Harry Moser’s Reshoring Initiative measures the degree to which U.S. companies are reshoring jobs and attracting foreign direct investment (FDI). With interest and activity heightened from the pandemic, trade wars, and other factors, I reached out for an update.
As with any conversation today about reshoring manufacturing jobs, we talked extensively about China, and a troubling undercurrent that may profoundly affect America’s industrial future.
CompanyWeek: Your 2020 final reshoring numbers are out, and the data indicates, “Reshoring and FDI job announcements for 2020 were 160,649, bringing the total jobs announced since 2010 to over 1 million (1,057,054).” Put those numbers in context for us?
Harry Moser: We track reshoring which is done by U.S. companies, and FDI — foreign direct investment — which is done by foreign-headquartered companies, and we typically report on the total of the two trends. In 2010, the total reshoring that year was 6,000 [jobs], and there was a continuous uptrend until 2017, which was the peak year so far, with about 185,000 jobs driven that year by business enthusiasm for the tax and regulatory reform. And then things fell off in 2018 and 2019, primarily due to the trade war. Companies didn’t know what the rules were going to be, what tariffs were going to apply to what products, from what countries, for how many years, and they said, “Let’s wait and see what happens.”
Then, in 2020, we had COVID, and reshoring surged dramatically. The total in 2020 was about 160,000 jobs, the second highest on record. So to have that happen during a pandemic was incredibly good, and the fact that reshoring was so strong, shows that companies are taking care of “home.” They realize — for U.S. companies at least — that their main market is still the U.S., and therefore they’re putting their investments in the U.S., where FDI has of course slowed down.
From a different perspective, this is the first time that reshoring has been stronger than FDI in about the last seven or eight years. A million jobs have been announced, and given that it will take a year or two from the announcement until the hires are actually made, we think that conservatively, 700,000 or so jobs have actually been created. To put that in perspective, that’s more than the actual employment increase since 2010, meaning that if we hadn’t had the reshoring, manufacturing employment would have gone down instead of up since 2010, and the 700,000 is about 6 percent of total manufacturing employment.
CW: So, what does 2021 look like? It would seem that, given the disruptions in the supply chain companies are experiencing, we’d see an acceleration in the trend?
HM: Our forecast is for 200,000 total jobs in 2021, the reason being that basic driving factors are still in place: companies are still very much aware of COVID, Chinese wages continue to rise — about a week ago it was announced China’s year-over-year consumer price increase was about nine percent — and their business costs continue to go up dramatically, so they are somewhat less competitive overall.
There’s also significant talk about “decoupling.” One of the top China experts [in Asia], Eamon McKiney, believes that China is so mad at the U.S. — because of Trump, because of Taiwan, Huawei and other things — that China, at some point in time, will not allow any of its companies to ship anything to the U.S. They will totally decouple. I’ve heard other experts echo this sentiment, maybe not as strong a view, but obviously, if it happens, there would be a lot of reshoring happening very quickly!
But even the possibility it could happen, that companies could be totally cut off from their Chinese sources, not in two years but bam, like that, should be enough to get companies to pull back the most important, hardest to replace, the most critical items here, but if not here, then Mexico or someone else they can count on.
CW: On the other hand, that seems to run counter to China’s demographic challenge, that China has to create millions of jobs each year to continue to support middle class growth. Many of those jobs are in manufacturing companies making products for American brands.
HM: I would not agree with all of that. Actually China’s working age population, say 18 to 65, is dropping at the rate of about three million per year. Why? Because of the one-child policy that went into place, what, maybe 40 years ago? Even though they’ve relaxed that policy, today the Chinese are saying, “Life’s good with one child! We’re not going to have three or four kids.” A lot has been written about the question, “Will China become rich before it gets too old?” and the demographics, the increase of the over-65 population, is frightening for them. Increasingly, there will be fewer people to replace the retiring population.
What they really need to do — obviously they shouldn’t cut us off completely — is to get their own people to consume more. They save, roughly, 40 percent of their income where Americans normally save 3 or 4 percent of their income. That’s why the Chinese have so much money to invest in factories, in highways, in everything else. They need to get their population to spend more, to become the consumers that Americans are, and absorb that extra capacity they’re shipping to the U.S. Conversely, Americans need to work more and save more, and create the productive capacity that we’re now getting from China.
CW: Just to stay on that point. It does seem, though, it would be a bit of a “cut your nose off to spite your face” approach. Decoupling would force the U.S. to strengthen its industrial base. The U.S. would become a more capable industrial competitor and global threat to China.
Moving on: Do you see, as others do, the entry of China into the WTO as a low-water mark for U.S. manufacturing? Can we coexist with China as an equal trading partner?
HM: Under the current terms of trade, we cannot coexist with almost anybody. The U.S. has a trade deficit with nine of its top 10 trading partners. The exception is the U.K., which is a basket case for manufacturing, relative to its glorious manufacturing past, and the U.S. has followed the same decline.
If you look at what China did, as they grew, they produced products that otherwise would have been produced in Mexico, in Taiwan, South Korea, Japan, India, Malaysia, wherever. But China invested the most, they were the hardest working, bid the lowest prices, whatever, and they got the contracts. Right now we have a $900 billion trade deficit. If China did not exist at all, I still think we’d have a $750 billion trade deficit!
