Significant evidence suggests that the practice of “design in the U.S., manufacture in China” is no longer a foregone conclusion. A number of U.S. manufacturers, notably Apple, Electrolux, Lenovo, and NCR, are reversing this long-term trend by reshoring some supply chain, a more hybrid approach known as “rightshoring.”
Harry Moser, founder of the not-for-profit Reshoring Initative organization, and one of the presenters at IPC’s Management Meetings in September, confirmed that the lion’s share of reshoring comes from China (61%) followed by Mexico, Japan, and India, and that electronic equipment, appliance and component manufacturers are leading the trend.
A number of factors contribute to the reshoring trend. “Wages in China are no longer a fraction of those of U.S. workers,” Moser said. “The labor costs in China and the U.S. will actually converge around 2015.”
Beyond the growing wage parity, he cited other reasons to reshore, such as higher quality control standards, reduced time to market, lower transportation costs, easier communications, fewer intellectual property risks, and more sales from the growing value of “Made in America” labeling.
GE, for example, has already successfully brought its water heater production back from China to Louisville, Kentucky, driven by local tax incentives and a need for closer collaboration between its engineering and production teams. Furthermore, it intends to reshore a significant part of its appliance manufacturing.
Another presenter at IPC’s Management Meetings, Michael Fink, shared his company’s experience with rightshoring. Fink is the head of worldwide manufacturing and supply chain operations for Lantronix, a Los Angeles-based provider of smart networking and communications solutions that had a history of being “100 percent Asia”–all products were made in China and Malaysia under the supervision of a Hong Kong-based team, and then shipped into Europe and the U.S.
When Lantronix moved to a new product introduction strategy, Fink was brought in to explore supply chain improvements to accommodate the 2014 launch of a console manager. This new product offered 18 configurations, which made it operationally complex, but provided the option for late assembly. It was also expected to do well in the U.S.
After analyzing various supply chain options in Asia, Mexico and the U.S., he selected a Bangkok contract manufacturer (CM) to ship 30% of the finished product to a third-party logistics provider (3PL) in Hong Kong, who then ships to the European and Asia market. Concurrently, the Bangkok CM will ship 40% of the product as finished and 30% semi-finished to a 3PL in Los Angeles, close to where Lantronix is located.
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