Reshoring sample pages

Chapter 1 Page 1

Hello and Welcome Welcome to The Reshoring Guidebook. We are excited to help you get started with your Reshoring efforts.

This guidebook will assist you with the steps to a successful Reshoring project by taking you through the various decision components one by one. You will find thoughtprovoking ideas, helpful exercises, and outlines for the things you will be considering during your Reshoring evaluation. We will explain these ideas and activities so that you can share them with your team and lead a successful Reshoring effort to bring manufacturing back to America.

Use of This Workbook This workbook is organized into 12 main sections. Please browse through the workbook first before you get started. Your project may require a different sequence than we have suggested or additional sections that we haven’t written about. You’ll need to adapt the materials to fit your own project as appropriate.

So, let’s get started!

Rosemary Rosemary Coates, Author and President

The Reshoring Institute

Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.

Chapter 1 Page 2

Organization of the Guidebook

This guidebook is organized into the following sections: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

How to Organize Your Project Cost Evaluation Innovation Automation Localization and Supply Base Considerations Skills and Education Tax and Other Incentives Government Outreach Marketing and PR Roadmap for Reshoring Building Your Business Case Project Close and Postmortem Review

Each section includes an overview, hints, tools, and exercises to guide you through the Reshoring process. We know this is not a simple process and we have leveraged our combined one hundred + years of experience to give you the best ideas, tips, and tricks to make your project successful.

Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.

Chapter 1 Page 3

Chapter 1: How to Organize Your Project Overview Disciplined project management is going to be very important for your Reshoring efforts. This is because the evaluation and decision to reshore are complicated and involve a lot of different moving parts. What we offer here are some helpful hints about how to structure your project and keep track of the progress toward your goal.

Our team has many years of project management experience and we know one of the keys to success for any project is solid organization and project discipline. This means you will have to think through the best ways to organize and then establish a solid timeline to execute the project. Establish weekly project progress reports and require weekly updates from all of the subprojects. Try to stay on time and on budget with your efforts, and find ways to catch up or retrench if you fall behind. This weekly discipline will help you to move forward and will highlight your progress.

Reshoring Project Sample Timeline

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Chapter 1 Page 6

milestones. We recommend you give these sub-project managers some autonomy to develop their plans and milestones and select their teams.

Communicate the overall project objectives to each team leader and ask them to set up scope, objectives, milestones, and metrics for their individual projects. They should communicate the objectives of their sub-project and the overall goals and objectives of your Reshoring project to their respective teams.

Use of Consultants Many companies use consultants, such as Blue Silk Consulting, for projects like these when they do not have all the resources available to complete the project themselves. If you do use consultants be sure to assign a primary point of contact at your company to be the liaison with the consultants. This will help the consultants stay on track and help you stay informed about project progress.

Besides additional resources, consultants should provide experience and best practices based on other projects they have completed. Consultants should become your project partners in achieving your Reshoring goals.

Project Management Tools If the project is large enough, you may need project management (PM) tools to assist with keeping all the moving parts in synch.

Scheduling tools, such as Microsoft Project (MS Project), can help you keep track of deliverables, schedules, and timing.

MS Project has the advantage of being as simple or complex as needed for your specific project.

Remember though,

This Week’s Accomplishments: • Improved performance of the document processor program by recommending an index for the database • Expanded the BofA file transfer program to include intermediary banks • Created a descriptive flexfield on the bank accounts window to record intermediary bank information Issues • Paul Gill discovered an error in the way we were handling the accounting distribution for sweaters. We have determined the proper way to detect these products, but haven't changed the AP account distribution yet.

• Bank wants 4 more files (2 from each account) before going to production

Remaining Work Plan: IDA >> AP Interface • •

Work with Todd to test the transfer and import.

Write “as built” MD50 documentation.

EFT •

Write “as-built” MD50 documentation.

Organize and Finalize Program • Write the “as-built” MD50 documentation.

Production • Recommend to the DBA certain indexes to maintain performance

Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.

Chapter 2 Page 2

A Note of Caution Here we should note that you cannot get a complete comparison of offshore versus onshore until you have gone through the innovation and automation sub-project work. This is because your current domestic costs will change as you invest time, effort, and capital into making your manufacturing line as efficient as possible.

In this initial summary assessment, you shouldn’t get too detailed. Keep the summary high level enough so that it can be easily explained to executives in 20-30 minutes. You will have an opportunity to work with more detail to back up your summary later. For now, you want to stay at a high level.

