Forum questions offshoring of manufacturing from U.S. and poses an answer to itForum questions offshoring of manufacturing from U.S. and poses an answer to it

Bad news this week out of the U.S. manufacturing sector stoked growing fears that the country will again dip into recession. What can domestic U.S. manufacturers and their engineering teams do today to reduce product costs and retain the quality and customer advantages of designing and building in their primary market, which is often still the U.S.? Some new perspectives on the offshoring/reshoring debate emerged at the recent 26th annual International Forum on Design for Manufacture and Assembly (DFMA).

As one might expect from a Forum devoted to DFMA and organized by Boothroyd Dewhurst Inc. (Wakefield, RI), a leading supplier of DFMA software, one focus of the event was on the importance of involving manufacturers as early as possible in the process of new product design. DFMA software helps companies develop products with fewer parts at lower cost and with higher quality; read here our article on one OEM's use of DFMA software to significantly reduce the number of parts in a medical device as it transitioned from metal to more plastics for the device.

During the Forum, held June 13-15 in Warwick, RI, product development expert Dave Meeker presented fresh data on overseas cost trends and an example of an efficient, low-labor domestic design that replaced a product outsourced to China. Harry Moser, founder of the Reshoring Initiative and retired president of metalworking machine center manufacturer GF AgieCharmilles, spoke about corporate accounting challenges that often lead U.S. manufacturers to mistakenly take production or sourcing overseas.  

There was some good news that emerged from the Forum, according to speakers there who said that savvy manufacturers in the U.S. increasingly are able to root out troublesome costs and problems from their products earlier and earlier in a lifecycle that starts even before a computer model is created. The use of tools such as DFMA also can make some work that was offshored economically viable in the U.S., say those same experts. "Traditional corporate and enterprise accounting systems do not generate total cost of ownership (TCO) data for companies locating or sourcing overseas in search of the lowest labor cost," argued Moser.
 
"When total cost of ownership is calculated," he continued, "most companies headed offshore find that they have saved maybe 10%, rather than the 30-40% they based their decisions upon. When TCO analysis is combined with DFMA product redesign and Lean Manufacturing programs, we're learning that the gap can close or disappear today-and will definitely close in the next few years." Other reports have generated similar data regarding the difference between projected savings from offshoring and the actual savings realized.
 
Moser's Reshoring Initiative offers free software and an online library of 98 articles to give manufacturers what it calls a clearer view of the competitive landscape between the U.S. and LLCC's (Low Labor Cost Countries).
 
Dave Meeker, product consultant and lecturer at MIT, updated a co-authored study from 2004 on the hidden costs of offshoring and shared his views from the same podium as Moser. "Seven years later, the problem of not accounting for total cost continues for most companies," said Meeker. "Labor is the common metric businesses pick in deciding to take production overseas. Yet, the largest slice of the cost pie is not really the labor content but the material and manufacturing process choices engineers make."
 
"Then, as well as now," he continued, "redesigns using DFMA show that assembly labor can be reduced an average of 45% while creating better functional designs. Add a very conservative 24% to offshored product costs to cover logistics, supply chain management and other expenses, and the playing field begins to shift. The evidence suggests that we can start to engineer our way out of the offshoring problem by streamlining designs and understanding the real costs."

Regarding the reshoring of manufacturing back to the U.S., John Gilligan, president of Boothroyd Dewhurst, noted: "The best-performing and highest-quality products are always less labor intensive to assemble. When all the costs of doing business are considered, DFMA can help companies stay onshore by helping engineers design products that are cost-effective to build anywhere, without chasing the lowest offshore labor rate."