companies surveyed found no financial benefit in
offshoring
20% brought sourcing closer in 2009
Of which 59% re-shored
Source: Supply Chain Solutions, Grant Thornton, Jan. 2010
survey.
312 responses.
Re-Shoring’s Visibility is Booming!
50
# of Articles
40
30
20
10
0
2000
2002
2004
2006
2008
2010
Year Article Published
Note: 1. 2010 calculated as 6X January + February count.
2. Measured by counting all relevant articles found via early March 2010 Google search on “re-shoring” “back-shoring”
and “on-shoring.”
Some Published Cases
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ATMs
Bicycles
Electric hand drills
Hybrid batteries
Machine tools
Photo Voltaics
TVs
Water heaters
Why it is easier to re-shore than
to export more
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There are distinct advantages for a U.S. company to compete here
rather than offshore:
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Absence of duty, freight and ocean packing
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No Interest on pipeline and contingency inventory
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Familiar legal and regulatory system
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Simplicity of selling into huge home market vs. fixed costs of
overseas sales and support
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No exchange rate issues
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Cost advantages of greater than 24%, similar to total direct labor %
of mfg. cost
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Timing: quick impact because already selling here
Requests of OEMs

Try the TCO Estimator
 Help improve the Estimator
 Make sourcing decisions based on TCO, not just price
 Check our Library to see what your industry is doing
 Consider how a stronger home market benefits your
sales
 Attend the Fairs!
Requests of Vendors
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Talk TCO
Use the TCO Estimator to help your customers
estimate the cost of on-and off-shoring
Help improve the Estimator
Attend the Fair!
Requests of All
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Submit successful re-shoring cases
 Good publicity
 Good for the country
Why Re-Shoring is Good for America
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Re-shoring can strengthen and broaden manufacturing and the
defense base
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Re-shoring can strengthen SMEs -- the source of job growth
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Re-shoring can help reduce the trade deficit, budget deficit and
unemployment
America Understands!
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Best ways to create more U.S. jobs:
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Keep mfg. jobs here: 18%
Lower taxes: 14%
Help small business: 12%
Green jobs: 12%
Infrastructure: 10%
Etc.
Source: Gallop Poll, Nov. 20-22, 2009
America Responds!
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June 21 email from TN OEM
Offshores 70+% of components
Always felt guilty about offshoring
Preaches importance of mfg.
Read June Mfg. Eng re-shoring article
Will seek U.S. sources and reconsider inhouse mfg.
Article: a “Kick in the seat of the pants.”
For more information on the Fair
Contact:
Rob Akers - Chief Operating Officer
National Tooling & Machining Association
9300 Livingston Rd,
Ft. Washington MD, 20744
Toll Free: 800.248.6862
Direct: 301.281.8009
E-mail: [email protected]
Visit: www.PurchasingFair.com
For more information on the
Re-Shoring Initiative
Contact:
Harry Moser
Initiative Leader
847-726-2975
[email protected]
Re-Shoring: a Key to a Lean Supply Chain
and Robust Manufacturing
AME/APQC Benchmarking CoP
- June 29, 2010
Harry Moser
Chairman Emeritus
GF Agie Charmilles
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