All these countries have industrial policies that combine things like currency, taxes, training and education, investment in research and facilities, et cetera. We don’t. I call it a “de-industrialization” policy. If you want to destroy your manufacturing, you’d do what we do: Every poor country you want to help, you’d give them favored-nation status to import products to the U.S. with lower duties than they give us; you’d spend billions protecting the rest of the world from pirates and terrorism; you’d allow your universities to flourish in liberal arts and your skilled workforce to decline; and you wouldn’t have a value-added tax to protect your key industries. If you want manufacturing to disappear, that’s what you’d do. And we’ve done that.
CW: Well said. How do the numerous recent initiatives strike you — legislation in the Senate and reference to a new industrial policy?
HM: I refer to them as “the Biden supply-chain effort.” And I call those things “tourniquets,” because our country has ignored these things for so long, because we’re in such a dangerous place of losing key industries, it’s certainly necessary to make these investments at a national level, and 10 years from now will be too late.
On the other hand, it’s not clear that you can save the patient that way.
CW: How so?
HM: The simplest thing to understand is chips. Taiwan Semiconductor is talking about one big chip plant in the U.S. Intel is talking about two, and the U.S. government is going to subsidize a few more, and soon we’ll be making two or three times as many chips as we do now. But the cost of making them, no matter the subsidies of the factories, will be higher because of higher labor costs here than in China or Taiwan; the costs of building the factories will be higher. So you’re going to have chips that are more expensively made here than made there.
Then, who’s going to consume the chips? Where do the chips go? Into cell phones, televisions, game boxes, servers, whatever — and almost all those things are made in China! We’ll be a high-cost producer of chips, dependent on China to buy all the excess chips above and beyond what we can consume. So instead of depending on them for chips, we’re going to depend on them being a customer for our chips.
My conclusion is that yes, we have to invest in chips, you can’t just drop out of that game, but we need to make the U.S. competitive by currency, by skilled workforce, by VAT, and motivate companies here to start making the products to consume the chips. Otherwise, we won’t be in much better shape than we are today.
Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek
Manufacturing is hard. Long live Manufacturing!
/in General/by Bart TaylorGreatness never comes easy.
The adage has never been more true for the stellar list of companies gathered last week in Denver, where winners of the 2021 Colorado Manufacturing Awards accepted trophies in person after a virtual “winners reveal” in April. Smiles, and a welcome sense of normalcy, displaced months of uncertainty and at times frustration, for one beautiful fall evening.
Yet comments from the CMA winners were uniformly blunt: Today, manufacturing is hard. Workforce and supply-chain challenges top the list — made worse by COVID-19. And for these companies, all flashing industry-leading attributes, recent headwinds only add to what still is a business culture that tilts away from manufacturing.
Their journey has clearly made success that much sweeter, though, and to a person, the companies and people in the CMA spotlight would be doing nothing else. A love of manufacturing runs deep in this group.
Others should be less sanguine. The blunt message from manufacturers here only works to emphasize a harsh truth: The consequences of abandoning U.S. manufacturing are coming home to roost, and it’s a sour symphony. The less we make here, the harder it is for companies to find employees, as products made for us by others languish in containers off the coast of California and other places. The number of vessels docked offshore seems to increase at the same rate as America’s trade imbalance — that again has reached record levels.
Many in business see it differently. Vocal, influential voices blame an inadequate supply and logistical network, not a lack of domestic manufacturing, for current disruptions. Others cite the inevitability of a service economy and downplay the importance of where products are made.
I’ve had a friendly debate going with Brian Lewandowski of the CU Leeds School of Business the past few years that goes something like this: Brian thinks I exaggerate the importance of the manufacturing economy in Colorado — and the U.S. for that matter. Even as I write this, Brian may be at work disproving my hypothesis — that the outcomes weighing on our economy have arisen as manufacturing employment has declined.
But if there’s no one to hire, it may not matter. The struggles of CMA winners to find qualified employees is more of the same. The sector is laboring through an employment crisis. To call it anything less is a dodge.
It begs the question we’ll address this fall in subsequent columns: What’s being done?
In the interim, congratulations to the people and companies in attendance last week to celebrate manufacturing — and look forward to early November when we open nominations for the 2022 Colorado Manufacturing Awards.
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
2021 CMA Winners Recap:
Business Innovation/COVID Response | Titan Robotics, Colorado Springs
Outstanding Consumer Brand | Moots, Steamboat Springs
Outstanding Craft Distiller | Storm King Distilling, Montrose
Food Brand/Co-Packer of the Year | Motherlode Co-Packing, Hudson
Cannabis Manufacturer of the Year | Medically Correct, Denver
Colorado Winery of the Year | Carlson Vineyards, Palisade
Outstanding Craft Brewer | City Star Brewing, Berthoud
Colorado Manufacturing Woman of the Year | Heidi Hostetter, H2 Manufacturing Solutions
Industrial/Equipment Manufacturer of the Year | Sundyne, Arvada
Aerospace Manufacturer of the Year | Special Aerospace Services, Boulder/Arvada
Bioscience Manufacturer of the Year | Leiters, Englewood
Energy/Transportation Manufacturer of the Year | Oribi Manufacturing
Building and Construction Manufacturer of the Year | Encore Electric, Littleton
Advanced Manufacturing & Machining Award | Focused on Machining, Louviers
CompanyWeek Q&A: CMTC’s Jim Watson on the Post-Pandemic Recovery
/in General/by Bart TaylorAmerica’s manufacturing workforce crisis may be most acute in California, where 70,000 manufacturing jobs are unfilled. We caught up with Jim Watson, CEO of California’s Manufacturing Extension Partnership Center, who describes the embrace of technology and automation underway in response.
