Reduce Costs and Add Jobs

Jobs. Jobs. Jobs. The unemployment rate has been the lead news story nightly, or at least very near the top. Politicians and candidates talk about creating jobs all the time. Maybe your organization has faced layoffs or considered that step as a cost-cutting option, or maybe you’ve already sent jobs elsewhere. In the wake of cost-cutting initiatives, tens of thousands of manufacturing jobs were shipped overseas or south of the border. However, the offshoring tide is beginning to turn.

Re-shoring, bringing manufacturing jobs back to the U.S. is beginning to gain traction. Shipping costs have skyrocketed in tandem with ever-rising energy costs, and the wage and currency rates in developing countries are also on the upswing. Foreign governments are losing stability. Offshore distance (both time and geography) has always been challenging. Suddenly, offshoring is not quite as attractive as it may have been.

In order to make an honest apples-to-apples cost comparison, you must calculate the total cost of ownership (TCO). According to Harry Moser, founder of the Reshoring Initiative, nearly 60% of OEMs do not fully investigate their TCOs. His survey shows about 60% use only rudimentary calculations including price, duty and freight, but ignore 20 to 30% of other costs that contribute to overall costs.

Three large companies, G.E., Caterpillar and NCR, have re-shored some of their products, including water heaters, excavating equipment and ATMs. Poor quality and a need to move engineering and manufacturing closer together to improve responsiveness are just two of the reasons. In fact, one company hired employees whose sole function was to inspect imported products for defects. Now that’s a very left-handed and profit-eating way to create jobs.

Waiting for parts or products to be shipped from China negates efforts for JIT production. Companies tie up capital to purchase initially and are then forced to spend again to warehouse once shipments arrive. On top of that, many companies have lost revenue and reputation due to counterfeiting. Intellectual property rights are not enforced as stringently outside the U.S. Adhering to compliance regulations with offshore parts and products is another potential headache.

Although there are a number of benefits to re-shoring and the tide is beginning to turn, the flow is still a trickle and certainly not a flood. No organization has been exempt from improving its competitiveness. The push to reduce costs is the reason offshoring began in the first place. You are, no doubt, in the same boat – looking to push your productivity up and pull your costs down in order to compete, no matter where your competitors happen to be manufacturing their products.

Measuring and monitoring are the linchpins to improving your efficiency. Remember, “Anything that gets measured gets improved.” When you monitor your equipment and your processes, profit-draining problems become obvious and can be corrected. And the news that’s even better than the turning tide of re-shoring? Measuring and monitoring are not difficult to do. At MPower, we’ll prove to you that your savings will exceed your fee, or we don’t move forward. How’s that for total cost of ownership?

You can win the offshoring battle, and we’re here to help you do just that. Contact MPower to find out how we can help you improve your efficiency and competitive edge.