Reshoring America with Harry Moser - Uptime Logistics
Today on Uptime Logistics, Doug Draper of ACME Distribution and the Denver Transportation Club explores the concept of reshoring America’s manufacturing with Harry Moser, founder of the Reshoring Initiative. Created in 2010 as a non-profit, the Reshoring Initiative’s goal is to balance the trade deficit of goods that America has with its trading partners.
Harry begins by outlining how the U.S. had a trade deficit of $1.1 Trillion in 2021 . Balancing this would see US manufacturing increase by 40% along with 5 or 6 million new manufacturing jobs. Raising awareness, advocating for policies, and providing pathways to achieve this balanced outcome makes up the work of the Reshoring Initiative.
The annual rate of manufacturing jobs coming from offshore increased from 6,000 in 2010 to 190,000 in 2017. Read More
Doug asks more detailed questions about why all of this is important. Harry shares some of Ray Dalio’s ideas, along with his own, about the importance of strengthening the US economy and the greater level of confidence created along with that.
They discuss many factors ranging from environmtanl concerns to logistics costs and other considerations. Harry then dives into the methodologies to enables more reshoring, including their calculations of Total Cost of Ownership. Just by doing the math correctly, about 30% more manufacturing could be easily and economically advantageous to produce in the United States instead of abroad.
Today’s episode outlines the positive trends we have been seeing over the last 10 years in making progress on reshoring and the positive signals as we look forward to the next 5 and 10 years. Overall, Doug and Harry highlight the importance of reshoring through exploring the reasons why and the methods to achieve this goal.
Learn more at:
www.reshorenow.org
Read the 20 articles Rshoring Series here:
https://reshorenow.org/blog/welcome-to-the-rebuilding-and-reshoring-series
Contact Harry Moser at:
harry.moser@reshorenow.org
(847)867-1144
You can also support the Reshoring Initiative at no extra cost by using this Amazon Smiles link designed for supporting non-profit organizations:
https://smile.amazon.com/ch/45-3289843
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Doug Draper 0:07
Hey, thanks for joining us today on Uptime Logistics powered by CAP Logistics, and I am your host, Doug Draper. I'm with the Denver transportation club and Acme distribution. And we have an amazing topic and an amazing guest today. I can't wait to introduce you to him. We are going to be talking a little bit about reshoring. America with reshoring initiative. And Harry Moser is with us today. Eric, I got to talk about you before you jump in here. Right. Okay. So, first of all, Ares a leader, he spent 25 years at the helm of manufacturing machinery solutions. He's an advisor, he's been chairman emeritus at the same organization. He's a scholar. Here, I didn't realize you get degrees from MIT and University of Chicago. So I need to make sure I sit up straight. And then represent my myself where award winner you have too many awards for me to mention, list them off, but quality magazine's professional of the year in 2012. And you are an inductee in the industry week's manufacturing Hall of Fame. Didn't know that existed. But I'm glad that you're part of it. That's pretty impressive. You've been quoted and everything on the Wall Street Journal, Forbes, USA Today. And you were involved with some task force with a former President Obama. And most importantly, with this call today, Harry, you are a founder with the reshoring initiative. So Harry, welcome to the show, my friend, how are you doing?
Harry Moser 1:37
Great. I'm very happy to be here with you.
Doug Draper 1:41
That's awesome. So probably too long of an intro, but mostly well deserved. So first and foremost, tell us about reshoring initiative. What's it all about? I'll turn it over to you.
Harry Moser 1:53
Great. So reshoring Initiative is a nonprofit, which I founded in 2010. And our, our mission is to balance the goods trade deficit. So the US in 2021, had a trade deficit of $1.1 trillion. That means we imported 1.1 trillion more than we exported. And balancing that which on average, every every country has to have balance on average balancing that would increase US manufacturing by 44 0%, would add five or 6 million manufacturing jobs. So that's, that's my goal, bring it bring those jobs back to the US, which would be a huge difference for the country.
