“Reshoring is happening,” says Moser. Labor costs in China are going up, and Chinese workers are beginning to demand workable conditions and hours. Breakdowns in global supply chains such as the one caused by the Japan earthquake, political uncertainties, expensive transportation costs, the need to be more responsive to customer demands and declining prices for U.S. natural gas and electricity are contributing to companies re-thinking their offshoring decisions, says Moser. Other factors favoring reshoring are becoming prevalent. The Chinese yuan is appreciating slowly against the U.S. dollar, making it more expensive to export from China. Companies continue to lose their intellectual property by moving offshore, creating unwanted competitors.

In China, employees are not returning to their jobs from annual holidays. Companies continue to deal with problems associated with culture, language, time and travel. American customers are choosing products stamped “Made in America.” And quality issues can be addressed easier with a production process close to home. The Reshoring Initiative has chronicled hundreds of examples of companies bringing production back to the United States, including General Electric water heaters, Master Lock locks and WHAM-O Frisbees.

“If they can make Frisbees competitively in expensive states such as California and Michigan, a broad range of products are reshorable somewhere in the U.S.,” says Moser. The organization’s Total Cost of Ownership software has found that the average price of a product made in the United States is 142 percent higher than in China. But when the total cost of ownership is calculated, the U.S. price disadvantage shrinks to 23 percent. “For 40 percent of the cases, U.S. total cost of ownership is lower than Chinese total cost of ownership, averaging 37 percent lower,” says Moser. The conclusion: “Using total cost of ownership instead of price brings the percentage of the sample that a company would source [in the United States] up to 40 percent from 15 percent.” But the Reshoring Initiative’s software tool is not enough to generate a huge reshoring trend, says Moser. Policymakers must get engaged. “The lack of skilled workers must be addressed now if we are able to compete in the future,” says Moser. The U.S. must also address unfair trade practices by foreign countries, including currency manipulation that has helped lead to “offshoring’s jobs devastation.”

The center is expected to be funded at $45 million with money that has already been appropriated by Congress. Of the total, $30 million will come from the Departments of Energy and Defense, of which up to $15 million will be used to buy equipment. Another $10 million will be provided by the DOD ManTech program. The National Institute of Standards and Technology will contribute $5 million. NASA is also involved.

“Another $10 million in funding from the DOD Defense Production Act Title III could potentially be available to support scaling-up technologies for the Pilot Institute in support of critical national defense needs, if warranted,” according to the Air Force “pre-
RFP.” DOD is taking the lead for a number of reasons: The military is a sizable potential market for parts made using additive manufacturing techniques, given that it has low volume purchases, and it deals constantly with problems of obsolescence.

The new pilot center is part of the proposed $1 billion National Network for Manufacturing Innovation (NNMI), which would fund up to 15 regional advanced manufacturing centers, so long as money is approved by Congress. The congressional budget request for the program that was submitted by President Obama was included in “mandatory” spending programs, giving it a better chance of funding success, although funding at such a large scale remains ambiguous. According to the Air Force Research Laboratory (AFRL) “Special Notice” (for Solicitation No. NNMI21012) issued on April 13, the pilot will not require a 50/50 cost share by industry, academia or research organizations.

In keeping with the goals of the NNMI, the new pilot center will “bring together large and small companies, academia, federal agencies and the states to accelerate innovation by investing in industrially-relevant manufacturing technologies,” says the AFRL solicitation. “These manufacturing technologies will contribute toward bridging the gap between basic research and product technology transition, provide shared assets to help companies access cutting-edge capabilities and equipment, and create an unparalleled environment to educate and train students and workers in advanced manufacturing skills.”