CompanyWeek: Let’s start with the obvious question: has COVID-related remote employment exacerbated an already difficult environment for manufacturers?
Jim Watson: Yes, but other challenges had an impact on the environment as well. In manufacturing, the physical work makes it difficult to shift production to remote work. As a result, COVID-related employee absenteeism forced companies to work with minimal staff on the shop floor. This created uncertainty as to a company’s ability to build and ship orders on time. The loss of existing workers, even for a short time, compounded a workforce shortage that was a growing problem prior to the pandemic. In August, the existing workforce shortages combined with the fallout from the pandemic has resulted in almost 70,000 open manufacturing job postings in California, which has definitely limited the speed of recovery and growth in manufacturing. As a testament to the serious nature of the workforce shortage, in a recent CMTC California Manufacturing Survey, finding skilled workers was reported to be the top ongoing post-pandemic concern.
CW: Are more manufacturers turning to automation due to the workforce shortage?
JW: There is no question that manufacturers are using technology to transform their operations. However, the frequency and rate of adopting automation needs to increase to improve productivity and the ability to compete in the global economy. As a baseline, in CMTC’s California Manufacturing Survey, nearly one-half of the surveyed companies (46 percent) had not automated their manufacturing processes. However, 61 percent are planning to automate within the next few years. Manufacturers are beginning to see the benefits of automation, as 32 percent felt advanced manufacturing technology was very or extremely valuable and would provide a competitive advantage contributing to their long-term success.
This question is tied to the previous workforce question as technology adoption and finding and/or keeping skilled workers are closely linked. Both are critical elements as manufacturers begin integrating technology into their operations.
CW: What workforce changes do you anticipate will emerge from the pandemic?
JW: From February 2020 through July 2021, California manufacturing is down 74,000 jobs. As manufacturers are rehiring and technology is becoming more prevalent in small- and medium-sized manufacturers, the need for a workforce with a strong science, technology, engineering, and mathematics (STEM) educational background will continue to escalate. For the existing workforce, manufacturers will need to prepare their workers to embrace technology and not be afraid of the changes it will bring.
Pandemic, retirements, and turnover has depleted skilled workers in manufacturing. Two approaches are being used to fill the gap: 1) workforce apprenticeship programs, with students getting on the job training while still taking courses, and 2) up skilling existing workers. To find STEM educated workers, manufacturers will need to actively engage with community colleges and universities who have graduates ready to work. For existing workers, manufacturers will need to ramp up internal training. Both training approaches will be necessary for manufacturers to consistently find and match the right person, with the right skills, to the right job.
CW: Pandemic aside, manufacturers are adapting to new, more automated, technology-informed operations. Within CMTC’s customer network, what are the technology needs and expected outcomes of technology adoption by manufacturers?
JW: Manufacturers are adopting new technologies driven by the need to be competitive. To solve this critical need, manufacturers are turning to a few key technologies. In our survey, manufacturers selected robotics, additive, and smart manufacturing as the top three technologies of choice. They were selected because:
Technology is enhancing the ability of U.S. manufacturers to compete with foreign suppliers.
As technology adoption increases global competitiveness, we should see a return of some manufactured products to the United States, which would lead to more high-paying manufacturing jobs.
Because 43 percent of clients surveyed responded that they were not sure of their technology needs, assistance will be required to determine which technologies will solve the unique challenges facing each manufacturer. Building a strategic approach for manufacturers to find affordable technology solutions, a skilled workforce to operate the technology, and capital to finance the integration of new equipment will be needed for tech-transfer to scale across the manufacturing community. The desire of manufacturers to seek assistance will determine the rate of the industry’s technology adoption in the future.
Contact Jim Watson at jwatson@cmtc.com.
CompanyWeek Q&A: As manufacturers gather for NOCOM, a “new normal” remains elusive
/in General/by Bart TaylorNOCOM, the NoCo Manufacturing Partnership’s Manufacturing and Trades Show, returns September 23 this year after an 18-month hiatus due to COVID-19. Attendees will gather at The Ranch on the Larimer County Fairgrounds in Loveland, Colorado.
The in-person event arrives at a delicate time: The Delta variant is again giving companies and people pause about gathering.
Yet in a brief interview with four executives whose companies sponsor NOCOM, an uncertain business climate is a more immediate cause of anxiety. Gathering in person portends some normalcy at a time when manufacturers are experiencing anything but.
Here’s my Q&A with:
Ashley Steinbach, director of strategic development, Snaptron
Chris James, owner and general manager, Metalex Thermal Specialties
Matt Hasseler, partner, BCS Fabrication
Larry Caschette, president, Metalcraft Industries
CompanyWeek: Can you put into words what it’s been like the past 18 months?
Larry Caschette: Two words to start: unreliable and uncertain. Just the entire manufacturing ecosystem — the entire economy, really, is rife with unreliability, from supply chain to labor, to even customers. There’s a level of uncertainty that’s incredibly hard to manage right now.
Ashley Steinbach: Yes, one word comes to mind: rollercoaster! At the beginning, it was, “How’s this going to impact our business? How’s it going to impact our customers?” — and it’s been some good, some bad, and some ugly, and I don’t think we’re finished yet.