Doug Draper 2:37
That's, that is, is amazing. So, you know, one of the things I say is, hey, the things I buy and the things I use, the clothes that I'm wearing right now, most likely was not made here in America. So why is it important to bring jobs or bring those jobs back and achieve the balance? Trade? A trillion dollars is a lot to balance. But why should America care and talk about the importance of that?
Harry Moser 3:00
Okay, so first, the shirt I'm wearing with our logo on it is made in America. I have to walk the talk, and I get them from something called authentically American, and got very good quality made an American product. So why is it important? First, I think there's to create confidence in the country. I don't know if you follow Ray Dalio, but he talks about two major countries competing. And when that happens, the one that used to be the leader tends to decline, the new one sort of takes over like, like the US did relative to to England, you know, whatever, 70 years ago, and right now it's US and China. And there's a feeling of Moez, you know, of American decline, that we're not the superpower the arsenal of democracy the the industrial juggernaut than we used to be. So just like by showing that that's increasingly not true, that we've made the turn that we're coming back, I think it's very good for confidence in America. The, in addition, when you bring back manufacturing jobs, you strengthen the economy, the multiplier effect for manufacturing is anywhere from two to seven, depending on what you're manufacturing, whereas the the multiplier effect for retail is maybe 1.4. So So by bringing back manufacturing jobs, you bring back all kinds of other jobs. You deal with a lot of the major national problems like income inequality, read all time about income inequality. And some of that's we've got too many billionaires maybe, but it's also that we've lost millions and millions of solid middle class manufacturing jobs that would pull those curves back together. We've got federal and state budget deficits going on forever and can't can't can't do that forever. And by putting these people back to work by having their companies make more profits, the tax tax revenue will be higher, the expenditures will be lower things will be better the environment, it's cleaner to make things here than it is to make it there and ship them here. Innovation. Some people say, Well forget manufacturing, let's do innovation. Well, it turns out, you can't do innovation as well, if you don't also in the same more or less the same location to manufacturing. Because if they're together, the engineers, the design engineers and the manufacturing engineers can work on the product and the process and to optimize for the defense industrial base. Increasingly, the Pentagon says, we no longer can obtain a lot of the components and materials we need for the defense of our country, in our country, even from our allies. So for all these reasons, it makes sense to bring it back.
Doug Draper 5:46
Yeah. Well, you know, whenever things touch an individual, then they kind of take notice. And I really liked the fact that you had made mention in the environment. That's something that's been a theme that's resonated through a lot of our uptime, logistic shows, how do you reduce the carbon footprint? What can I do as an individual to impact this massive situation we're dealing with? So yeah, that I think that's a very valid point to bring up. So let me ask you this. Favorable trends, right, we talked a little bit about things that were may have missed if I were in this position, but there's gotta be some trends out there that you're seeing that are tipping the scales. We'll talk about those?
Harry Moser 6:26
Well, first, first, the trend, the result is that when we started this in 2010, in that year, the total number of jobs announced coming back was about 6000, in the year, last year, 2021 in the year 260,000. And this year, 2022. Looks like 340 350,000. So we're 4050 times as many jobs per year being announced coming back. So the overall trend is, is very favorable. So it's it's much more than an even I predicted 12 years ago.
Doug Draper 7:06
So what are any other trends? I know, we've talked a little bit about a few other ones out there as any other things that you're seeing that are helping to tip.
