‘More than half of U.S. executives at manufacturers with sales of at least $1-billion (U.S.) say they are planning to repatriate some production to the United States from China, according to an August survey by Boston Consulting Group. Respondents cited factors such as proximity to customers, product quality and lower transportation costs, competitive wage rates and skilled labour.’ Barrie McKenna, Ottawa — The Globe and Mail- Published, Oct. 06, 2013
By Larry Cote, President Lean Advisors Inc
In the past few years there have been rumblings from the North American manufacturing community about the desire to return some of their manufacturing to North America.
There have been many changes in the economics and the markets since the early 90s both here and in Asia (China specifically). Some of those changes are that China’s economic environment has evolved and grown. As it happens in every economy, growth and competition puts pressures on the cost of doing business, the infrastructure of transportation/logistics of shipping higher volumes and more products becomes stressed.
In the meantime while this evolution has been happening in China, North American productivity has improved, especially in the US through technology and advancements in process thinking. All these factors (and many more) have caused CEOs of manufacturing companies to reassess the decisions that they made a decade or two ago to move production overseas. They are realizing that it may be more profitable now to do some of their manufacturing here on this continent.
This opportunity should not be missed by Canada or the US.
Management teams must first recognize that they can be competitive in quality, cost and speed of supply. Once this realization is made then they quickly must re-examine the importance of dramatically and quickly transforming their current methods and thinking – both culturally (value thinking) and processing. We must not kid ourselves, this opportunity to take advantage of ‘repatriation’ or ‘re-shoring’ will not last long. CEOs are constantly searching for the next place to invest, where they can drive profits and a better ROI.
The one solution that is being touted for attracting manufacturing back to North American soil is to adopt the latest technology as well as investing in innovation. This is a simple solution that on the surface is an obvious statement to make. The reality though, is that over the past decade, our margins have been squeezed so tight that survival has been the primary focus. In this scenario, very little money can be freed up to buy new technology let alone spend time on research and innovation. So, what do we do??
Our belief is that expensive technology should not be the first step in becoming attractive to foreign business. Technology should be the second step in turning around your company. “Leaning out” your existing processes is the first step and will give you the knowledge and understanding of what technology you really require and should invest in.
Initially, North American organizations should be focused on ensuring their current processes are ‘waste’ free. Without this customer focus of ‘value’ as the major driver of the corporate strategy, we will miss the opportunity to attract the manufacturing industry we lost to foreign countries over the past few decades. This “leaning out” will also give organizations the profits they need to move to the next phase, which is purchasing new technology.
I know this sounds like the same old preaching Lean has been teaching since the mid 90s, but ‘off-shoring’ of manufacturing began well before Lean could have an impact. Now we’ve had the past 15 years to become experts – let’s call the last 15 years ‘practice time’ – and we are ready to actually demonstrate to the world that North America is the place to invest if you want the best quality, service and cost.
Manufacturing is the backbone of our economy. Let’s not miss this small window of opportunity to bring back some of the manufacturing we lost and even to develop new opportunities for growth. We have been given a second chance, let’s not miss out!!