Chris James: Yeah, I would say rollercoaster as well. We’ll have tons of parts coming in that need to be heat-treated, for example, and a week later it’s pretty slow. It’s like everyone needs something all at once, then everyone drops off for a while. Very up and down.
Matt Hasseler: I have a different word that kind of echoes the same sentiment: anxiety! During that rollercoaster, we were fortunate enough to have work for the most part, but just the anxiety of: “What does the next week look like? What’s going to shut down, what customer’s not going to make it, what supplier’s not going to make it?” Just a lot of anxiety and uncertainty at our shop.
CW: As a follow-up, I gotta ask: Where are we on the timeline here? Are we still in the middle of it? Are we at the beginning of a new part of it? Are we out of it? Where are we?
LC: What we keep saying around here is that 2020 was a breeze compared to 2021. I don’t think we’re anywhere near through it. I think we have another year or two before the logjams begin to break down.
AS: I kind of agree. To me, it seems like we’ve shifted. Early in 2020, it was like, “We don’t have any orders, some of our customers have had to shut down — layoffs, furloughs, whatever.” And since then, we’ve actually seen an outpouring, where people are coming back to the office, and now we kind of have too much, where everyone’s in a rush to get as many parts as they can because they were down and are trying to ramp back up and become stable again.
Also, everybody’s been hit by supply shortages. So we’re shifting now to see what we can do to make sure we have materials available. It’s a different issue we’re running into. So I would agree: I don’t think we’re through this by any stretch, and I think it’s going to continue to change and evolve as we move forward in the next couple years.
CJ: I agree, I think we’re right in the middle of it — and there’s still a way to go before we get out of it. With the materials and workforce shortages, it makes people who’ve been down for a while in a rush to get parts in, and with the supply jam, it’s making it more difficult.
CW: So is the “new normal” uncertainty? Is there a new normal?
AS: We’re still in the process of defining what that is. For Snaptron, we’ve had this mentality of we want everyone in the building all the time, we’re reaching out to our customers as often as we can, but like a lot of places we’ve had to go to a remote workforce, so we’re still shifting, and figuring out that path forward. Especially in marketing, we’re seeing a shift for digital, so people have definitely jumped on the Amazon train, where everyone’s online shopping, they’re expecting packages to come to them.
We’re also watching the buying experience change, and asking how that changes our sales team, trying to get in front of buyers sooner rather than later. And I don’t know about you guys, but I feel like I’m getting 40 to 50 different prospecting emails every day clogging up my inbox. Traditional prospecting techniques aren’t working.
We’re just still trying to come up with new ideas to be more agile — that’s our new mantra right now!
LC: We’ve talked about the importance of “being flexible” for years now. But if you can’t be flexible now, hour to hour — in all honesty, if you’re not flexible with the workforce, you’re going to be in a lot of trouble.
There’s no better time to be in the entry-level or underskilled positions in manufacturing. They’re really calling the shots, and they have an opportunity to thrive and pursue great careers. But managing that is really driving hour-by-hour decisions.
CJ: For us, it comes down to a lot of rush-order parts right now, and we have to be able to process that and get those parts back to them when they need them, especially those companies that are trying to get started up again, and keep their customers.
It’s important for us: if we can’t get those rush-order parts done, they might lose customers. We’re trying to keep up with them, and the ability to be flexible about when we proces parts, what time of the day we’re processing to get them all done — that’s how it is right now for us.
MH: The biggest change for us — and we’re working with a lot of contractors and developers — is that with material shortages and raw material increases, we’re seeing a lot of pre-buy from the ownership, so we’re getting released to buy all the material needs for a massive job up front, which has really changed the way we handle inventory and materials.
I agree with the others about the need to be flexible. For us, it’s having the right staff that, when we get this giant wave of materials, we’re preparing them to work nights and weekends to get caught up, anticipating the next lull. Then the next wave of gear is coming through our shop, and so on.
CW: What can be accomplished by bringing the community together at NOCOM?
LC: I have a little bit of past experience in other parts of the country and one of things we noticed about Colorado is that it was very siloed, disjointed — a very protective manufacturing community. There wasn’t a lot of collaboration, coordination.
As a region, really across all types of manufacturing, we can’t allow that to continue. As people are starting to get back out, it’s so important to come together, meet new people, have open discussions, and network. It’s an important way we can spread the word about manufacturing to our youth, to our representatives in government, and to start to shift more of our economy to manufacturing.
AS: I agree and would take that one step further. We’ve talked a lot about workforce, and maybe how some of these entry-level positions are really calling the shots, but one of the things we’ve run up against — and I don’t know if it’s a sign of the times — but it’s the bad perception around manufacturing. I think having events like this, and pulling people together to showcase some of the cool aspects of manufacturing , can really help to recruit top talent.
We make small parts that sometimes aren’t the most glamorous things, but the industries we work with and some of the things we’re accomplishing can help showcase the benefits and excitement and value of working in manufacturing facilities.
MH: I’d agree. Having NOCOM is a great way to reach out to create visibility among workforce, but the role of the event in creating a community for manufacturers is also a plus, whether it’s opportunities to share work and help each other out, or just finding someone to commiserate with, someone who’s having the same challenges as you are. Knowing there’s other people in your world, who happen to be in your backyard, there’s value and comfort in that.
CJ: Yes, very similar thoughts, and just having the networking part, knowing what’s here and available is helpful, because I know a lot of people are sending things out-of-state to get things done. Bringing everyone together to get the word out about what we’re capable of doing here, in Colorado, is really important.
