Dr Lisa Lang was interviewed by Charles Showalter, host of The Union Edge, Labor’s Talk Radio on www.WFRNLive.com on Labor Day September 3, 2012 . Dr Lisa and Charles discussed reshoring or onshoring of manufacturing work back to the U.S.
Listen into this 9 minute interview: 9-3-12_lib_2_DrLisa (<–click to listen)
Transcription of Interview:
[The Union Edge Interview with Dr. Lisa Lang]
Speakers: Charles Showalter and Dr. Lisa Lang
Charles Showalter: Hello, welcome, I’m Charles Showalter. You’re listening to The Union Edge in American Family Radio Network. Thank you very much for taking time out of your busy day to talk about the issues.
Hey, right now we are talking with Dr. Lisa Lang, Dr. Lisa, who is with the Science of Business. Dr. Lisa, welcome to The Union Edge of the American Family Radio Network.
Dr. Lisa Lang: Thanks, Charles, I’m happy to be here.
Charles Showalter: Thank you very much. Hey, you recently wrote an article about reshoring. It caught my eye, I’m always interested in seeing good jobs, good manufacturing jobs here in the United States. Talk to me about your article and what reshoring is.
Dr. Lisa Lang: Sure. Well, reshoring is when US companies have discovered that the price of producing overseas has gone up and it can actually be more financially attractive to bring jobs back and produce back in the US.
Charles Showalter: Exactly—oh, I’m sorry, go ahead.
Dr. Lisa Lang: Yeah, that’s been an ongoing theme over the last few years, we’re seeing that really start to happen more and more.
Charles Showalter: And what are some of the costs that businesses may not anticipate when they send the jobs overseas and then they realize, “Oh, this is more expensive than we thought it was,” and oftentimes the quality control isn’t there, the quality of the product isn’t there.
So what are some of the things that people learn shortly after they start reshoring? Or offshoring, I’m sorry.
Dr. Lisa Lang: Yeah, well, inventory carrying costs are one of the big items, so if it takes six months to get your inventory over here on a boat, then you’ve got to carry at least six months of inventory and you probably increase that a little bit more than six months, just to be safe. You’ve got to carry a ton of inventory relative to, if you bought from somebody in the US, then the manufacturing lead time plus the transportation lead time, which is going to be a fraction of that six months. So inventory costs end up being much higher than they initially expect. That’s one of them.
Just the intellectual property risk, so if you have something that you want protected, often times going overseas, it can get easily copied. So that’s a good one that’s typically not anticipated.
But there are a bunch of these little, seemingly little costs, that end up, once you add them up, they’re actually quite a bit.
Charles Showalter: Can you talk to us about what manufacturers here in the United States have experienced with issues concerning quality control and product safety?
Dr. Lisa Lang: Yeah, sure. Quality control is a pretty big one. And, you know, some people say, “Well, it’s less of an issue because you’re carrying so much inventory. So if you have a few bad parts, no problem, you still have thousands of parts sitting there, so hopefully some of them will be good.
But quality can still be a big issue. If they send you a container full of parts and they’re all bad, then it doesn’t matter how many of them you have, they’re still all bad. And if you think about the more custom a part is, or whatever it is you’re purchasing from overseas, probably the more likely the quality may be bad. The type of work that’s going overseas, is more long run. It’s not very custom stuff. Stuff we’re making millions and billions of. That stuff can go overseas because they can get set up and they can get pretty good at running it. But when you start to look at parts that are more custom, then we start to see more of the quality issue.
I had one client who, one of their customers, wanted to start outsourcing the part overseas. And he didn’t fight that, but he said, “Okay, that’s fine, I’ll tell you what, we’ll be your back up supplier. So if anything happens to go wrong, we’ll be your back up supplier.” And sure enough, oh, several months into it, they’re getting containers overseas and a few containers full of doorknobs show up. Well, these guys aren’t selling doors. So, you know, that’s a quality issue of just sending the totally wrong thing. And there’s all kinds of these stories and perhaps they’re somewhat funny, unless you’re the person receiving the doorknobs.
