Eyewitness to Onshoring

Patricia Szczuka is a vice president of Computed Tool & Engineering, a maker of progressive dies and other tooling in Anaheim, California. I recently spoke with her about the phenomenon of “onshoring” or “reshoring,” in which manufacturing work returns to the United States. Reshoring is real, she says—her shop benefits from it. However, while it seemed to her that work left the country in a big wave in 2001, it is not coming back in a similar fashion. Instead, it has returned sporadically, one job at a time, for any of a variety of reasons.

Ms. Szczuka’s observations about low-cost competition paint a picture of offshoring and onshoring that is more subtle than the popular view. Cost is not always the issue, she says, and when it is, foreign suppliers aren’t necessarily the least costly. Here are some of the brushstrokes of the picture that she paints:

1. There is no single big reason why work comes back to the U.S.

Quality is not the main factor, she says. Some customers have faced unexpected quality problems in China, but this doesn’t stand out to her as the most significant reason why work returns. Rather, there is a spectrum of reasons. One customer sending work away brought the work back after a U.S. harbor strike disrupted shipping. Another customer wanted to protect the details of an innovative design. Yet another just wanted pricing to remain stable for the length of one-year contracts—something that was not possible given the volatility of both shipping costs and the foreign market’s material prices. In short, the reasons for reshoring are as different as the companies.

2. People who send manufacturing away often do not weigh costs objectively.

When a U.S. shop bids against a foreign supplier, the comparison is often apples-to-oranges, Ms. Szczuka says. The customer might expect and permit a lower level of performance from the overseas shop, without factoring the cost of that difference into the quotes. She says she has objected to this mentality as if on a playground, catching herself exclaiming to a customer, “That’s not fair!” (But to no avail.)

3. Then again, people who keep work in the U.S. do not always focus on cost, either.

Trust keeps work in the United States, she says. Long-time customers know that her shop will recommend changes to a die because the change makes sense, not to raise the die’s price. Simple personal relationships help, too—as in the value of getting to deal with a vendor who knows the names of your children. In one case, a manufacturing buyer wanted Computed Tool to send dies to Mexico for use in short-run production there. Computed Tool offered to keep the dies and perform the production itself—saving the buyer from having to find stamping, deburring and plating suppliers in another country. The promise of avoiding this hassle was enough for the buyer to say yes.

4. Low-cost competition doesn’t have to be foreign.

A lower-priced competitor might be located in an American garage instead of in China. The low bid might come from an owner-operator with just one CNC machine. Many successful shops have started this way, and some of today’s start-ups will be tomorrow’s substantial businesses. That is why Ms. Szczuka says focusing on China, or even foreign suppliers in general, partially misses the point. Instead, the key is to see and adapt to the pricing pressures affecting the overall market. “Emerging economies” are found in many places, including within our borders.