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
To learn more about NOCOM or register to attend, click here.
Most manufacturers aren’t requiring a vaccine — yet. Will “encourage” be enough?
/in General/by Bart TaylorWe’ve asked the most recent 30 companies we’ve featured in CompanyWeek to share some anecdotal information about where employees are working, their vaccination status as, or if, they return from remote work, and whether companies are requiring COVID vaccinations.
Here’s their feedback:
CW: What percentage of employees who went remote are returning or have returned?
Data relating to a company’s vaccination policy was definitive, if seemingly in flux:.
CW: Will you require a COVID vaccination at company facilities?
Of the 83%, some companies further qualify their policy:
Shifting gears: We continue to develop SCoP — CompanyWeek’s supply-chain portal. It’s a searchable database of all CompanyWeek company features, but more, an up-and-coming regional sourcing tool, connecting companies that need things made with companies that can make things, within manufacturing’s diverse industry supply chains.
Here’s new capabilities recently added to SCoP via the latest CompanyWeek profiles.
Contact me for a direct connection to one of these suppliers or manufacturers. To get featured in CompanyWeek and listed in SCoP contact one of our editors; or add a listing in SCoP on your own.
For our part, we’ll continue to provide details on new and current entries in SCoP — companies that may help you facilitate more local and regional production and manufacturing.
Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.
The Heritage Foundation opens a new front in the war on manufacturing
/in General/by Bart TaylorIn many ways the national manufacturing narrative has moved beyond the apocalyptic themes of a decade ago. Ten years of growth has changed everything.
Yet naysayers persist, and today the unlikely source is The Heritage Foundation, the respected conservative Washington D.C. think tank.
In “Biden’s Manufacturing Plan: Wasteful Investment in Industry of Past,” Research Fellow Elizabeth Hanke opens a new front in D.C.’s scorched-earth power struggle, using manufacturing as a cudgel. She conjures up a story that Biden’s “Buy American” plan is a dead-end as long as it includes support for low-skilled manufacturing jobs, surmising that “investing and restoring the manufacturing industry is costly, inefficient, and puts American firms at a disadvantage compared to firms based in China and Mexico where production costs are significantly less expensive.”
Her “key takeaways”:
Biden frequently talks about reviving domestic manufacturing, an industry that has sharply declined over the past 40 years.
The movement of American manufacturing away from low-skilled labor has been economically beneficial.
Biden’s unnecessary approach lacks any economic consideration to implement such guidelines.
You get the message, and Hanke sums it up nicely for us near the end. “Biden’s manufacturing plan does not “build back better” or help American workers,” she writes. “It wastes taxpayer dollars by investing in a declining sector of the economy.”
In other words, U.S. manufacturing’s not worth the investment. Better just to say, “If Biden’s for it, we’re against it.” It would make for a better argument.
As a practical matter, it’s impossible to invest in manufacturing’s future without investing in people and industries powering its growth today. A realistic American manufacturing agenda has to include investments in “low-skilled” labor so long as it takes until we have a more highly trained workforce. Manufacturing’s comeback is being fueled by a mix of industries and companies, many that rely on blue-collar talent — labor that we stopped training — and celebrating. Today a labor shortage in manufacturing is the price we’re paying.
I don’t begrudge a so-called thought-leader a misguided position here and there. For a decade we’ve listened to manufacturing’s critics pronounce the sector dead or irrelevant. Hanke’s missive is more of the same.
But events the past year shed even more light on why those pronouncements were wrong. In this case The Heritage Foundation should know better — or tee up a more compelling argument that manufacturing is no longer strategic to the U.S. economy. This attempt falls flat. Politics provides no cover for a byline from even the most haughty of sources.
Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.
Adventures in the supply chain: My move from Colorado to Texas
/in General/by Bart TaylorLate in June, my family’s six-month journey to relocate from Colorado to Texas ended successfully in New Braunfels, Texas — the new headquarters for CompanyWeek.
In the end we’d hoped a move like this was easy, or normal, as if picking up and moving for no reason, other than we wanted to, was seen as normal. It wasn’t; folks were surprised we’d leave Colorado. For us, adventure seemed a good idea after finally planting our youngest on a college campus in January.
But it turned out that explaining the inexplicable was easy compared to the move, a move that for me became a metaphor for the supply-chain woes we write about every week.
Americans are on the move. In the West, a migration of humanity is underway, to and from California, Arizona, Texas, and Colorado. The influx of people into Austin, our destination when we began, is staggering. You’ve no doubt read about the Austin housing market. In early February, we hadn’t. The short story is that selling a house in Colorado is easy. Finding a house in Austin, not so much.
But the supply-and-demand narrative involving housing has nothing on the logistical challenge of moving in the midst of a labor shortage. Our moving company struggled to find and schedule employees to move our load out, to transit, and unload. A single, resilient Russian immigrant from Brooklyn, who spoke very little English, was left to unload our 3,000 cubic feet of goods on his own in Texas. Three, then four, then five employees were scheduled to arrive to help. They never showed up. His accomplishment was epic, one for the ages. It was a nightmare for us.
The irony is that in Texas, factions are working to diminish prospects for immigration reform that would ease the burden on employers. The efforts of a Texas governor, George W. Bush, who appeared motivated to solve the immigration conundrum before 9/11, look otherworldly, today. Texas is a logical place for historic immigration compromise. Yet this state with so much workforce promise is bitterly divided.
