Reshoring, Real or Ruse?

Updated January 16, 2013 permalink
Apple is going to start making some Macs in the US, but not everyone expects the trend to grow. I don't know if it will grow or not, I feel certain that any plants that Apple builds in the US will use robots and automation to keep the number of employees to a minimum. There is no way to match the labor costs that Asian workers are forced to endure in the US. That's precisely the point that the article (which first appeared in the International Herald Tribune)

MIT Tech Review recently interviewed Harry Moser in the wake of Apple's announcement that it was bringing some of its manufacturing back to the US. Apple is going to start making some Macs in the US, but not everyone expects the trend to grow. I don't know if it will grow or not, I feel certain that any plants that Apple builds in the US will use robots and automation to keep the number of employees to a minimum. There is no way to match the labor costs that Asian workers are forced to endure in the US. That's precisely the point that the article (which first appeared in the International Herald Tribune.)

And here is an article about new and improved robots poised to take the place of humans. Robot technology is improving rapidly, and robots don't complain about working conditions, and their wages don't double every four years, as Moser asserted in the interview with the MIT Tech Review linked above. The reshoring trend is a few years old, he says.

Back on April 25, 2012 I watched an Globaspec Online webinar about reshoring presented by Moser. In that presentation, Moser noted that Boston Consulting sees a Renaissance in Manufacturing by 2015, because labor costs are rising. Manufacturing in the US is less money, if you look at total costs. Labor costs in China will still be lower, the total cost per unit won't be equal either, but the differential will be less, and when you add the rest of the costs and risks it will be cheaper to make the stuff in Texas or the Southeast (and eventually in the Northern states. ) Moser offers free software for companies to do the math to see if moving manufacturing back to the US makes sense.

He claims that in 2009 (in total costs) the US was 10% more competitive than China, and without the intellectual property risk. Essentially, any intellectual property you bring to China will be appropriated. A lot of outsourcing and offshoring was part of a "herd" mentality, Moser said, and the numbers weren't run to consider the total cost of overseas manufacturing.

Moving to China wasn't the panacea expected, but companies put it elsewhere on the balance sheet, so it wasn't obvious that really they were losing money. He claims companies didn't make the decision objectively, and that they ignored about 20% of the real cost of moving offshore. They looked at per piece price, but didn't take into account others, (such as carry cost, tariffs, intel property, shipping etc.)

So his companies offers Total Cost of Ownership (TCO) software designed to show the real cost. Both companies and unions would want to use this software. The software is free. And they have a library of case studies that demonstrates the benefits of reshoring. In the MIT article, Moser claimed that 50,000 jobs have returned.