Harry Moser 7:14
The things that have helped it happen that helped make that trend is given at the momentum over the over the years from say 2010 to 2020. Company started to recognize that that even though they were saving 30 40%, by buying offshore, the routine costs of duty and freight, the carrying cost of inventory and travel, the risk of stocking out all this stuff, made it clear that some of the stuff was more competitive to produce some source here. And now the let the last two years disruption has become the norm you might say the the 1000 year storm now hits every five years kind of thing. And the so companies have seen the Fukushima tsunami, the Thai floods, the COVID coming out of China are en la doc strike, the Suez Canal blockage, the Russia, Ukraine wall war, and each one of these cases, all kinds of supply chains, crunch to a halt. And for weeks or months, you don't get the product that you need. And now hovering over all that is the is the risk of some kind of decoupling with China, because of either they're just tired of us, because of our position on various issues are that there's actually some kind of violence over Taiwan. And if that happens, and and all shipments stop from Taiwan and China for months or years, some companies are going to go out of business. And so we we say they should at least look at that, do the math. And we can show them that 20 30% of what they're importing from China, they'll be more profitable producing here in the US. So at least bring back the stuff that you'll be more profitable by bringing it back. So that if if the if things go to hell, you'll you'll you'll your danger, your damage will be less. Yeah.
Doug Draper 9:13
Well, you check when you are going through the list of things that are impacting external forces, right? I think I joke with my wife that at a cocktail party is nobody cared about supply chain and logistics, they want to talk to the doctor and the lawyer. Now all of a sudden, everybody wants to know what's going on with supply chain logistics, but you nailed it with so many external forces that a manufacturer has minimal if any control and the carrying costs are huge, or you purchased this thing and it's sitting on the water or stuck in a warehouse or stuck in a port. That's hard dollars. So I'm glad that you made mention and people may not understand, you know those indirect indirect implications. So, all right, so we talked about it. One thing that you mentioned was and data. And I think it's really important because our audience may say, Okay, well, what is the reshoring initiative, you talked about, you know, doing some analysis and things like nature. So talk specifically about what the reshoring initiative can do. If I'm a customer, I'm like, a company and I'm making this widget, it's going to cost me X and China and y. And in Colorado, where I am talking about the tools out there that you can provide those groups,
Harry Moser 10:26
we have ways to enable the process to make more reshoring happen. And so the, the one that we started with was TCO, total cost of ownership. So so we provide a software on our website that companies can use, and get them to go away from just looking at the price, the the fob price, or the Ex Works price, and instead calculate the total costs. So the using the software they did, they didn't put a lot of data, and then the algorithms would do the calculations, but it would start with it that FOB price, and add in the duty and the freight and the carrying cost of inventory, the travel costs the risk of stocking out because of long deliveries, etc, etc. So it's actually 2025 of these, these different costs than when and I took the 280 cases of China versus the US where the user had put in all the data. And based on FOB price, the US would win 8% of the time, but based on total cost 32% of the time. And if there happened to be a section 301 Trump tariff of 15%, then the US wins 46% of the time. So just by doing the math correctly, and going away from just looking at price, but looking at all the relevant costs and risks. All of a sudden 20 30% of what is being imported, becomes clearly producible or searchable here
Doug Draper 11:56
at a higher profitability. Yeah. So it's not necessarily advocating bring 100% over let's look at your product mix and the manufacturing that you're doing and find out. I mean, I don't know if this is the right term, maybe some low hanging fruit that would be easy to pull out that would really have some serious impact on the bottom line for the company and the customers.
Harry Moser 12:15
What we say is, if someone comes to me and says, where should we start, I say, make a list of the products where you have pain, where you have too much inventory, or you're stocking out where the quality isn't what it should be, and you haven't warranty costs where you have too much travel or midnight telephone calls to work on issues, one after the other. And start with those because there'll be champions inside your company that will support the process. Whereas if you if you start with the stuff where you're hugely profitable, and everything's wonderful, that you're not going to get the support to do the analysis.
Doug Draper 12:51
I know there may be some capital expense involved with bringing manufacturing back to the US, right? Hey, the factory takes care of everything they buy the raw materials, they have the equipment to manufacture the items. Harry, I love it, I want to do my part, I get it. But it's going to cost me X dollars to try to get up and running here. Do you factor that into the equation with capital expense?
