I recently interviewed Harry Moser, Founder of the Reshoring Initiative. He discussed how to make America's supply chains more dynamic and innovative. Harry’s background is in manufacturing. His family for several generations had been in manufacturing. Harry’s grandfather was a foreman and system superintendent at Singer Sewing Machine, a huge factory in Elizabeth New Jersey. At one time it was the largest building in the world. The building is no longer there and the products are made elsewhere. Harry that happening and felt he needed to do something to reverse that trend and bring manufacturing back to the US. That was the motivation for the initiative.
Harry has a BS and MS in Engineering from MIT and an MBA from the University of Chicago. Harry ran machine tool companies for roughly 35 years, most recently AgieCharmilles LLC which makes EDM and high speed milling machines.
How to make America’s Supply Chains more dynamic and innovative
This can be broken down into two or three topics. Dynamic suggests fast response. You get faster response with shorter supply chains with quicker delivery times, JIT delivery etc. The things which are supposed to be driving the supply chain today, except perhaps price, are enabled by re-shoring or re-evaluating the trade-offs between off-shoring and re-shoring. By re-shoring you get faster more dynamic response. Smaller inventories allow the customer to make decisions more rapidly.
In terms of innovation, there has been a lot of study, mostly notably by professors Gary P. Pisano and Willy C. Shih from Harvard Business School, showing that when you separate manufacturing from engineering by off-shoring your manufacturing but keeping your engineering and marketing on-shore innovation declines because the marketing and engineering people need to talk to the tool & die maker or foreman who is half way around the world and who doesn’t speak your language. The ability to make that innovation efficiently is reduced.
These professors have talked about this. The people at MIT, the defense department, etc have also discussed how you cannot separate the two and still be an innovation country, which everyone says we are supposed to be.
Harry would add that another item about supply chains is stability. We have seen the impact of natural disasters such as in Japan and the volcanoes in Europe which disrupted air freight. We have seen political instability in the Middle East. Obviously, these things are not consistent with the stability or sustainability of the supply chain. Harry read one article where an economics professor suggested that the long supply chains actually helped cause the great recession we recently went through.
This is because US companies would have extended supply chains with months of inventory in the pipeline. When orders were reduced the inventory in the supply chain suddenly went up from 3 months to 6 months, for example. As a result they stopped ordering from all of their vendors in order to get their turns right and their balance sheets to be ok. According to the professor who wrote this article it was a major cause of the recent great recessions. By having the long supply chain you make it less stable for yourself as well as for everyone around you in your culture.
Small suppliers providing innovation to large multinationals
Obviously they are here and can cluster with the big companies. Professor Michael Porter at Harvard Business School writes a lot about clustering and how when a company has its vendors, suppliers, local universities etc, all working physically close together it is much more efficient and innovative.
Harry recommends to the smaller companies to use this argument to convince the big companies that even if their price may not be as good as in Asia, they should look at the total cost of ownership. This could convince the big company to source locally and get those supply chain benefits from the local sourcing.
Large firms reaching out to small suppliers
First they need to be willing to do so. Large firms need to re-evaluate their sourcing. Currently, big companies tend to bonus their supply chain managers on price reduction. Instead, they should bonus them on total cost of ownership reduction. If they did this the supply chain managers would be more willing to look to domestic suppliers who may not have the best price but has a superior total cost of ownership.
One company Harry has worked closely with is Morey Corp in Woodridge IL. They produce printed circuit boards and telematics which they sell to big companies like Caterpillar and John Deer. They give an example of a component they were buying from China. They had a quality problem and had to bring the product back for quality reasons and to let the customer see that they were taking action to overcome the problem. When they brought the sourcing from China back to a local supplier they reduced their inventory by a factor of 18!
This is the kind of economic benefits which can outweigh any price differential between the off-shore source and the domestic source.
In addition, Harry is working on the Reshoring Initiative which has a library of 100 articles with different cases about re-shoring. There will soon be 200 articles available. Companies can go in and see how their competitors or others in their industry have benefited from re-shoring.
If anyone has any re-shoring cases where they have successfully re-shored Harry would love to hear from you. If anyone needs help there is a total cost of ownership calculator on the website. Harry can also be emailed directly at Harry.Moser (at) Comcast.net Harry’s organization is a non-profit and they don’t charge anything for the service because they believe it is in the user’s interest and the countries interest.
About Harry Moser