'Reshoring' trend grows, moving manufacturing jobs back home
Ian Sadler's company makes steel rolls that keep jobs in United States, he says.
His company, MCC International Inc. in Cecil, is one of a growing group of companies that are moving production and jobs back to the United States or keeping jobs here instead of sending them overseas.
Called “onshoring,” “reshoring,” or just plain “outsoucing,” depending on the perspective, up to 50,000 jobs returned to the United States during the past three years by one estimate. Some experts downplay the trend, saying it is nothing more than the normal back-and-forth flow of global commerce.
“We're very much a Pittsburgh, Rust Belt-type of company — a foundry and machine shop. Many of our kind are out of business,” says Sadler, MCC's chief executive. “Most of our competition comes from overseas. If we were not here, our customers would have to buy overseas.”
The company, formerly Miller Centrifugal Casting Co., makes hardened steel rolls that enable U.S. Steel Corp., Nucor Corp., Gerdau of Brazil and others to bend flat strips of steel into round tubing used to drill natural gas and oil wells.
MCC has 58 employees, up from 47 since the 2008 recession. It commands a 75 to 80 percent share of the market for its specialty rolls.
The onshoring trend, according to some, is adding manufacturing jobs because companies discovered that customer services such as design and engineering and costs such as shipping are as important to the bottom line as low labor costs.
Behemoths such as General Electric Co., Wal-Mart Corp. and Apple Inc. recently announced reshoring moves.
Back and forth
In the past three years, 50,000 jobs returned to American shores, says Harry Moser, a v manufacturing executive who founded the Reshoring Initiative in Chicago, which works with companies to move jobs back.
He says companies that decide to move jobs oversees do so without considering factors such as quality, political instability and protection of intellectual property.
“Approximately 60 percent of companies make sourcing and investing decisions based on labor rates ... ignoring 20 percent or more of the total cost,” Moser says. “Multi-national corporations far too often do not see past a low price to reveal a much higher total cost.”
Whether “onshoring,” “reshoring,” or “outsoucing,” is the right term for the trend, Moser said, “Any company that produces anything has the alternative to do it overseas. Keeping it here instead of sending it there to be made does us as much good as bringing it back.”
Labor cost advantages in China are declining, he says, making other higher costs of doing business there important.
He cites a 2011 study by the Boston Consulting Group that predicts that by 2015 the United States will “experience a manufacturing renaissance as the wage gap with China shrinks.”
If the Chinese wage trend continues, 1 million manufacturing jobs could return to the United States by 2015, the study said.
Columbia University professor of economics and law Jagdish Bhaqwati thinks other factors are responsible.
“The reality of onshoring is it's simply a macro-economic effect” of monetary policy the Federal Reserve is pursuing, Bhaqwati says, noting that printing money reduces the value of the dollar against other currencies.
“When the dollar goes down, we start exporting in a massive way,” Bhaqwati said.
Over the next five or 10 years, international trade will swing from continent to continent. As labor costs in China rise, manufacturering will move to Thailand, Vietnam or India — “if they can get their act together,” he said.
“Nobody knows who will win. ... The concept of onshoring is a crazy way to look at these things.”
Like many of its former competitors, MCC International experienced economic hard times before emerging in a position of strength.
The company was started in 1957 by William H. Miller, who built it from a one-man operation using a patented centrifugal casting and machining process that can make complex, irregular shaped rolls for tubing, structural shapes and beams, bar and rod. It does not make rolls that steel mills use to make flat-rolled steel automobiles and refrigerators.
Miller retired in 1998, selling the company to Acutus Gladwin Industries Inc. of Coraopolis, a steel mill repair and rebuilding company. The declining steel industry forced AGI into Chapter 11 bankruptcy in 2001; Miller was sold in an auction to MCC Holdings LLC in 2002. The current MCC International was formed with its sale to Austrian-based roll manufacturer Eisenwerk Sulzau-Werfen in 2009.
“Many years ago, there were a dozen rollmakers in the United States” that competed in the specialty roll market, Sadler says. “There's been a dramatic contraction,” because of a decline in customer orders. “The market is getting smaller all the time as mills become more efficient.”
Shipping costs are a factor in keeping business in the United States, Sadler says: “We can beat on delivery because of delays from overseas.”
He declined to provide sales figures, saying MCC will return to pre-recession levels this year.
Quality and the value of the American dollar are top reasons that Retriever Communications Inc. of Sydney, Australia, outsources jobs to the United States, said CEO Mary Brittian-White.
Retriever is a software developer that produces smartphone applications for companies ranging from Fosters Beer to Otis Elevators and Emerson Power. Brittian-White said her company is the largest producer of mobile apps for business in the Asian-Pacific market with customers in 32 countries.
For Otis, Retriever makes an app for service personnel who inspect elevators, enabling them to easily record and report their results.
To expand in the United States, Retriever recently completed an outsourcing deal with Rural Sourcing Inc. of Jonesboro, Ark., which will produce Retriever's software.
“We've been training the people who will be living in Jonesboro. They are stable; their clarity of communications skills is a cultural fit for us, and their ability to understand the same ideas has been very important.”
Companies in Australia usually send such work to India or China, she said, but there is high turnover among Indian workers who “often leave for a better offer.” And their “communication is somewhat challenged,” Brittian-White says.
“Finally, it's the Amercian dollar: it's economical for us to source in the U.S.,” she says. In Australia, a senior programmer makes about $100,000. At Rural Sourcing, the difference is about 30 percent.
“America is an amazingly economical place to do business,” Brittian-White says.