The Air Force, which is acting as contracting agent for the DOD, says that there is only one vendor so far that has expressed interest in operating the center: ILC Dover, which has “used additive manufacturing technology for 20 years.” The ILC Dover representative listed in the pre-RFP said his firm is interested in participating in the pilot but not in running it. Additive manufacturing “has a lot of potential but there is a lot of work to be done to make it cost competitive with current technologies,” says Phil Spampinato of DLC, an engineering company that makes such things as space suits for NASA, impact bags used to land rovers on the surface of Mars and respirators used by soldiers in Afghanistan. The proposed pilot center “will be a step to get additive manufacturing from a niche to the mainstream,” says Spampinato. “The government has to play a role because the industry is not going to invest in the developmental side of it beyond parochial interests. The government or some strategic entity has to take it to the next level. If our government doesn’t do it, then the Chinese, Indians, Brazilians or others will.”

The proposed Additive Manufacturing Pilot Institute will develop open architecture processes “that have flexibility in starting raw materials, in-situ metrology and process controls for quality,” says the pre-solicitation announcement. It will work on fabrication of new materials that have properties such as tailored stiffness, electrical conductivity and cooling passages. It will try to improve deposition rates, surface finish, manufacturing throughput, process reliability and lower energy density. It will develop “additive manufacturing enterprise methodologies for enabling rapid design and functional fabrication of current and future DOD platforms through integration of digital designs with reverse engineering techniques using computational tools.” And it will try to develop methods to “rapidly and affordably qualify additive manufacturing processes.” The government hopes the institute will become self-sustaining in five years.

There was strong growth in demand in the electronics, solar and food and beverage industries last year, especially in Asia. “We expect the strong trend towards a significant shift in manufacturing footprint to Asia to be maintained,” said Per Vegard Nerseth, head of ABB Robotics in Switzerland. KUKA Roboter of Germany experienced a 40 percent increase in sales of robotic systems, with China being the most rapidly growing robot market in 2011. The industry is being driven by “global mega trends like sustainability, increasing industrialization and demographic shifts,” said KUKA CEO Manfred Gundel.
FANUC’s robotics division in Europe “achieved record booking levels,” said its president Olaf Gehrels. “FANUC Corp. Japan increased its robot production platform in 2011 to a staggering level of 60,000 units per year.” Ysakawa’s Germany based operations experienced a 40 percent increase in demand for its robotic systems, mainly among Tier 1 automotive companies. Company president Manfred Stern says “significant growth” is expected in the areas of packaging, picking and placing, assembly, material handling and medical and life sciences. Durr Systems of Germany sold 1,800 painting and sealing robots in 2011, up from between 500 to 700 in previous years.

For American robot producer Adept Technology, the U.S. market last year was driven by “the decision of many U.S. manufacturing companies to keep manufacturing at home by automating and, in some cases, bringing back manufacturing that had previously been sent overseas.” Nachi Robotic Systems’ U.S. operations experienced shipment growth of 80 percent worldwide. In North America, its sales were up by 70 percent due to improved strength of the automotive sector.

“There has been a lot more ‘Buy American’ feeling in the country,” says American Posts CEO William Feniger. “There is also fear among people [in retail] who are buying in this country that they need to make sure that they keep us alive and buy from us because if something would happen [to Chinese supply] then where are they going to buy these fence posts from? They buy a lot of them — a lot of them. They could put themselves in a corner that they don’t want to be in.” Buyers at Ace Hardware and Menards have embraced “Made in America” as a selling point. “In the last few years there is more of an emotional atmosphere among consumers who feel that they need to support the people who are making things in this country,” says Feniger. “It’s not overwhelming. It’s not a huge tidal
wave, but it’s more than it was six or eight years ago.”

Feniger says he understands the competitive nature of retail and why big box stores like Home Depot buy cheap products from China. “But one of the things I want them to understand is that if I hired 20 people, that when they leave work here on Friday afternoon and have yard work to do on the weekend, they are the ones who are going into Home Depot. When they are buying posts from overseas, the guy who makes those posts over in China is not walking into the Home Depot store and spending his paycheck. If I don’t hire those 20 people, that is 20 fewer people who will walk into an American store and buy something.”

