Harry Moser President

Reshoring Initiative

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MS MIIA Reshoring Summit

Reshoring Trends

The Bleeding has Stopped

Manufacturing Jobs/Year 2000-2003

Annual Average

2015 % Change

New Offshoring

~240,000

~60,000 -75%

New Reshoring & FDI

12,000 67,000 + 400%

Net Jobs Gained

~-220,000 ~0 N/A

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Losses on Out-of-Stocks & Overstocks

U.S. Retailers Losing $250 Billion/year from Out-of-Stocks & Overstocks

Reshoring improves product availability through shorter lead times via shorter supply chains.

Typical Markdowns by Retailer Category

Source: Retail's $1.1 Trillion Inventory Distortion Problem,

Source: Sourcing Journal, Zara Gap: Change the Culture, Change the Game, Apr 2016/

Apparel Industry: Better Margins and Response

Smaller runs of garments that sell at full-price are better than volume runs of garments that have to be sold at discount.

Source: FASHION RESUOURCE NETWORK: Aug 11, 2014

Definitions

Reshoring/Backshoring/Onshoring/Insourcing: Bringing back manufacture of products that will be sold or assembled here: Same or different company Same or replacement product OEM or contract manufacturer

Transplants/FDI: Similar logic Producing near the consumer Localization!

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Flawed Company Economic Model

60% of manufacturers: Apply “rudimentary” total cost models

Wage Arbitrage PPV (Purchase Price Variance) Landed Cost

Ignore 20% or more of the total cost of offshored products

Source: Archstone Consulting survey, American Machinist Mag., 7/16/09

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Indexed Unit Labor Costs in the Manufacturing Sector of Selected Countries

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The Industry-Led Reshoring Initiative Provides

Online Library of 3,500+ reshoring articles Statistics from TCO and Library databases Case Study template for posting cases. Motivation for skilled manufacturing

careers Free Total Cost of Ownership (TCO)

software for: Companies for sourcing Suppliers of parts and equipment for selling

* NIST’s MEPs also offer a TCO system. 9

TCO Comparison Example

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2012 TCO cases, China vs. U.S.

Comparison Basis

% of cases where U.S. has the advantage

Price 5% TCO 53% Difference 48%*

*Conservatively 25% might return if companies shifted to TCO

Source: TCO user database 11

Some National Reshorers

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Water Heaters

Bringing Production back from China: Water-heaters, fridges, and washing machines Unionized facility in Louisville, KY 1300 jobs, renovated facility, $800 million invested Reasons:

Tax incentives High-tech new model Ease of design collaboration with workers: retail

price -20% 2 tier contract Chinese cost: -30% becomes +6% considering

inventory and delivery problems “Jobs at U.S. suppliers”: 20,000

Walmart’s U.S. Manufacturing program

Walmart’s increase in U.S. manufactured purchases: $250 Billion over 10 years In the 10th year:

Approx. 300,000 manufacturing jobs* Approx. 1 million total jobs**

• http://engage.walmart-jump.com/ *Reshoring Initiative **Boston Consulting Group

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Resources for Retail Suppliers

Purpose: Help suppliers supply more Made in USA products Developed for Walmart. Will invite all retailers Page on Walmart USA Mfg. site, w/links to Nine Resources on Initiative site:

Timing Product Selection Revaluation Competitiveness (including USCTI) Suppliers Retailers Compliance Transition Financing

Personal contacts at 35 associations/companies/Commerce

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Circuit Boards

Woodridge, IL Supplies heavy equipment companies Had quality issue with a Chinese

component Found local IL source Result: Quality problem fixed Inventory cut by 94%

$25M order

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MS Reshorers

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Upholstery

From overseas to New Albany, MS 150 jobs $2 million investment First domestic factory Reasons:

“For us to continue to grow, we felt we had to have domestic production as part of our program. We think it will help us to become a more complete supplier.”

Assistance from the MDA, TVA, the City of New Albany and Union County

Source: http://www.furnituretoday.com/article/520055-emerald-home-furnishings-open-first-us-plant

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Auto Parts and Assembly Work

● Mexico to Pelahatchie, MS ● Won Chrysler contracts over bidders and parts makers from Mexico, Europe and Korea ● $250,000 investment to accommodate an increase in production ● 30 jobs ● Reasons:

● Quality: “Zero defects record” ● Trust ● Price

Source: Jeff Amy, “Miss. Aims to lure factories from other countries.” Business Week. August 21, 2012. Ted Carter, “ Mississippi getting the nod in reshoring decisions.” Mississippi Business. August 26, 2012. Wally Northway, “Is onshoring the new trend? Local manufacturers finding a more level playing field.” Mississippi Business Journal. November 29, 2013. https://www.mississippi.org/news-room/multicraft-3-26-2013/

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Commercial Refrigeration Compressors

● France and Brazil to Verona, MS ● 150 jobs ● Reasons:

● To help expand sales in North American market ● Mississippi Development Authority provided financial assistance with building modifications and equipment

● To meet growing demand

Source: http://www.annarbor.com/business-review/tecumseh-products-company-announces-multi-million-dollar-investment-in-mississippi-manufacturing-pla/

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Steel Parts for Sporting Equipment

● China to Amory, MS ● 100 new jobs over 4 years ●Reason:

●United Steelworkers Union aided plant workers in ratifying a contract which stipulated the closing of a plant in China

Source: http://djournal.com/bizbuzz/2015/12/21/icymi-true-temper-moving-work-from-china-to-amory/

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MS Kept from Offshoring

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Recliners (Kept from Offshoring)

● Potontoc, MS instead of China ● Since 2007 has grown its local workforce from 500 to 1,300 ● Reasons for not offshoring:

● Image/brand ● Skilled workforce

Source: Wally Northway, “Is onshoring the new trend? Local manufacturers finding a more level playing field.” Mississippi Business Journal. November 29, 2013.

