Trend of bringing jobs back to U.S. causes stir at summit
Many of the nearly 200 manufacturers who attended the inaugural Western Colorado Manufacturing Summit last week walked away with plenty to consider, especially those questioning whether overseas production makes financial sense.
The trend that favored offshore manufacturing has slowed during the last decade as more business owners refigure expenses, experts say.
The recent increase in costs for fuel and labor, especially in foreign markets like China, is causing manufacturers to reconsider their offshore contracts, said a “reshoring” expert who addressed the crowd at Two Rivers Convention Center on Thursday.
The trend could benefit Grand Junction. Low energy prices are driving the reshoring movement, said Diane Schwenke, president of the Grand Junction Area Chamber of Commerce.
“This is a message that we need to get out,” Schwenke said. “When we talked about outsourcing those jobs and the pain that it was causing our country, it was all over the media. Reshoring, on the other hand, has not been, but it has been quietly happening.”
Reshoring refers to manufacturing that was previously done outside of the U.S. and has been moved back, a trend that is picking up steam, Forbes magazine reported in June 2013.
Most companies make sourcing decisions based on price alone, resulting in a 20 percent to 30 percent miscalculation of actual offshoring costs, said Reshoring Initiative spokeswoman Millar Kelley, the summit’s keynote speaker.
Rising Chinese wage rates, high oil prices and low U.S. natural gas prices caused electronics companies like Motorola, Google abd Apple to reshore about 100,000 manufacturing jobs since January 2010, Kelley said.
That surge represented about 15 percent of the total increase in manufacturing jobs since the low of January 2010, she said.
About 40 percent of manufacturing plants in the U.S. saw new contracts as a result of reshoring in 2012, Forbes reported.
“The reshoring trend is growing, with increased media coverage, growing consumer preference for ‘Made in America,’ and companies re-evaluating their sourcing decisions,” Kelley said.
Owners reviewing their offshore contracts are considering many factors to determine the true cost of ownership, including overhead, balance sheets, corporate strategy and other external and internal business costs, Kelley said.
Seth Anderson, co-founder of Grand Junction’s LOKI outerwear designs, is one of those.
Anderson presented information about LOKI products during the summit’s business showcase, along with more than a dozen other area manufacturers.
The company’s products are fabricated in Asia, where the expertise needed to make LOKI designs is available, Anderson said.
“We tried (in the U.S.),” he said, “but things have kind of deteriorated (in the textile fabrication industry).”
For example, many domestic factories have been torn down or put to other uses.
There have also been major changes in the workforce over the years with many preferring not to work in manufacturing, Kelley said.
The reshoring discussion caused Anderson to start thinking again about the possibilities, though. One alternative would be to place the work with expert sewers who work at home, he said, a daunting logistical challenge with its own costs.
The need for skilled labor was voiced many times by summit attendees. Grand Valley manufacturers must frequently locate talent outside of Mesa County to fill open jobs, most of which pay above-average salaries, said Nina Anderson, who helped organize the summit.
Programs at Western Colorado Community College are producing talented students capable of filling the jobs, but most leave for other areas to find work, Nina Anderson said.
She experienced the reshoring process in her work with a medical device manufacturing company. A client of the business wanted its manufacturing process moved to Mexico to take advantage of cheap labor.
Analysis showed the company was spending too much on shipping products back to the U.S. for inspection and then re-shipping them. She blamed federal regulations for the problem, but concluded bringing the manufacturing back to the U.S. was more cost-effective.