The U.S. market for metal fence posts is between 20 million and 30 million posts per year. American Posts is now producing about 10,000 to 15,000 posts in an eight-hour shift, up from 2,000 to 2,500 in 2005. In 2011, the company produced more than six million fence
posts, accounting for 18 to 20 percent of the U.S. market. It’s goal for 2012 is to manufacture eight million posts, which it can do by adding a second shift and providing its customers with just-in-time delivery. Eventually, it hopes to supply 40 percent of the U. S. market. The Chinese make up the rest of the market. China’s domination of the U.S. market has been achieved through illegal trade practices, says Feniger.

“The thing that irks me the most is that I don’t mind competing and trying to be creative and work hard, but I find it despicable that our country has allowed the Chinese to manipulate their currency to the point where it makes me uncompetitive, and I hate that. That is one of my biggest beefs and we just sit back and let them do it.” When asked by Manufacturing & Technology News what he thinks of the Republican House of Representatives killing the currency reform bill that overwhelming passed the Senate,
Feniger replied: “I don’t care if there is a D or an R behind their names. The whole group in Washington is so disgusting. The idea that we allow China to manipulate their currency so that they can sell fence posts to Home Depot and make it impossible for me to compete is just disgusting. There is a hidden agenda [in Washington] that we don’t even know half the details why and probably don’t want to know.” Obama has done nothing to address China’s illegal industrial subsidies, incentives and currency practices and probably won’t, says Feniger. Mitt Romney says that he will confront China from day one of his presidency. But Obama made the same promise when he was campaigning four years ago through the Midwest. As president, why wouldn’t the same thing happen with Romney — reneging on his promises — given the geopolitical, economic and financial forces that would temper his actions toward China? “That could easily happen,” Feniger replies. “But I’m willing to roll the dice that he can make the change because I know one thing: If we put Obama back in
the White House, I am surely not going to see anything better than what I have seen in the past and it could get even worse because there will be no checks on him.” Feniger has no problem supporting Romney for president. “He’s committed to the idea that America
has to get back to making things and I think he’s a good businessman,” says Feniger. “Do I think he is a polished politician? No. I wish he was, but I believe he has the basics of a
good businessman. He has a track record of more successes than failures, which is really important in business. For the last couple of decades, we tried the ‘political’ candidate
and it hasn’t worked and it is not working. We’ve lost too many jobs and taken too many steps backwards. I’m willing to roll the dice and take a businessman and I’ll take
my shot with a businessman who maybe doesn’t have the political savvy that Obama has. You are not going to get me to look at Gingrich or Santorum either. I don’t care if
they are politically inclined and can talk in public. Their track record is terrible — their voting record is even worse and I don’t want more of the same.”

When Feniger, who has been in the steel service center industry for decades, purchased American Posts in 2005, the company was run as a mom-and-pop shop, producing on antiquated machinery with a laborintensive process. At the time, there were at least 10 other U.S. companies producing steel posts. But those companies were not able to make the investments to compete effectively with Chinese producers who were paying workers $5 a day, compared to $12 an hour in the United States. Unlike the other U.S. producers,
Feniger automated his line. “As we started to make that investment, we saw more and business available and it became something that we got more and more excited about as the market began to get more visible to us,” says Feniger. There is no reason for the Chinese to be competitive with American Posts, says Feniger. “I don’t want to
compete against any country that says they want to sell their product in the United States as a loss leader and they don’t care what they sell it for because the government is going
to subsidize them,” he says. “I can’t compete with that. But I can compete if they have to buy their steel like I do and make their product and roll form it, paint it and package
it the same way I do. Plus they have the freight costs of having to ship it here.”

What can other American companies that make basic products learn from American Posts? “Before someone just runs from a fight or gives up a battle, they need to look into what they are facing without the fear that it is being made overseas and you can’t compete so you quit,” says Feniger. “It takes a lot more investigating. It’s worth taking the time and effort to see what you are really competing against. Is it a fear that is really there? Or if you took your time and put your ingenuity to it, could you compete? People run from a fight because of the awe and aura over the last decade that because they are making it in China they can’t compete here in Toledo or Nashville. That is bull. In many
areas, we can compete and in many areas we can beat them.”