You can buy a handgun and holster in Texas, and wear it proudly, and if you’re so inclined, move your manufacturing company here, as hundreds of business owners are doing. And for me, the chance to chronicle manufacturing’s Wild West is too good to pass up. The business press is choked full of news of relocations, expansions, and launches. Much like Colorado’s Front Range, South Texas, our new home, is on fire. Like everywhere, workers are hard to find. Builders are backed up; service and retail companies are undermanned — there’s a line for everything; and manufacturers are desperate for employees.
But as I watch Blue Origin touch down in Texas after an historic mission, the possibilities seem limitless.
America’s space race is at home in Texas. As of today, so are we.
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.
CompanyWeek Q&A: Harry Moser, Founder and President of the Reshoring Initiative
/in General/by Bart TaylorHarry Moser’s Reshoring Initiative measures the degree to which U.S. companies are reshoring jobs and attracting foreign direct investment (FDI). With interest and activity heightened from the pandemic, trade wars, and other factors, I reached out for an update.
As with any conversation today about reshoring manufacturing jobs, we talked extensively about China, and a troubling undercurrent that may profoundly affect America’s industrial future.
CompanyWeek: Your 2020 final reshoring numbers are out, and the data indicates, “Reshoring and FDI job announcements for 2020 were 160,649, bringing the total jobs announced since 2010 to over 1 million (1,057,054).” Put those numbers in context for us?
Harry Moser: We track reshoring which is done by U.S. companies, and FDI — foreign direct investment — which is done by foreign-headquartered companies, and we typically report on the total of the two trends. In 2010, the total reshoring that year was 6,000 [jobs], and there was a continuous uptrend until 2017, which was the peak year so far, with about 185,000 jobs driven that year by business enthusiasm for the tax and regulatory reform. And then things fell off in 2018 and 2019, primarily due to the trade war. Companies didn’t know what the rules were going to be, what tariffs were going to apply to what products, from what countries, for how many years, and they said, “Let’s wait and see what happens.”
Then, in 2020, we had COVID, and reshoring surged dramatically. The total in 2020 was about 160,000 jobs, the second highest on record. So to have that happen during a pandemic was incredibly good, and the fact that reshoring was so strong, shows that companies are taking care of “home.” They realize — for U.S. companies at least — that their main market is still the U.S., and therefore they’re putting their investments in the U.S., where FDI has of course slowed down.
From a different perspective, this is the first time that reshoring has been stronger than FDI in about the last seven or eight years. A million jobs have been announced, and given that it will take a year or two from the announcement until the hires are actually made, we think that conservatively, 700,000 or so jobs have actually been created. To put that in perspective, that’s more than the actual employment increase since 2010, meaning that if we hadn’t had the reshoring, manufacturing employment would have gone down instead of up since 2010, and the 700,000 is about 6 percent of total manufacturing employment.
CW: So, what does 2021 look like? It would seem that, given the disruptions in the supply chain companies are experiencing, we’d see an acceleration in the trend?
HM: Our forecast is for 200,000 total jobs in 2021, the reason being that basic driving factors are still in place: companies are still very much aware of COVID, Chinese wages continue to rise — about a week ago it was announced China’s year-over-year consumer price increase was about nine percent — and their business costs continue to go up dramatically, so they are somewhat less competitive overall.
There’s also significant talk about “decoupling.” One of the top China experts [in Asia], Eamon McKiney, believes that China is so mad at the U.S. — because of Trump, because of Taiwan, Huawei and other things — that China, at some point in time, will not allow any of its companies to ship anything to the U.S. They will totally decouple. I’ve heard other experts echo this sentiment, maybe not as strong a view, but obviously, if it happens, there would be a lot of reshoring happening very quickly!
But even the possibility it could happen, that companies could be totally cut off from their Chinese sources, not in two years but bam, like that, should be enough to get companies to pull back the most important, hardest to replace, the most critical items here, but if not here, then Mexico or someone else they can count on.
CW: On the other hand, that seems to run counter to China’s demographic challenge, that China has to create millions of jobs each year to continue to support middle class growth. Many of those jobs are in manufacturing companies making products for American brands.
HM: I would not agree with all of that. Actually China’s working age population, say 18 to 65, is dropping at the rate of about three million per year. Why? Because of the one-child policy that went into place, what, maybe 40 years ago? Even though they’ve relaxed that policy, today the Chinese are saying, “Life’s good with one child! We’re not going to have three or four kids.” A lot has been written about the question, “Will China become rich before it gets too old?” and the demographics, the increase of the over-65 population, is frightening for them. Increasingly, there will be fewer people to replace the retiring population.
What they really need to do — obviously they shouldn’t cut us off completely — is to get their own people to consume more. They save, roughly, 40 percent of their income where Americans normally save 3 or 4 percent of their income. That’s why the Chinese have so much money to invest in factories, in highways, in everything else. They need to get their population to spend more, to become the consumers that Americans are, and absorb that extra capacity they’re shipping to the U.S. Conversely, Americans need to work more and save more, and create the productive capacity that we’re now getting from China.
CW: Just to stay on that point. It does seem, though, it would be a bit of a “cut your nose off to spite your face” approach. Decoupling would force the U.S. to strengthen its industrial base. The U.S. would become a more capable industrial competitor and global threat to China.
Moving on: Do you see, as others do, the entry of China into the WTO as a low-water mark for U.S. manufacturing? Can we coexist with China as an equal trading partner?
