Reshoring Success Stories
In my last column, we discussed the conditions propelling a significant global supply chain shift and the positive trend toward localization that is increasing the rate of reshoring by U.S. companies and foreign direct investment (FDI) by foreign companies. Companies are reevaluating their offshoring by using Total Cost of Ownership (TCO) instead of “freight on board” price and closing any remaining cost gaps with automation and lean efforts. I’d like to share some reshoring and FDI success stories with you.
Germany-based Alimex, a producer of high-precision aluminum cast plates, is investing $2 million in a South Carolina facility, creating 27 new jobs. Continuous product innovations have resulted in rapid growth in North America and earned Alimex a leading position globally. Government incentives and proximity to customers and the market were the domestic factors that made the U.S. location attractive.
New technology, lean production, process innovation and part redesign will yield greater competitiveness for U.S. companies, enabling more resilient, localized supply chains. Automation, a key enabler, narrows the labor cost differential, reducing the offshore labor cost advantage. Investments in lean factories, and new technologies like Industry 4.0, robotics and automation, speed production and increase responsiveness.
In October 2020, Pratt & Whitney, a division of Raytheon Technologies Corp., announced plans to invest $650 million in a
1 million-sq.ft. facility in Asheville, North Carolina. The new facility will house an advanced casting foundry to produce turbine airfoils. This investment will create 800 new jobs through 2027. “We need to invest today to ensure that we have the infrastructure, production capabilities and workforce in place to meet future market demand and provide the best products to our customers worldwide,” said Chris Calio, president, Pratt & Whitney. The new smart factory will implement industry-leading manufacturing technologies and processes.
Jergens Inc., a 78-year-old Cleveland-based manufacturer of standard tooling components, vises and other workholding equipment, is fully invested in automation. As automation increased production, the company was able to widen its business offerings and hire additional staff.
In 2020, a shortfall in parts from a single-source supplier caused Fiat Chrysler (FCA) to reshore 30% of casting production from Mexico to Kokomo, Indiana. The insufficient supply had the potential to disrupt six top-selling vehicle platforms at six different plants.
Blue Rooster, an outdoor-fireplace maker, imports cast-metal parts from China for assembly in Minnesota. Disruption caused by the COVID-19 pandemic forced two of its three main Chinese suppliers offline. Blue Rooster is currently looking to bring nearly 90% of its production in-house.
Doing the Math
Using TCO will assist your company or your customers to more accurately assess the total microeconomic impact of the firm’s offshoring or reshoring decisions. Our biggest challenge is to convince companies to use TCO to do the math correctly. The shrinking cost advantage of low offshore wages and FOB prices are increasingly offset by dozens of hidden costs. Essentially, the Reshoring Initiative provides the tools for companies to decide whether their overhead comes down more than their manufacturing cost goes up when sourcing locally.
It’s time for companies and customers to do the math. Choosing U.S.-based manufacturing for more products supports employees, suppliers, local communities and the national economy while increasing profitability. Please report casting
reshoring cases to www.reshorenow.org/contact-us/ so we can keep documenting the industry’s competitiveness. CS