Advanced manufacturing is essential to innovation, jobs and exports, says the plan. Without an advanced manufacturing infrastructure, the United States is having a difficult
time rapidly introducing new products and new industries “that are most likely to ‘stick’ in the United States because they are hard to imitate,” says the NSTC. Advanced
manufacturing is essential to the U.S. military, intelligence community and homeland security agencies. “These impacts justify Congressional and executive branch attention to
Federal policies that affect advanced manufacturing,” says the plan, cochaired by some of the longest-serving government manufacturing executives.

The United States has either lost or is on the verge of losing a number of “vital” defense and national security technologies, the plan notes, listing a “sampling of specific
vulnerabilities” including aircraft landing gear; large rotor disks for turbines; rocket engine parts; missile launch systems; unmanned aerial and ground vehicles; nuclear power components; aircraft fuselages; orbital vehicles; network routing and switching; optical data transport; advanced power electronics; low cost composites; and transmission conductors.

“Currently, Germany, Korea and Japan each have more R&D intensive manufacturing sectors than the United States,” says the plan. Of particular concern is the growing
inability of American companies to produce American inventions. This gap has led to huge trade deficits in high-tech goods, amounting to $81 billion in 2010 and soaring
by 23 percent in 2011 to $99.3 billion. The government must implement a “robust innovation policy that would reduce the gap between R&D deployment and advanced
manufacturing innovations,” says the study. It must put in place a strategy to strengthen “the industrial commons,” whereby innovative firms are able to utilize the latest production technologies such as nanomaterial processing, additive
manufacturing, advanced robotics, “smart” manufacturing and green
chemistry to bring their new products to market. These advanced
manufacturing process technologies “must be refreshed through continual investment to keep the knowledge base and physical infrastructure at the leading edge of
technology,” says the plan. “It may be difficult for the firms that would benefit from them to make these investments individually since they cannot capture all of these benefits. Coordination of investments across firms is also subject to market failures.”

Other countries are making these investments to the benefit of their
own companies. Such investments “would make basic research investments
more productive for the economy,” says the strategy, which advocates the adoption of new policies with the following objectives:

• Accelerate investment in advanced manufacturing technology, especially by small- and mediumsized manufacturing firms;
• Improve the skills of the workforce needed for advanced manufacturing systems and make sure the educational system is producing people capable of designing highly complex systems such as electronics, 3-D printing and robotics;
• Create new regional government- industry-academic partnerships to accelerate investment and deployment of advanced manufacturing technologies. The National
Design Engineering and Manufacturing Consortium funded by the Economic Development Administration is an example;
• Coordinate federal investments in advanced materials, production technologies, advanced manufacturing processes, data and design;
• Increase total national investments in advanced manufacturing R&D through a more robust research and experimentation tax credit, additional R&D investments at NIST (including the proposed $21 million Advanced Manufacturing Technology Consortia program); DOE ($290 million — more than doubling the amount in 2012 for the newly created Advanced Manufacturing Office); and NSF ($39 million increase in investment for developing revolutionary manufacturing technologies in partnership with other federal agencies and the private sector).

The policy proposal “would address the full lifecycle of technology in order to provide a fertile innovation environment for advanced manufacturing,” says the plan located at www.whitehouse.gov/sites/default/files/microsites/ostp/iam_advancedmanufacturing_strategicplan_2012.pdf.

