Reshoring helps drive rise in Ohio manufacturing

While American companies have brought jobs back to the U.S. from overseas, Maan Said brought along a few additional items too big to fit in an airplane seat.

The president of Polymera, Inc.  helped relocate an entire polymer factory – nearly 850,000 pounds of equipment – from the Middle East into Licking County in 2011.

"Everything was put in place overseas, the global financial crisis took place and the plant was mothballed," said Said, who co-purchased the assets that had just been offshored. "We thought it was better to bring it back to the U.S...Nobody else here was doing what we were doing."

After ten straight years of decline, Ohio manufacturing employment increased for the second straight year in 2012 (5.4% two-year growth). Part of the reason is the emerging trend to bring production back to the U.S. that had been taken overseas – known as "reshoring".

In February, Ford Motor Company announced plans to move engine production to Brook Park from Spain -- adding 450 new jobs to a once-shuttered plant. Weeks later Cleveland hosted the first regional summit wholly dedicated to reshoring, attracting 50 participants ranging from manufacturers to an investment firm looking to capitalize on the trend.

Former Cleveland-area resident Harry Moser, founder of the national Reshoring Initiative, has been the movement's chief evangelist since retiring as president of an Illinois machine tool producer in 2010. He joked his start in public crusades began with helping defeat a Cuyahoga County city's income tax proposal.

"I showed the city they had miscalculated the revenue needed from the tax increase. I'm an analytical kind of guy," he said.

True to form, Moser developed an online tool to help companies understand the true cost of offshoring according to 36 different factors. The free Total Cost of Ownership Estimator aggregates all cost and risk factors into one number for more objective decision-making beyond lower overseas labor costs.

"The reason it's coming back is increasing overseas wage rates, long delivery times and loss of intellectual property," said Moser.  Other key cost factors in the tool include: on-site inventories, prototyping, travel, rework, quality and even brand image from manufacturing domestically.

Tool user data suggests that 25% of what has been offshored should come back if companies use the TCO estimate instead of base price for sourcing decisions. Moser reports that 50,000 jobs have been brought back since 2010, such as the following recent Ohio examples:

• Suarez Manufacturing Industries of North Canton – More than 300 jobs from China
• Horton Archery of Kent – 20 jobs from China
• Freeman Schwabe Machinery of Cincinnati – 17 jobs from Taiwan
• Whirlpool Corporation's Greenville plant – 25 jobs from China

Moser said that given its current fiscal climate and high concentration of high-automation industries that minimize required labor, Ohio has been one of the top-benefiting states from reshoring.

As a raw material supplier, Said noted the primary driver for Polymera's reshoring was customer proximity. "It can take 4-5 weeks by the time it clears the docks overseas," he said. He added several reasons for choosing Ohio: centralized proximity to customers/ suppliers, the state's strong polymer presence, available industrial space and abundant skilled workers. He noted three of the key persons he recruited for the operation were already based in Ohio.

Polymera is the country's only compounder servicing the wood and natural fiber polymer composites (WPC) industry. Said noted sales are doubling every quarter, and he expects to double the plant's workforce of 15 by next spring.

Moser noted many attending the Cleveland summit were contract manufacturers not directly involved in reshoring, but nonetheless looking to benefit from the trend. Arnold Gauge Company, Inc., a Cincinnati-area small manufacturer of high-precision measuring gauges, played a key role in helping a U.S.-based Tier-2 automotive manufacturer win a recent bid to reshore component manufacturing for Ford engines.

Company President Michael Bruns noted the Tier-1 supplier had been struggling with quality issues from an overseas supplier, and put a new contract out requiring that all 3 million anticipated parts needed checked for proper tolerances.

"Our customer was working with a distributor and looking to coordinate measuring machines (CMM), but you can't check 3 million parts a year with a CMM," said Bruns. So on the distributor's referral, Arnold proposed design of a machine to check a part every six seconds and reject bad parts.

"We invented the solution…The quality guarantee helped them get the contract with the Tier-1," said Bruns, adding this contract has created new jobs within his plant.

Moser, Bruns and Said offered several tips for Ohio companies and communities looking to jump on the reshoring bandwagon:

• Networking. Moser proposed the economic developers organize state/regional purchasing fairs to help local suppliers replace offshore sources. Bruns said he is active with several industry groups, such as the Techsolve Manufacturing Extension Partnership.
• Efficient design and flexibility on the plant floor. "Companies that can turn the battleship quickly have the advantage," said Moser. Bruns, who took over the family business after a career in information technology, likewise provided a strong design and system integration focus to the business.
• Liberality in partnerships. "I am a big believer in 'co-opetition,'" said Bruns. "On any project, you may be a supplier, a vendor, a customer, a competitor or different permutations of each."

Moser said the most important controllable factor to help drive reshoring is developing the skilled workforce to operate and maintain the highly automated technology. He laments the public perception, often fed by the government itself, that formal education is the only pathway to prosperity.

"They say education pays, but they should say education and training pays," said Moser, who advocates for a form of federal student loans for apprentices that a company would repay as long as the worker is retained.

Despite the buzz about reshoring, offshoring does continue. For example, the last piece of Hoover production in Stark County – the Canton bag plant – was outsourced to China at the close of 2012 with a loss of 17 jobs. Another 750 jobs were moved to Texas and Mexico when the county's main Hoover production facilities were closed in 2007.

Yet as one industry era closes, another is beginning in the county with the shale gas boom.

"We're doing an awful lot to help businesses develop into Utica that will be of great benefit to manufacturing," said David C. Kaminski, Director of Energy and Public Affairs for the Canton Regional Chamber of Commerce. "It is a plentiful and fairly inexpensive source of energy for manufacturing that will mean a lot of northeast Ohio."

Tom Prendergast is a Mansfield-based freelance journalist. He has significant experience in public policy, higher education and economic development issues.