Coming back from China – NECN

(NECN: Peter Howe, Burlington/North Attleborough, Mass.) – When Apple Inc. stunned the world Thursday, announcing it will invest $100 million moving a Mac computer production line back to the U.S. from China, one person who was not completely surprised: Paul Belham, vice president of Bell’s Powder Coating in North Attleborough, Mass.

Bell’s, which employs 22 people, electrostatically applies coatings – better and more durable than paint – to all kinds of high-tech equipment cases and point-of-sale vending devices and dozens of other products. After 2005, it saw 60 percent of its work shift to much cheaper dry coating plants in China.

But lately, “We’re starting to see some of it come back,” Belham says. He estimates about 15 percent of the work they’d lost to competition they’ve won back, in no small part because manufacturers were unhappy with the quality and reliability of made-in-China coatings.

“The quality’s terrible,” Belham said flatly. “I mean, they’re not held to our standards. In the U.S., we make stuff to last. They make stuff as a throwaway … Now, the costs are going up over there, so people are looking into: Is the value still there? And do we want to go back to the Made in the USA product, and do they want a good quality product now?”

While the Apple “reshoring” move is tiny compared to its overall output, it would mean Apple would be manufacturing computers in the United States for the first time since 2004, when it completed a decade of moving U.S.-based production to other countries.

Another Massachusetts businessman who understands what might behind Apple’s shift is John Green, chief operating officer of Collaborative Consulting in Burlington. “It’s all a quality play. Make the model simpler,” Greene said.

Collaborative has 310 employees, including 50 programmers and testers it just brought back – to a new office in Wausau, Wisc. – from the Far East. In a National Geographic wall map, Greene has a colleague who has push pins in dozens of cities Collaborative is evaluating to bring back another 150 jobs in coming years.

“It’s not the quality of the people” in China and India, Greene said. “The people are great. It’s the model that’s the problem. You have people who are 10 or a dozen time zones away. You have culture, and you have communications, and in China and India, you have turnover, so it makes it very difficult.”

When comparing “total domestic costs” and “total offshore costs,” Greene likes to show off a PowerPoint presentation that tries to enumerate all the additional costs that can make an offshore worker who gets paid, say, half as much as an American worker wind up being, net, much more expensive, items he labels Quality Lapse, Rework, Additional Employee Effort, Language and Communication Issues, Security Risk, Turnover, Intellectual Property Risk, and Public Image. The last has been a big issue for Apple, amid reports of suicide-inducing, high-stress, long-hours working conditions at iPhone factories in China.

In recent months, companies including General Electric, Caterpillar, and Ford have all announced plans to bring back to the U.S. manufacturing they’ve been doing abroad. An October survey by the MIT Forum for Supply Chain Innovation found of 104 companies polled, one out of every seven had plans underway to “reshore” or “homeshore” manufacturing being done overseas.

For New England, an October study by The New England Council and Deloitte Consulting found there are regions that – this may surprise you – can be very cost competitive with the low-cost southeastern U.S. states when it comes to manufacturing of “highly engineered products” like electronics, aerospace components, medical devices, precision machining, and semiconductor equipment.

The study found in counting up wages and salaries, energy, rent, taxes, and other costs, Rhode Island and the Blackstone Valley area of Massachusetts are just 10 percent costlier than the Southeast; the Interstate 91/”Precision Valley” from Northampton, Mass., up through Brattleboro Vt. and Hanover, N.H., just 5 percent more expensive; and a “Down East” zone stretching from Portsmouth and Rochester, N.H., through southwestern Maine to Augusta just 2 percent costlier. See the full report here: http://www.newenglandcouncil.com/assets/SmartInfrastructureStudy-FINAL.pdf

Greene said he’s confident many New England businesses are only beginning to see how well they could compete with now-offshored manufacturing and information technology work.

“We’re not going to have a similar price per hour as a China or an India,” Greene said, “but in the end, the total job, I guarantee you, will be less or equal in cost — with better quality.”

With videographer Nik Saragosa.

Tags: Apple, Peter Howe, China, India , John Green, Collaborative Consulting, techology manufacturing, Paul Belham, Bells Powder Coating, reshoring trend