High-Level Cost Comparison: China Factory versus USA Johnstown Factory (SAMPLE) Location Item

Tianjin

China

Johnstown

USA

Cost

Per

Cost

Per

Labor costs per hour and any overhead allocations applied

$0.63

hour

$21.45

hour

Labor costs per product (if available)—this information will help you to determine which products are candidates for Reshoring consideration

$3.26

hour

TBD

hour

Allocated indirect labor costs such as engineering, quality assurance, and procurement

$0.56

hour

$6.32

hour

Costs associated with operating the factory including the cost of machinery, energy, depreciation, etc.

Overhead costs for management and benefits paid to workers (if any)

$52,789.00

month

TBD

month

$0.18

hour

$7.00

hour

$27,500.00

year

TBD

year

Material costs for production of products

$0.78

unit

$1.98

unit

Packaging costs

$0.13

unit

$0.13

unit

Logistics and transportation costs

$0.22

unit

$0.13

unit

Export and import costs including customs duty and fees

$0.03

unit

$-

unit

Other costs attributable to your offshore production

$0.17

unit

$-

unit

Taxes and fees paid to the host country (local, province, and national)

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Chapter 2 Page 3

Note that in this sample spreadsheet, some of the costs are TBD and you will complete these sections after the workshops later in your project process. Automation will drive down the labor content of the production costs to bring the total costs down significantly, especially for those products requiring a lot of assembly labor.

Many of our clients are able to get US production costs to within 15 to 20 percent of offshore costs. As energy prices continue to decline in the US, these costs are likely to get even more competitive.

Just Sourcing If you don’t own the offshore plants and are simply sourcing from foreign factories, then meet with your Purchasing Department to gather procurement costs from your offshore suppliers.

These costs include the prices paid for products, packaging costs, documentation costs, logistics costs, and customs duties and fees. We recommend talking with the buyer involved with the procurement of offshore goods as well as examining a few paid invoices from your Accounts Payable department. This way you can validate that you have indeed captured all of the costs associated with a component part of sub-assembly including the import and transportation costs.

Very often there are hidden costs associated with procurement. For example, the buyer may have to make regular trips to visit the supplier factory. There may also be costs associated with placing and managing the purchase order, negotiating a contract through your Legal department, and engineering review time. Be sure to include all of these costs in your analysis.

SUPPLIER COST CHECKLIST 

Per unit cost



PO placement costs, EDI, etc.



Packaging cost



Legal department costs



Export documentation cost



Engineering review costs



Travel to supplier facility



QA and rework costs



Import brokerage and customs duties



Other costs specific to the supplier



Logistics costs (may be paid directly to a freight company)

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Chapter 6 – Page 2

new skills that are going to be required. For example, if there are new machines or robots that require skilled operators, start to determine where you will find these workers.

If you are locating a production site in greater Chicago, for example, you will have an easier time finding skilled labor than you will in a small town in Texas or South Carolina or Alabama. You should start thinking about this now. You may have to work closely with local trade schools, community colleges, universities and local governments to find and develop skilled workers.

Start with a general table of skills you expect will be needed for the new production operations.

Below is an example of a chart that you can use to determine what labor will be needed for new production lines.

Skilled labor needed for new production line Skill Welder Assembly Machine Tool Operator

Do we have skilled people today?

Yes, but shortage Yes Yes, but shortage

How many will be needed?

6 15 7

Machine Tool Programmer Robotics Operator

Yes, but shortage

2

no

3

Manufacturing Engineer Other

yes

2

Likely new source Local trade school General population 60% of current Machine Tool Operators will be retiring within next three years – we need apprentice program to transfer skills Manufacturer’s training, apprenticeship Manufacturer’s training; community college Local university, recruit away from other companies

From this chart you should be able to tell where you will have skilled worker gaps for your new production operation.

Outsourcing of Skilled Manufacturing Jobs Outsourcing of manufacturing and transferring operations overseas has certainly taken a toll on the availability of workers in the US. To further complicate matters, few new employees had been entering the manufacturing workforce at the entry level, primarily because there have been very few opportunities to move up the career ladder. So even though there may be

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Chapter 6 – Page 3

skilled workers at the most senior levels, there is no one trained to backfill. You may want to consider apprenticeships with senior people to transfer knowledge to new workers.

Skills Ladder Discuss career pathways and skills ladders with your HR department to determine how you will continuously create career progression for employees. While this may not be a critical decision point for your initial investigation, it is very important to employee retention and satisfaction.

