Overseas Manufacturing “Reshoring”

TWO years ago, Caliburll in Duluth, Minnesota, did what any other cash-strapped manufacturer looking to prune costs would do: turn to China.

But the maker of game console cases is happily shifting its manufacturing operations back to the US, after discovering that doing business overseas can be more trouble than it is worth.

One supplier lost the moulds for the company’s decorative shells while another demanded a bribe. Quality problems abounded.

“We just kind of got kicked right in the teeth dealing with China. It wasn’t any fun by any means. But it helped us learn to bring stuff back to the United States,” says Caliburll owner Coy Christmas.

The hassle of operating abroad has triggered some companies to move production stateside, a move called “reshoring” by some.
Coming home not only bolsters the speed, quality and simplicity of doing business, it’s also more economical than it used to be.

Average wages in China have jumped 10 to 25 per cent a year, hitting $US4 to $US6 an hour in some plants.
Add shipping and high fuel costs, and offshore manufacturing is no longer such a bargain.

The return of offshore production to America has emerged as a surprising silver lining in the US economic recovery.
The government doesn’t track corporate reshoring efforts, but experts say they are hearing of more companies bringing work back to the US.

“Lots of very encouraging anecdotes—and obviously the more of that we see, the better off we all are,” says Alan Tonelson, a researcher for the US Industry and Business Council.

Since 2002, about 3.5 million manufacturing jobs have been lost across the US. Returning jobs could create opportunities for thousands of workers.

Minnesota government official Mark Phillips says companies that have moved jobs back, such as Caliburll and 3M, have different reasons for the change. But all have discovered that operating in China, Mexico or Poland is not always rosy.

“When you are dealing across the ocean, there are logistical issues and language issues,” Phillips says.

Christmas describes Caliburll’s experience in China a nightmare, with one vendor losing $US700,000 in tooling equipment and another demanding a $US150,000 “fee” to release his product.
“And then we found out our product was being sold on the black market. It’s been a horror story,” he says. The company, which makes cases for popular consoles such as the Xbox360, will now add a few employees in Duluth and many more in Chicago, where it plans to hire contractors to handle moulding, assembling and packaging.

Ryan Kanne, director of the US Commercial Service Office in Minneapolis, says the obstacles overseas are rising and many companies are bringing manufacturing back because of quality concerns. While it is sometimes cheaper to do business abroad, companies can keep a tighter rein on manufacturing done in the US.

DEE DePASS
MINNEAPOLIS STAR TRIBUNE