HM: Under the current terms of trade, we cannot coexist with almost anybody. The U.S. has a trade deficit with nine of its top 10 trading partners. The exception is the U.K., which is a basket case for manufacturing, relative to its glorious manufacturing past, and the U.S. has followed the same decline.
If you look at what China did, as they grew, they produced products that otherwise would have been produced in Mexico, in Taiwan, South Korea, Japan, India, Malaysia, wherever. But China invested the most, they were the hardest working, bid the lowest prices, whatever, and they got the contracts. Right now we have a $900 billion trade deficit. If China did not exist at all, I still think we’d have a $750 billion trade deficit!
All these countries have industrial policies that combine things like currency, taxes, training and education, investment in research and facilities, et cetera. We don’t. I call it a “de-industrialization” policy. If you want to destroy your manufacturing, you’d do what we do: Every poor country you want to help, you’d give them favored-nation status to import products to the U.S. with lower duties than they give us; you’d spend billions protecting the rest of the world from pirates and terrorism; you’d allow your universities to flourish in liberal arts and your skilled workforce to decline; and you wouldn’t have a value-added tax to protect your key industries. If you want manufacturing to disappear, that’s what you’d do. And we’ve done that.
CW: Well said. How do the numerous recent initiatives strike you — legislation in the Senate and reference to a new industrial policy?
HM: I refer to them as “the Biden supply-chain effort.” And I call those things “tourniquets,” because our country has ignored these things for so long, because we’re in such a dangerous place of losing key industries, it’s certainly necessary to make these investments at a national level, and 10 years from now will be too late.
On the other hand, it’s not clear that you can save the patient that way.
CW: How so?
HM: The simplest thing to understand is chips. Taiwan Semiconductor is talking about one big chip plant in the U.S. Intel is talking about two, and the U.S. government is going to subsidize a few more, and soon we’ll be making two or three times as many chips as we do now. But the cost of making them, no matter the subsidies of the factories, will be higher because of higher labor costs here than in China or Taiwan; the costs of building the factories will be higher. So you’re going to have chips that are more expensively made here than made there.
Then, who’s going to consume the chips? Where do the chips go? Into cell phones, televisions, game boxes, servers, whatever — and almost all those things are made in China! We’ll be a high-cost producer of chips, dependent on China to buy all the excess chips above and beyond what we can consume. So instead of depending on them for chips, we’re going to depend on them being a customer for our chips.
My conclusion is that yes, we have to invest in chips, you can’t just drop out of that game, but we need to make the U.S. competitive by currency, by skilled workforce, by VAT, and motivate companies here to start making the products to consume the chips. Otherwise, we won’t be in much better shape than we are today.
Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek
Colorado Leaders Q&A: Marcia Coulson, President of Eldon James
/in General/by Bart TaylorWe’ve reported how Colorado lags in large manufacturing-related infrastructure investments, but despite another subpar year relative to other states, a flurry of recent activity lately demonstrates how things could be changing.
Last week alone, three significant new factories were announced, in three growth industries powering Colorado manufacturing. York Space Systems‘ new “mega-center” in Denver, Meati‘s 76,000-square-foot production facility, and Eldon James‘ sprawling new 100,000-square-foot medical-device factory are all eye-opening additions to the region’s manufacturing ecosystem.
I caught up with Eldon James President and 2019 Colorado Manufacturing Woman of the Year Marcia Coulson for a brief conservation last week.
CompanyWeek: You’ve been busy! Can you provide an update?
Marcia Coulson: Well, the pandemic has been a catalyst for us. We never anticipated this, but beginning last spring we started supplying millions of parts for the ventilator project. We pulled out all our stock and began manufacturing as fast as we could to keep up with the demand. We got to work with ventilator companies throughout the world building ventilators. Ford actually wrote us a really nice letter thanking us for being part of their ventilator project. That felt really good for our company.
Then it shifted to producing the vaccines, and we supply a lot of components for the single-use systems that they use for vaccines, including the large plastic bags that they grow drugs in, instead of the stainless-steel systems. They migrated from stainless steel because it takes about a week to clean between different drug lots, and they’re always concerned about cross-contamination from one lot to the next.
So they’ve migrated to these large plastic bags, and we make connectors that are welded into the bags, the tubing that’s connected to those fittings, and all the fittings downstream, including our new SeriesLock quick-disconnect product, that are used in the pharmaceutical industry as well.
We were able to supply components for Pfizer, Moderna, and J&J, and now we’re working on the Sputnik project and supplying a lot of parts for their vaccine program. It’s been exciting to play a small part in such an important initiative.
CW: Or a large part, as it were. I’m curious: You seemed so well-positioned, with a network in place, to plug right in to a national vaccine effort. How did that come about?
MC: We’ve been working more with pharmaceutical companies the past 15 years. When we built our first clean room, it was to manufacture products for that market. So it didn’t happen overnight; we’ve been working with these companies for that amount of time, building products for that industry. We’ve actually migrated to where 85 percent of our sales today goes to the pharmaceutical, medical device, and laboratory supply markets. We actually changed our business, as we were once also focused on automotive and industrial products. Thankfully, now 85 percent of what we manufacture goes to those three markets.
CW: Do you see that mix sustaining? I know there was interest in the beverage industry.