Apprenticeships and On-the-Job Training Perhaps the best way to fill this type of skills gap is to establish an apprentice program in your own shop. Work with your HR department if this is a likely pathway to developing skills. An apprenticeship program should match a worker who is learning a new skill with a seasoned veteran who will teach the necessary job skills. Apprenticeship programs can last from a few weeks to several years until the new worker is ready to work on his own.

A bonus to this pathway is government funding that will pay one-half the salary for On the Job training (OJT) for six months. The link to this program is below. This program is federally funded but administered through state One Stop Career Centers: http://www.dol.gov/dol/topic/training/adulttraining.htm And a link for apprenticeships:

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Chapter 9 – Page 1

Chapter 9 – Marketing and Public Relations Both Marketing and Public Relations are going to be very important to your Reshoring project.

Let’s start with Marketing’s involvement in the investigation of what products to develop.

Marketing and Your Customer One of Marketing’s primary roles is to listen to what your customers want. They also pay attention to what concerns and interests are trending in your existing and potential customer base.

Because your Marketing folks are always scanning the marketplace for new ideas, it is very important that you include them in your innovation activities.

The Customer Survey As we pointed out in Chapter 3, Marketing should have input into your innovation process, including new ideas for products or product enhancement. You may also want to survey your customers. Marketing should lead customer survey events as they have the experience in this area.

Customer Survey Questions Here are some sample questions for your customer survey: 

How are you using our product today?



How long have you been using it?



Who are the primary users?



Do you collect information about the product use or operation?



Do you use similar products from competitors? If so, compare and contrast the products.



Are there features about our product that you really like? Why?



Are there things about our product that you would like to see changed?



Do you have ideas for new products that you would like to share?



Do you think a product made in the USA is more reliable or higher quality? If so, why?



Would you be willing to pay more for an American-made product?

Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.

Chapter 9 – Page 2

Better in Person Customer surveys are always better when conducted in person. The conversation will be much more engaging and productive. You can see how people react to questions and adjust accordingly. In-person interviews, however, are not always possible due to time or budget. If you must conduct the interviews over the phone, then have at least one other person with you to take notes and ask follow-up questions. This is because it is just too difficult to ask questions, take notes, and think ahead to the next topic by yourself.

Rules for Conducting the Survey Interview 

Set a time and schedule the meeting. Never just call a customer out of the blue and tell them you have a survey. Ask for permission to conduct the survey.



Conducting the survey should always start with an overview of your goals for the conversation, including what you are trying to accomplish. You should also explain how many questions you have (we recommend no more than 10 – so they’d better be good ones!).



Stay within the allotted time. If you think you are running beyond the scheduled time, ask for permission to continue or schedule a follow-up call.



Take copious notes. Ask for additional explanations if you don’t understand the customer’s answers.



Always thank your customer for his or her time

Follow-Up If you promise anything to your customer during the survey, then make sure you deliver. For example, if you’ve said you will provide notes from the conversation, then write them up and email them quickly. If you’ve promised to investigate something or follow up in some way, then make sure you do. There is nothing worse than promising your customer something and then not delivering.

Selecting Customers to Survey When selecting which customers to survey, choose carefully. Consider your best customers or the most strategic ones. Your company might also be interested in developing a certain solution by industry. For example, you might be developing a pipe fitting designed for the oil industry. If Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.

For more information on Reshoring, visit www.BlueSilkConsulting.com/Reshoring www.ReshoringInstitute.com

info@BlueSilkConsulting.com or contact Rosemary Coates rcoates@BlueSilkConsulting.com +1 408-605-8867

Rosemary Coates, President Blue Silk Consulting Rosemary Coates is President, Blue Silk Consulting, a Global Supply Chain consultancy. She is an Amazon.com Best Selling author with three other books: “42 Rules for Sourcing and Manufacturing in China,” “42 Rules for Superior Field Service,” and “Negotiation Blueprinting for Buyers.” Ms. Coates earned an MBA from University of San Diego and a BS in Business from Arizona State University.

She has been a management consultant for 25 years, helping over 80 global supply chain clients. She serves on the Board of Directors of the University of San Diego Supply Chain Management Institute.

She is passionate about bringing manufacturing back to America.

PO Box 760 Los Gatos, CA 95031

Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.

Produced and Printed in the USA Additional copies for sale at http://ReshoringInstitute.com and Amazon.com DVD + Guidebook $399.99

info@BlueSilkConsulting.com

Copyright 2014 Blue Silk Consulting LLC. All Rights Reserved. No part of this document may be reproduced without the express written permission of Blue Silk Consulting LLC.