Charles Showalter: Yeah, you know, one of the things I’ve heard is, you know, with the wind generation, or electric generation with wind power manufacturers in China, the precision of the equipment just aren’t there, the machinists aren’t nearly as good as they need to be, the quality control is a real problem, and when some of the wind, electric generator companies here in the United States purchase the Chinese wind turbines, and we’re talking about the big ones on the tower, the life expectancy of that piece of equipment is not nearly as long as the ones that are built here in the United States.
Dr. Lisa Lang: Sure, because that’s getting into more high custom, high precision stuff and they’re just not going to be as good at that. They can set up and run millions or billions of something that are going, you know, the specs are not going to change for some period of time, they can do pretty good at that. But this high precision stuff, high custom stuff, that’s where a lot of the quality issues are coming in.
Charles Showalter: Yeah, absolutely. What would you say to a company today who is considering offshoring or a company that has offshored, in coming back to the United States?
Dr. Lisa Lang: So if they’re considering offshoring, I would say this, get really real. Let’s be really upfront, let’s be really straight on what all the costs are going to be. And there’s some good information out there that you can find and help you to figure out some of those hidden costs that you might not be able to anticipate. So just get really straight with that and make sure that you’re aware of all the potential costs, and then probably add a little bit more just to be safe.
If you’re considering coming back, then likewise, look and see what all the true costs really are. What are all the potential costs out there that you may not have considered when you initially went overseas. There’s news that the cost of labor in China and some of the other countries where people are sending work to, that the cost of labor is starting to increase. So you’ve got cost of labor increases in those countries, also the cost of transportation is increasing. And to buy something overseas, you are using even more transportation than you’d use in the US. So these other countries are starting to get a middle class and the wages are increasing and you’ve got tons of transportation costs.
Charles Showalter: Dr. Lisa, let me ask you this: You know, from a number of esoteric reasons, wouldn’t it be better to manufacture it here in the United States because let’s face it, the American workforce is the most productive workforce in the world, productivity continues to go up in this country on a, you know, quarterly or yearly basis. And nothing but the funds that people earn when working here in the United States stay in our economy, and help our economy grow.
Dr. Lisa Lang: Absolutely. I’m with you. I think that in many, many cases, even if we looked at a pure financial basis, the case can be made.
Now, in the case where it’s not made on a purely financial, then you have to look at some of these other areas, where maybe you can’t make a financial case, but you just look overall, isn’t it kind of better? And the closer, if you want to sell more, if you want to increase your business, the more closely you’re tied to your vendors, the more you’re going to be able to respond to your customers. So just from a customer service, being able to serve your market better, having your vendors here in the US is going to make you a lot more responsive, a lot more able to go out and get new business and grow your business. So I think it’s, even in the case of where you can’t make a full, financial case, you can certainly make a customer service case, for sure.
Charles Showalter: Dr. Lisa, how do we find out more about your business and anything else that we should know about you?
Dr. Lisa Lang: Okay, I have a website where we curate, if you will, all the reshoring articles and news that are out there. So if you want to learn more about reshoring and get some of the numbers and learn about some of those hidden costs, you can go to that website and you can search and you’ll find hundreds of articles and posts there, and really get some more information. And that is www.ReshoringMFG.com. So check that out, there’s tons of information there.
Now, if you’re a highly custom job shop and you want to become more competitive so that more of the business that is being reshored gets to you, as opposed to one of your US competitors, check out www.VelocitySchedulingSystem.com. And that’s a program I have where I help US companies become more competitive. Both internationally, but also within the US so that they can better compete and gain more of that business that is being reshored.
Charles Showalter: Well, thank you very much, Dr. Lisa, I appreciate your time, I appreciate your thoughts and please, keep encouraging manufacturers to manufacture here in the United States. And I think we will all be better if we buy a few more American-made products.
Dr. Lisa Lang: I absolutely agree with you, Charles, and thanks for having me.
I’m Charles Showalter, you’re listening to The Union Edge on the Working Family Radio Network.
To hear the entire Labor Day show: http://workingfamilyradio.libsyn.com/happy-labor-day-work-in-progress-veterans-and-womens-issues-plus-not-for-profit-hospitals