There has been quite a bit of discussion out there about American manufacturers bringing business and jobs back to the United States. I’ve written about this before because I have an especial interest in American manufacturing and small business in particular. Before we either break out the champagne or lock ourselves back into the closet, let’s look at a few things:

First, manufacturing data itself. Now, the US government puts out all sorts of stuff, but as a former purchasing person (ask me about slit sheet coil sometime), I think that going right to the folks who are on the shop floor (as collected by the Institute of Supply Management) is a good way to get the feel for what is happening out there:

“ISM’s Employment Index registered 58.6 percent in July, which is 0.8 percentage point higher than the 57.8 percent reported in June. This is the eighth consecutive month of growth in manufacturing employment. An Employment Index above 49.8 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) data on manufacturing employment.

Ten of the 18 manufacturing industries reported growth in employment in July in the following order: Textile Mills; Paper Products; Computer & Electronic Products; Miscellaneous Manufacturing; Transportation Equipment; Fabricated Metal Products; Primary Metals; Machinery; Electrical Equipment, Appliances & Components; and Chemical Products. The two industries reporting a decrease in employment during July are: Nonmetallic Mineral Products; and Food, Beverage & Tobacco Products.” July ISM Report

OK, so over all, there is continuing (perhaps not boom times, but regular increases) improvement in manufacturing employment. And one of the things here to note – it’s THEIR companies hiring THEIR employees. Companies hiring temps and contractors don’t show employment increases – those people show up as increases on payrolls for people like Manpower: They might be doing manufacturing work, but they show up under ‘service’ because that is what companies such as Manpower do. So, if you have actual manufacturing employee increases, these are people who are right on the company payrolls.

Additionally, companies have increasingly lost patience with the whole Chinese manufacturing experience: the length of time from product inception to actual production; the supply chain; the shipping time (and now the increases in costs for shipping per se and shipping containers themselves); the problems with quality; the problems with intellectual property copying and theft.

“With new tariffs, taxes, and employee salary and benefits laws that took effect [in China] January 1, 2009, many OEMs have had second and even third thoughts about keeping manufacturing in China. Added up, China’s manufacturing advantage as an [Lowest Cost Country] only amounts to about 5 percent. Given the other risks of manufacturing in China, is it really worth it?”
Insourcing

Manufacturing’s moving production back to the United States is actually not a new thing – manufacturing groups have been monitoring this since 2008, but the energy toward the United States is growing.

Manufacturers cited in the above article and where they are going:
Hy-Lite Blocks: Architectural blocks. China to Pensacola, Florida (their home state)
Farouk Systems: Professional level hair dryers. China to Texas (their home state)
Diagnostic Devices: Blood glucose monitoring systems. China to North Carolina (their home state)

And, this week:
“A small but growing band of U.S. manufacturers — including giants such as General Electric (GE), NCR (NCR) and Caterpillar (CAT)— are turning the seemingly inexorable offshoring movement on its head, bringing some production to the U.S. from far-flung locations such as China. Others that were buying components overseas are switching to U.S. suppliers.” Manufacturing coming back

And where are they going?
Ford Motor. Parts from Japan, China, and Mexico to US plants (but again, these are going to plants where Marcy reminds me that they already have the new UAW-negotiated 2-tier rate plan).

GE: High Tech water heaters. From China to a new plant they built in Lousiville, KY where employees had agreed to lower their wages from $22 an hour to $13 an hour. GE also got $25 million in state and local incentives and tax credits.

NCR: ATMs. From China, India and Hungary to a brand new plant to be built in Columbus, GA.

Sleek Audio. High end earphones. From China to Florida.

There also is, believe it or not, a ‘buy local’ movement in manufacturing, just like the movement for local foods and services:
"Onshoring also has been a boon for suppliers. Three supplier trade groups joined forces last year for a marketing campaign to push manufacturers to bring production back to the U.S.
"I’d like to reduce the amount that’s offshored by 30% to 40%," says Harry Moser, a former machine tool executive who conceived the effort. At a May trade fair in Irvine, Calif., 18 of 28 manufacturers that attended asked suppliers for quotes on purchases they would like to switch to U.S. sources.
Sales for vehicle gear supplier Morey are up 70% over last year as makers and fleet managers shift purchases to the U.S., says Vice President Taymur Ahmad.
Morey, which makes devices that track vehicle location, speed and maintenance data, has hired 110 employees at its Woodridge, Ill., plant since October.
"I’m getting business that’s unprecedented," Ahmad says. "And it’s all from customers that are looking to buy locally."

And, to turn the story on its head, here is coverage from India: “Monty Hamilton, chief executive officer of Atlanta-based Rural Outsourcing Inc, is a darling of the American media these days. His company is setting up units in smaller towns in the US, hiring low-cost labour (from those laid off during the recession) and vying for contracts or outsourcing jobs from bigger companies, much the same way call centres and BPOs in Bangalore and Gurgaon have been doing all these years… Hamilton, while opening a new office location in downtown Jonesboro in June, said: “Our 300% annual growth rate is indicative of the market’s appetite for a low-cost, high-quality on-shore alternative to the traditional offshore India operations… Many experts say that the opportunities emerging in the US after the recession will be immense and both American and non-American companies will get to share those opportunities. Indian companies will have to co-exist with a new breed of US firms as entrepreneurship gets a leg up in a new America. Afterall, US onshoring could even become the peg that is required to survive in a world where offshoring starts losing its sheen and the advantages of labour and time arbitrage are taken away. It’s time for Indian IT services majors to start innovating.” Indian view of US onshoring in IT

In closing, I’d like readers to note two movements in this. You really have two factors in terms of why and where companies are moving business back into the US:
First, you have people who through their offshore experience have realized that the farther away production is, the less control you have over every aspect. These people have all not only moved production back to the United States; they have moved it as close physically to themselves as they possibly can get it. So, if you have a manufacturer in your area who has offshored production and want them to bring it back to the US, you have a better case for bringing it right to your hometown than any place else, especially if the item is high end, high tech, or they have a lot invested in the development of the technology. If you can help them find grants for new technology and training for the facility, that’s the cherry on the cake.

Second, you have people who want to move production to the US but are going to squeeze down the workers and communities as much as possible to get the jobs, a brand new plant with new technology. You notice where these jobs and plants are going: Arkansas, Kentucky, Georgia. Right to Work States. These jobs, especially the manufacturing jobs, are not going to go to places like New York, Pennsylvania, Ohio and so on. Even if a state made a huge push, with incentive money, etc. to attract them, these are NOT Right to Work states. As I have stated in my diaries many many times, the very first item on the ‘where do we wanna go’ check list for companies such as these is NOT ‘availability of rail’ or ‘number of machinists in the community’ – it’s “Is this a Right to Work State?” If the answer is no, that state is knocked out immediately.

So here is a map showing Right to Work (aka: Hostile to Unions, aka: Higher Chance of Dying in a Job Related Accident States) in bright blue:Right to Work States

If you, like Aunt Toby, live in a non-right to work state, what do you do? Go back to my comment above labeled ‘First” – you have to work with the companies that you’ve still got in your state and in your community. If they did not want to be in your state, they’d have pulled up stakes and gone to a Right to Work state already. So, you have one advantage: The Wanna Factor. They ‘Wanna’ be where you are. Be a gardener: Grow your own.