When asked by Manufacturing and Technology News if the 80 percent drop-off of manufacturing workers was caused by robotics, automation and high levels of productivity, virtually every GE person who responded said the same thing: No. The loss was due to offshore outsourcing. The lack of commitment to investment in U.S. manufacturing, innovation, new product development and renewal of the workforce demoralized Appliance Park. The dishwashers, refrigerators, ranges, washers and dryers were viewed as low tech,
commodity products with low margins and no future in a corporation that was flying high on GE Capital. Breaking the ice on the transformation is the GeoSpring water heater, the production of which has now moved from China to Louisville. It is the first of a series of product reintroductions at Appliance Park that will include ranges, refrigerators, washers, dryers and dishwashers. “It’s a super exciting time for us to see this factory change,” says Rich Calvaruso, the lean leader of GE’s appliance division. “It is a completely amazing thing to grow a new factory from the ground up.”

GeoSpring Water Heater–GE thinks it can corner a profitable share of the U.S. water heater market. There are 7.5 million residential water heaters sold in the United States every year, with 7 million for the replacement market and the remainder for new construction. Half of the U.S. market is for electric water heaters. GE’s water heater uses a high-efficiency heat pump to reduce yearly energy consumption from an average of $520 a year for a traditional electric unit (or 4,879 Kwh) to $195 per year (1,845 Kwh), a 62 percent savings that amounts to $325 per year. (A comparable natural gas unit consumes $315 of natural gas per year; an LP gas unit’s consumption is $595 per year). In moving production back to the United States, GE decided that every aspect of the water heater needed to be redesigned through a team approach under a lean planning system that included GE’s sales division, designers, product and process engineers, accountants, executives and workers. It included the involvement of plumbers, retailers and customers. Anybody involved was allowed to suggest improvements. “What this shows is what can happen when we all sit down and work together,” said GE International Union of Electrical Workers President Jerry Carney.

The design team moved the pressure relief value from the back of the tank to the front of the tank, making it easier to install. It reduced the unit’s weight by 11 pounds, making it a easier to handle. It reduced the overhead clearance so that it can fit in smaller spaces. It added color to the unit to appeal to customers as they shop. It added electronic controls so that it’s easy to know the exact temperature of the water, and simplify changing the temperature for vacation mode. It can be hooked up to the Internet or a smart grid and be controlled remotely by the customer or the local electric utility so that it can respond to time-of-use rates and demand management systems. GE sealed the system so that fan noise was greatly reduced. It reduced the number of parts, fasteners and joints by 20 percent and eliminated features that weren’t needed. In the process, it made the unit more affordable, reducing the retail price from $1,599 for the product made in China to $1,199 to $1,299 for the unit manufactured in Louisville. It added a 10-year warranty. Energy efficiency rebates from state and federal governments along with local utilities can provide buyers with up to $550 in tax credits.

The attendance of Secretary LaHood is a very strong indication that this event supports the future of the rail industry and its vital importance at the National and State level. As Secretary of  Transportation, LaHood leads an agency with more than 55,000 employees and a $70 billion budget that oversees the nation’s air, maritime and surface transportation system.

The “Next Generation Supply Chain Connectivity Forum” will be held on Feb. 8, 2012 at the Woodlake Hotel (formerly the Radisson) in Sacramento, CA. Various speakers from the U.S. Department of Commerce, the Federal Railroad Administration and CALTRANS will also participate in the event to bring together rail sector manufacturers/suppliers with key OEMs.

The Forum is for manufacturers who are interested in growing their business by considering opportunities in the rail industry supply chain. Panel Discussions for both traditional and potential new suppliers will take place followed by one-on-one meetings between OEMs and suppliers. This Forum is the result of a partnership between the U.S. Department of Transportation (DOT) and the U.S. Department of Commerce (DOC) to leverage existing agency capabilities to promote the development of a robust domestic supply-base to support intermodal transportation investment in the United States. This initiative is part of a broader opportunity of $782 million in grants that will pump new life into domestic manufacturing across the nation.

Former Apple CEO Steven Jobs told President Obama that his company indirectly employed 700,000 people in China, as opposed to about 30,000 (not including those who
work in Apple’s retail stores) in the United States. The company conducted 229 audits last year among its overseas parts and component suppliers, up from 127 in 2010, 102 in
2009 and 39 in 2007. It plans to do a lot more this year, hiring the Fair Labor Association to help conduct third-party audits using the association’s Code of Conduct performance
evaluation. The results of those audits will appear on the Fair Labor Association’s website.