MC: Yeah, we’re not putting as much emphasis on the beverage industry. The pharma market requires quality, so they don’t necessarily beat you up on price. The beverage industry is very competitive, and there’s not as much margin in the products. It’s a fun industry! Just not one we’re putting a lot of focus on.
CW: Speaking of price, I picked up on something in our last conversation that stuck with me, that of the need, in your view, for targeted tariffs, or VATs, to enable domestic manufacturers to compete with Asian imports on price. Given what’s happened the past year, do you still see a need for measures to level the playing field?
MC: Well, we still need support with tariffs. However, one thing I think the pandemic has pointed out is that hospitals are starting to realize that maybe we don’t want all of our drugs and medical devices made in China. And they’ve finally caught on to that!
Take ventilators: Companies were manufacturing ventilators like crazy, but providers didn’t realize that every ventilator that was being used needed two filters — one to protect the ventilator and one to protect the patient — and those have to be changed on a daily basis. I had hospitals in New Jersey that were basically in tears because New York absorbed all the filters that were available in the market for the ventilators. There were none left for hospitals in New Jersey.
We realized that all of the filter media was made in China. We were done when we ran through the inventory. Add to that, for the manufacturers of the filters, the Chinese market was the top priority. I’m sure we lost some people because we couldn’t replace the filters on the ventilators. There’s no statistics to prove it, but it’s a scary thing, that all the filter media manufacturing went to China, and we couldn’t get it when we needed it.
We actually had a filter we were trying to get through the FDA so that we could manufacture filters here, but we just couldn’t get any traction as they were giving all their attention to approving ventilator manufacturers. Fortunately, as providers realized that fewer patients need to be on ventilators, things quieted down a little bit.
CW: But hospitals got the message?
MC: I do think it was a huge red flag for hospitals: “Maybe we oughta break this up and not buy the least expensive product.”
And as manufacturers, we can’t compete with China. There’s no way we can offer the same product at the same price. Medical devices do take humans to build and assemble and package and label and work in the regulatory side.
And something interesting has also come to light: We sell to China, and I know there are companies there that do what we do. To my customers, I’m like, “Why aren’t you buying Chinese products?” We’ve been told, “Well, we prefer in China for our medical devices to buy the higher-quality products made in the U.S., and we sell the U.S. our lower-quality products.”
What they’re saying is: “What we manufacture in China isn’t good enough for us, but it is for the U.S.”
We need more help from the government to equal out the playing field, to encourage hospitals to buy American-manufactured products, whether it’s a bonus program, or a tax-credit program to where they’re incentivized to to buy. Hospitals are under great pressure to make a profit; they’re going to be encouraged to buy the least expensive products.
CW: National policy issues aside, what can be done at a local level to encourage more manufacturing?
MC: We have a hard time hiring employees, so we need to encourage people to go to work, to go back to work. I’m not sure what we’ve created here — it should be interesting to see how it plays out. But we’re incredibly thankful to our great team.
CW: How many employees do you currently have?
MC: Between the two facilities — WilMarc and Eldon James — we’re at about 100.
CW: You’re doing a lot with 100 employees.
MC: Keep in mind we automate just as much as we possibly can so that we can compete on a global basis. We’re working really hard to automate. The new facility will be highly automated — but we still need people! They just don’t have to do the work equipment can do.
CW: Again, congratulations — and we’ll see you in September at the Colorado Manufacturing Awards Alumni gathering!
Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.
California Leaders: Q&A Pamela Kan, President of Bishop-Wisecarver
/in General/by Bart TaylorLike it or not, supply chains are infrastructure
/in General/by Bart TaylorOne casualty of our political paralysis is momentum to enact supply chain and manufacturing initiatives that appeared to have bipartisan support coming out of the election. Today we can’t seem to agree on the need to agree.
I thought as much reading Robert O’Brien’s insights last week in Bloomberg, “Supply Chains Are Our Most Critical Infrastructure,” that said so much even as it didn’t.
O’Brien served as national security advisor to Donald Trump and obviously understands the strategic importance of a stronger U.S. manufacturing economy. In one short paragraph he supports and derides President Biden’s $2.3 trillion infrastructure program before concluding, “Republicans may respectfully disagree on the plan, [but] a shared lesson from the pandemic is that essential U.S. supply chains constitute critical infrastructure. That is a point we can all agree on.”
Can we? I’m not convinced we all agree, but O’Brien’s right about the supply chain. He offers other useful nuggets:
O’Brien writes as a political actor so he falls short, in the end, of acknowledging that both sides agree action is necessary to strengthen U.S. manufacturing, even as neither side will take all the steps necessary to compromise and cooperate for the greater good. That admission is apparently a bridge too far in today’s landscape.
If we reach a consensus on basic themes, we can get to the business at hand, that of shortening the supply chains of which O’Brien speaks. A slimmed-down infrastructure spending program that energizes supply-chain development should enjoy bipartisan support. The formula is straightforward: help companies accelerate factory innovations that keep production more local, reduce costs to enable OEMs to compete utilizing domestic labor, and use scalpel-like tariffs to establish a more fair domestic market for U.S.-made products. Plus, celebrate U.S. craftsmanship, increasingly fueled by technology: CNC and artisan will co-mingle in the same sentence, a lot, in the future.
The means to accomplish the ends are available to lawmakers.
There are so many good stories to be told, if we can take small but significant steps. Crossing the political divide to undergird U.S. manufacturing tops the list.
Bart Taylor is publisher of CompanyWeek. Email him at btaylor@companyweek.com.