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MS FDI

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Automobiles (FDI)

Japan to Canton, MS $2.9 billion investment Nissan Canton Vehicle Assembly Plant directly employs

6400 people, generates over $300 million a year in local and state taxes, and generates $2.6 billion a year in disposable income

Plant is responsible for 25,000 jobs statewide Benchmark: By 2015, 85% of all Nissan vehicles sold in

the US to be built in North America Reasons:

Government incentives Proximity to market To rationalize supply chain

Sources: Emily Wagster Pettus, AP. “Nissan building park for suppliers at Miss. plant.” Manufacturing.net. July 31, 2013. http://www.manufacturing.net/news/2013/07/nissan-building-park-for-suppliers-at-miss-plant#.UfkbBdCzbTw.twitter. http://www.clarionledger.com/story/news/politics/2016/06/23/nissan-canton-study/86278982/

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Leather Tanning (Foreign Direct Investment)

● Vietnam and China to Vicksburg, MS ● Leather supplier to footwear companies such as Timberland, Rockport, the US military and others ● 366 jobs ● $10.1 million investment ● Reasons:

● Lead time/time to market ● Quality ● Proximity to North and South American markets ● Government incentives

Sources: “TanTec Leather to Locate Tannery in Vicksburg.” Mississippi.org. May 12, 2014. “ISA TanTec to create 366 jobs at Miss. Tannery.” Bloomberg Business Week. May 12, 2014.

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Tissue Paper (FDI)

● Italy to Hattiesburg, MS ● 230 jobs ● $120 million investment ●Reasons:

● Quality real estate available for immediate occupancy

● Pro-business environment ● Skilled workforce ● Government incentives ● Proximity to customer base

Source: http://www.areadevelopment.com/newsitems/11-5-2015/sofidel-america-hattiesburg-mississippi892322.shtml

INDUSTRY # OF CASES

JOBS (FDI)

JOBS (RESHORING/KFO)

Transportation Equipment 11 10,120 30

Electrical Equipment, Appliances & Components

3 950

Apparel & Textiles 3 385 150

Rubber Products (Tires) 2 4500

Non-Metallic Mineral Products

2 240

Furniture 1 1300 Call Center 1 462

Paper Products 1 230

Wood Products 1 141

Fabricated Metal Products 1 100

Misc. 1 100

TOTAL: 27 16,525 2183

Reshoring, KFO and FDI to MS

COUNTRY JOBS COUNTRY JOBS Japan 11,065 Denmark 240 Germany 3530 Italy 230 Netherlands 500 Brazil/France 150 France 490 China 100 Canada/China 462 Israel 100 Vietnam/China 366 England 54 Switzerland 300 Mexico 30

FDI into Mississippi

Reasons for Reshoring, KFO, and FDI in MS Skilled workforce Positive business environment Government incentives/ Assistance from MDA (or other agency) To meet growing North American demand Proximity to customer/ market Workforce training programs Lead time/ time to market Quality Trust Image/ “Made in America” brand appeal Innovation Quality of life Transportation/ infrastructure Walmart pledge Raw materials Total cost

Top Countries From Which Reshored to the U.S.

Source: Reshoring Initiative Library, December 2014.

Country Cases China 194 Mexico 27 Canada 10 Taiwan 9 Japan 8 India 7 Italy 6

Korea, Malaysia, Hungary

3 each

Global Region

Cases

Asia 241 North

America 37

Western Europe

12

Eastern Europe

5

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Objective of Reshoring

Balance the $500 billion trade deficit: 4 million manufacturing jobs Cut U.S. budget deficit by about 50% Strengthen the middle-class 30% increase in manufacturing If spread over 20 years: 25% extra annual capital

equipment investment Allow productivity and growth in mfg. employment

1/11/12 Insourcing Forum

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How You Can Use the Free Tools

Decide what to produce or buy in-market Sell against imports Identify prospects that are reshoring and

FDI Help customers decide to produce more

domestically

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How to Get Started

Ask about pain and opportunities: Delivery/air freight (W. Coast dock delays) Orders lost due to delivery or slow response Quality Excess inventory Travel Late night calls IP loss or risk Regulatory issues Purchase price rising Corruption Violence Natural disasters or political instability

CSR Estimator Will Provide

For companies: Standard tool to include externalities in sourcing

decisions. Identification of the products with the best

shareholder and sustainability returns. Help justifying the marginal opportunities Recognition for success,

For advocates: Tool to advance an economically and

environmentally sustainable economy. .

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How to Un-tilt the Playing Field

Skilled workforce Lower USD Lower corp. tax rates VAT Train on TCO Then negotiate trade agreements

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Available

To help any candidate or EDO develop and implement a reshoring program

A non-profit with 28 sponsors, including

GoldGoldG

Silver

Platinum Gold Silver

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Help Reverse the Offshoring Flood Now!

Contact: Harry Moser Founder and President 847-726-2975 harry.moser@reshorenow.org www.reshorenow.org

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