Among the 229 audits Apple conducted in 2011, it found hundreds of violations. Only 38 percent of the facilities it audited were in compliance with Apple’s policies regarding  working hours. “At 90 facilities, more than half of the records we reviewed indicated that workers had worked more than six consecutive days at least once per month and 37 facilities lacked an adequate working day control system to ensure that workers took at least one day off in every seven days,” according to the Apple audit report. Only 69 percent were in compliance with paying appropriate wages and benefits, and 78 percent were in compliance with preventing involuntary labor.

The 27-page report, “Apple Supplier Responsibility 2012 Progress Report,” is located at http://images.apple.com/supplierresponsibility/pdf/Apple_SR_2012_Progress_Report.pdf.

Additional information is located at http://www.apple.com/supplierresponsibility/.

“We need the manufacturing sector to be the foundation for the future, as its strength or weakness has tremendous impact on job creation and the health of the overall economy,” says Hank Holzapfel, President of Manex. “Our goal is to do everything we can to help manufacturers compete globally while continuing to do business in California and employ highly-skilled workers in good paying jobs.”

In his keynote address at the summit, Harry Moser, Founder of the Reshoring Initiative, will describe the Initiative’s tools designed to help companies recognize the advantages of bringing manufacturing jobs back to the U.S. “World macro-economic trends, such as rapidly rising wages in China, suggest that U.S. manufacturers are or soon will be competitive for most products sold in the U.S. market,” says Mr. Moser. “The non-profit Reshoring Initiative provides free Total Cost of Ownership™ software that companies are starting to use to compare domestic to offshore sources, resulting in more U.S. jobs.”

Also presenting will be Bill Browne of Manex, who will reveal the latest resources for manufacturers and discuss why Lean Six Sigma and data-based decision making are no longer an option, and best practices are now a requirement. The morning session will also feature a panel discussion to include various local leaders and Northern California manufacturers.

The afternoon sessions include a panel discussion “Transition to Innovative New Processes and Products” and will feature local South Bay leaders, including panelists from Google, Mission College, and the Alliance of Chief Executives. The Summit will conclude with a presentation on Sustainable Manufacturing by UC Berkeley’s Laboratory for Manufacturing and Sustainability, and a session by Energy Commercialization on what companies need to do to assess their current status.

For more information and to register, go to: http://www.manexconsulting.com/events/santa-clara-manufacturing-summit

Inventory is one of the foundations of manufacturing, and historically, manufacturers have been stocking it in large quantities. Given the current economic situation, and manufacturers’ pursuit of providing more value to their customers, inventory levels need to be optimized. Having too much inventory causes numerous problems and incurs cost, while having low inventory could lead to the loss of sales.

Given the evolving habits of the price conscious customer and intense domestic and international competition, it is imperative for manufacturers to carefully assess inventory levels to be profitable. Inventory reduces a portion of the liquidity of any company, and as one manufacturer put it – “I would rather have money in the bank than money lying around on my warehouse shelves”.

Since the needs of all manufacturers and the requirements of various industries are unique, Manex uses a tailored Lean and Six Sigma tools to design and implement an inventory control system that will work optimally in the organization. We focus on the following types of inventory – raw materials, work in process, finished goods and obsolete materials.

We perform in-depth analysis of all the processes and procedures in place for inventory control and help develop new procedures as required. Among other things, we help manufacturers develop and implement:

• Robust raw materials ordering processes
• Safety stock levels, re-order points and order quantities for raw materials
• New production scheduling methodologies to optimize WIP
• Improved manufacturing methodologies to meet demanding customer lead time requirements
• Stocking levels for finished goods
• Kanban systems to manage raw materials and finished goods
• Plans for dispositioning obsolete materials and excess inventory

For more information on our inventory management solutions, contact us at info@manexconsulting.com.