Harry Moser 13:15
In the in the actual TCO calculation? No, perhaps I should. But it calculates sort of a steady state difference in the cost. But I agree entirely that the company should look at the one time cost of making that transition. So for example, if you if you've got a mold over there, and it's being used in China, and you may not be able to get them all back, you may have to buy another mold here. And you there'll be some kind of startup cost of making the product here, either in your own phone factory or outsourced. Does always start up, you know, the first article inspection, getting any things working right quality, etc. So there's definitely always costs involved, and those should definitely be included in the calculation.
Doug Draper 14:02
Yeah, it sounds like everybody, at least in the industry that you and I are in is that What's plan B, right? I got problems in China, Taiwan. I need a plan B because I need to continue to sell my product. So really reshaping, in some instances is not just, Hey, here's a 18 month fix. But we're ultimately gonna go back China. Really the success stories out there is think of a longer runway view of this. And yeah, there may be some capital expenses. But if you're here to stay and really want to impact what we're trying to accomplish, don't look 15 feet in front of you look 50 ahead of you. It's kind of what you're saying is that right?
Harry Moser 14:40
Yeah. And that's what the Chinese do. They've they've had great success. Yes, pulled their people into the middle class with our money. And because they've taken that 50 Year 100 100 year view and develop the industries develop the training, don't don't investment, you know, stolen intellectual property. I've done things that are wrong, but If they've made it happen, and our companies need to take that, that long view also, both in terms of where should I make it, but also in terms of the long term view on automation, for example, that US companies definitely under invest in automation and CNC machine tools and robots and all this kind of thing relative to most other countries. And if we do that will, our productivity will not go up will not be competitive. So we need to invest in automation and lean to make help improve the process flow and such within the companies in skills, apprenticeship programs, recruiting a really smart kids to commit and learn learn the trade or profession within their company. So companies need to take that longer look. And, and, and when they look long, they'll see that China has probably peaked that they their population is falling, their workforce is dropping at something like 3.4 million per year, because the one child policy there, they they're going to age out people say they will age out before they get rich. And that's a problem for them. They have a drought problem ongoing for centuries drought problem, there's a lot of reasons why China isn't as great a place as it as it was 20 years ago, and why the US makes an awful lot of sense. Yeah,
Doug Draper 16:31
no, I like the the need to look at that runway. And you mentioned that's what China did is not looking at what's happening right in front of my face. But what's the long term play? Speaking of which, I have two questions. I want to follow up and trying to figure out which one to ask first. So I'm just gonna go into the chips act when I spoke about that before. And it's in the news now, and it's made a made headlines, talk about that, what's your thought maybe, for our audience, reset and explain what it is and talk about the benefits you see, related to reshoring initiative. Okay, so
Harry Moser 17:04
we endorsed the chips Act, the US had fallen substantially last, its share of chip production, I think we used to be 5045 50%. And we're down to 13%, something like that unacceptable condition for the leading country, the leading technology country in the world. And so we had to do something, a lot of money for 52 billion, I think for desperate to subsidize the building of the chip foundries, and then hundreds of billions more for r&d and training and all kinds of things. But I believe it had to be done. But my my concern is that, say, let's go back to basics, the reason we have the huge trade deficit, is because US manufacturing cost is 40% higher than China is 10 15% higher than much of Europe and Japan and South Korea. And, and, and as a result, or let's say the cause of that is lack of skilled workforce, we're not as productive as we should be. And the dollar is just too high. 2030 40% too high. And so if you don't correct those problems, if you don't get the skilled force, like Germany, or get the dollar down, so we're competitive, then we're going to have all these chip foundries that we've subsidized pouring out to build trillions of chips, and every other country is doing the same thing they're building chip foundries, and, and our chips are going to be the most expensive is generally agreed ours are going to be you know, 1520 30% more expensive than the Chinese chip. And so we'll be making lots of chips, but we don't assemble much in the way of electronic products, we buy our infotainment systems or servers, or electronic medical devices from China and other countries. And so we're going to be dependent on China to buy our chips to produce the electronics to ship back to us, we're just going to work if there's no serious disagreement between US and China, they're gonna say, hell with you, we'll, we'll use our own chips. And so if they've made the commitment for the chip foundries, I believe we need to work to level the playing field, get the rest of us manufacturing, price, cost and price competitive. So there'll be a market here for the chips. Otherwise, I predict that some of those chip foundries are going to go bankrupt in 10 years.
