Is the pendulum swinging back on off-shoring manufacturing?

Very interesting article in this week's issue of Crain's Chicago Business. An excerpt:

Some Chicago-area manufacturers are bringing production back to U.S.

The Moreys remember well Chinese New Year two years ago, when they were calling all over Shenzhen, China, trying unsuccessfully to find someone who could pick up a load of finished parts from a factory during the two-week holiday and ship them to Chicago. Then it was holes not drilled deeply enough in a shipment of circuit boards from a Chinese supplier. Similar problems have occurred in metal and plastic castings.
 
“An infinite number of problems occur when you have a supply chain 8,000 miles long,” says Dana Morey, an executive vice-president at Woodridge-based electronics manufacturer Morey Corp., which employs about 650 and does about $150 million in annual sales. So far this year, Morey has spent around $200,000 to ship parts from China via air freight.


This interesting trend shows that companies are slowly figuring out that it isn't only about buying the cheapest widget. You have to take into account other factors, including:

• Shipping costs
• Lead times
• Damaged goods
• Errors
• Increased inventory needs
• Environmental costs

Caterpillar, GE and Ford are among the heavyweights that are bringing jobs back to the U.S. from China and other countries, according to a recent story by USA Today. The key is that calculating TOTAL costs—not just labor—sometimes results in very different numbers. Numbers that companies have to start looking at.

What are your thoughts? Is this merely a blip in the wave of off-shoring manufacturing, or a real trend to watch in the coming months?

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I can confirm the "Errors" point on your list. When sending prints to China you need to employ a hefty dose of GDT. I have a lot of welded frames manufactured and machined in China. Our manufacture will use both the high end and the low end of the tolerance. Everything looks crooked but it's within spec'. Same with machining. Don't assume your machined surfaces will be parallel unless you specify it. This has been a problem with our gearboxes. Here in the States, a machinist knows how a gearbox should be made even though you may not specify that bearing bores should be parallel across the gearbox. Also you need to be on the lookout for counterfeit parts. When a SKF bearing failed after a few days of operation, we called in a SKF rep'. He told us he couldn't help because that wasn't a SKF bearing even though is said SKF on the casting.

What's missing from your list is loss of intellectual property. If you send a machine to be made in China, in a couple of months you will have a new competitor using your brand name or company name usually with a slight spelling variation.
Great point on the intellectual property issue, Ward. When I worked in the hotel design industry for a couple of years, it was very interesting attending the trade shows. Companies were very protective of their designs—for chairs, wallpaper, lighting, you name it. You'd occasionally see Asian visitors taking photos of products, which was strictly forbidden on the show floor. Sometimes vendors would catch them doing it and run them out of their booths.

It's peculiar to me how some of the Asian culture (well, China in particular) doesn't see the stealing of intellectual property as wrong, whether it's a bearing, a chair or a DVD.




Ward Holloway PE said:
I can confirm the "Errors" point on your list. When sending prints to China you need to employ a hefty dose of GDT. I have a lot of welded frames manufactured and machined in China. Our manufacture will use both the high end and the low end of the tolerance. Everything looks crooked but it's within spec'. Same with machining. Don't assume your machined surfaces will be parallel unless you specify it. This has been a problem with our gearboxes. Here in the States, a machinist knows how a gearbox should be made even though you may not specify that bearing bores should be parallel across the gearbox. Also you need to be on the lookout for counterfeit parts. When a SKF bearing failed after a few days of operation, we called in a SKF rep'. He told us he couldn't help because that wasn't a SKF bearing even though is said SKF on the casting.

What's missing from your list is loss of intellectual property. If you send a machine to be made in China, in a couple of months you will have a new competitor using your brand name or company name usually with a slight spelling variation.
From their point of view it's our culture that is peculiar. They tend to think that the only way to "own" an idea is never to speak it, or print it. As soon as an idea leaves your head, how can you claim ownership? China tends to look out for its own interest. If someone can take a machine, reverse engineer it, start a new company and put 100 people to work who do not have jobs, then their system tends to look the other way.
We had a team of engineers over in China setting up a plant. It was discovered that a Chinese vendor, that was also on sight, managed to exploit a MS flaw and got full access to a couple the engineers wireless laptops. They made full copies of the hard drives taking all the models and prints of the machinery.

Interesting to see what New Jersey's doing to try to jump-start their manufacturing sector ... check out this link from the Morris County Daily Record:

 

Is there a future for manufacturing in New Jersey?

 

I bet we'll see other states with similar programs start making announcements soon.

you would think that they would have thought of these "hidden costs" in the first place. When I travel I figure the costs of airfare, rental car ect, when I buy things I figure in shipping costs vs going to the store and buying it there.Why are we just now realizing that it costs time and money to ship goods and services.

For those of you who say that hindsight's 20-20, look at this piece from 2005!

 

     http://www.newswise.com/articles/view/513892/?sc=rsbn

 

I think that the social costs of offshoring, as menioned in this link, are pretty interesting. An excerpt:

 

"In the home country, it is not only employees who are hurt through layoffs; suppliers lose business, communities lose tax revenues, and the local economy loses the multiplier effects of direct spending. These impacts are heightened in areas lacking a deep economic base, where one company's decision to expand or shut down operations can reverberate throughout an entire community."

 

I've had Chinese factories make parts for me with mixed results (though more often than not poor results).  The problem is they have no culture of quality there.  I send a print and they make it the way they think it should be.  If that means substituting a 3/8" bolt for a 1/4" bolt, so be it.  I see one of two things happening over the next 10 years.  Chinese shops figure out they need to provide US-quality in their work and they keep most of our manufacturing business, or US operations realize Chinese quality isn't worth the "savings" and more and more of the fab work comes back here.  

 

Aaron

www.designtheproduct.com

I am old enough to remember the phrase " Made in Japan, no good". That was in the 50's and 60's ... The Japanese increased their engineering knowledge in the 60's and generally exceeded the quality of goods made here. Before that they were a "copy goods society". The Chinese are still a copy goods society at present, but they Are sloppy in their methods very often. I've seen tolerances pushed to the max, and even found body plastic on cast parts to fill in huge flaws so they are not visible on the shipped part. They may eventually get to the quality of the Japanese, but it will take a while...they depend mostly on "disposable" unskilled labor for much of their production. I for one, will be glad to see a lot of this work return stateside, since I have been OUT OF WORK for more than 2 years now.  Most American companies are so busy looking at the bottom line, that they try to ignore the sloppy manufacturing practices. I am a big believer in tight tolerances, inspection, and R&D assemblies.... I work on the floor to assure quality in my designs in manufacturing and assembly. For some reason recently the HR services of most companies stateside  has taken the idea that young inexpensive college grads with computer skills rather than old timers that helped to design and build these computers are a more ecconomical path rather than utilizing the Hands On experienced Old timers.

Interesting insight Bill - it seems to me as though there is a fork in the road (whether we've perhaps already passed it, can see it not so far in the distance or well beyond the horizon) where companies who utilize overseas/Chinese supplies DEMAND better products. 

 

Check out this article I found (albeit from 2007) which seems to indicate that domestic buyers have known of the quality issues in the past...perhaps this trend is gaining momentum nowadays...??

 

http://www.huffingtonpost.com/steven-g-brant/chinas-quality-problem...

 



Bill Redd said:

I am old enough to remember the phrase " Made in Japan, no good". That was in the 50's and 60's ... The Japanese increased their engineering knowledge in the 60's and generally exceeded the quality of goods made here. Before that they were a "copy goods society". The Chinese are still a copy goods society at present, but they Are sloppy in their methods very often. I've seen tolerances pushed to the max, and even found body plastic on cast parts to fill in huge flaws so they are not visible on the shipped part. They may eventually get to the quality of the Japanese, but it will take a while...they depend mostly on "disposable" unskilled labor for much of their production. I for one, will be glad to see a lot of this work return stateside, since I have been OUT OF WORK for more than 2 years now.  Most American companies are so busy looking at the bottom line, that they try to ignore the sloppy manufacturing practices. I am a big believer in tight tolerances, inspection, and R&D assemblies.... I work on the floor to assure quality in my designs in manufacturing and assembly. For some reason recently the HR services of most companies stateside  has taken the idea that young inexpensive college grads with computer skills rather than old timers that helped to design and build these computers are a more ecconomical path rather than utilizing the Hands On experienced Old timers.

 

 

 

I certainly hope so. So many business managers have grown up with a "bottom line" oriented business approach, not realizing that final production goods require functionality and longivity in the market. This is only acheived through research, development and testing. Everybody wants to make a buck without the investment into quality of manufacturing.

Bill Redd 

Tom Lazar said:

Interesting insight Bill - it seems to me as though there is a fork in the road (whether we've perhaps already passed it, can see it not so far in the distance or well beyond the horizon) where companies who utilize overseas/Chinese supplies DEMAND better products. 

 

Check out this article I found (albeit from 2007) which seems to indicate that domestic buyers have known of the quality issues in the past...perhaps this trend is gaining momentum nowadays...??

 

http://www.huffingtonpost.com/steven-g-brant/chinas-quality-problem...

 



Bill Redd said:

I am old enough to remember the phrase " Made in Japan, no good". That was in the 50's and 60's ... The Japanese increased their engineering knowledge in the 60's and generally exceeded the quality of goods made here. Before that they were a "copy goods society". The Chinese are still a copy goods society at present, but they Are sloppy in their methods very often. I've seen tolerances pushed to the max, and even found body plastic on cast parts to fill in huge flaws so they are not visible on the shipped part. They may eventually get to the quality of the Japanese, but it will take a while...they depend mostly on "disposable" unskilled labor for much of their production. I for one, will be glad to see a lot of this work return stateside, since I have been OUT OF WORK for more than 2 years now.  Most American companies are so busy looking at the bottom line, that they try to ignore the sloppy manufacturing practices. I am a big believer in tight tolerances, inspection, and R&D assemblies.... I work on the floor to assure quality in my designs in manufacturing and assembly. For some reason recently the HR services of most companies stateside  has taken the idea that young inexpensive college grads with computer skills rather than old timers that helped to design and build these computers are a more ecconomical path rather than utilizing the Hands On experienced Old timers.

 

 

 

Very good article and video. Thanks for the link. This is pretty close to what I was saying earlier.

Bill Redd

Glad you liked Bill!

Bill Redd said:

Very good article and video. Thanks for the link. This is pretty close to what I was saying earlier.

Bill Redd

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