Doug Draper 19:22
Hmm, yeah, that's a great, great angle on it, I can totally understand your point. And related to the you know, you and I could go down a wormhole or have two or three more shows just about the political nature of what's going on and pray about China. So but that's a great point. I, you know, I have not thought of that everybody's like, Hey, we're getting these these foundries and these manufacturing plants, everything is solved, but you bring up a very valid point that is in the future. So I want to flip to the other the other questions I had is kind of like five years out like future trends if if our audience so my question is, Where did these Where do you see reshoring? Initiative? Specifically? And maybe how Americans starting to embrace the concept of reshoring? Where Where do we? Where are we five years from now? Okay.
Harry Moser 20:11
But in terms of embracing, I've been delighted with the last year or two. Because what happened, especially with COVID. And now with Russia, and now in China, everybody seems to see that being so dependent on offshore and especially on non allied countries is just stupid. It's just it's not not consistent with the long term strength of it or survival of the country. So everybody seems to understand that now, whether it will take the right actions is the question, but at least we've got that basic understanding. As an example, Wall Street has come around where we're at 2030 years ago, and Wall Street was pushing, telling companies cut back to your core competence. Let's see, what is that that's finance, of course, marketing, maybe sales, you know, something or engineering, keep those here. But that manufacturing stuff, that's a commodity, send that off to China, India, Mexico, somewhere haven't done, and, and you'll reduce your assets employed, return on assets goes up, life's wonderful. And now the companies are finding that doesn't work. And so the companies are starting to come around, and Wall Street is actually coming around where it used to be pushing the companies offshore. We now have at least eight Wall Street finance companies, either either research or analytical companies or are like big banks, like Bank of America, that have come to us used our data, put it in their monthly reports, some of them even buy our data to recalculate and distributed to their clients. So Wall Street is telling companies reshoring is real. And you shouldn't be. And the company should be identifying the actions they can take the investments they can make to maximize their benefit from reshoring. So we're delighted to have Wall Street on board.
Doug Draper 22:08
Yeah, yeah, talk about embracing, having, like you said, Wall Street on board is huge. So there's probably some other barriers, right, that still need to be overcome, to really flip, you know, put this thing into fifth gear and punch the gas down with a paradigm shift. So Wall Street's on board, starting to embrace it more, what else is out there that needs to be removed or addressed, to really take this thing to the next level,
Harry Moser 22:32
in priority order, and I've alluded to some of it is, number one is skilled workforce, we need to have a skilled workforce, like Germany's in Germany, something like 60%, six oh, percent of the high school kids at the age of 16, or 17, go into an apprenticeship. And they become incredibly well skilled, really well trained by a master. And they're, they're as good as anybody in the world at what they do. And we tend to have people that just sort of fall into the industry somehow, too often. And so we need to have a skilled workforce like like Germany's more engineers, they train more engineers, as in their universities as a percentage than we do. So we're more engineers. So that that whole workforce side, and then we need to get the dollar down. It's generally agreed the dollars 30 or 40%, overvalued, especially now it's had a big run up the last six months. And so you get the dollar down to a point where our costs become competitive once again, and then the government won't have to subsidize companies to move we're here because the companies will say, of course, I'm coming there because it's the most profitable place for me to be in the biggest market in the world.
Doug Draper 23:41
Yeah, I love the workforce development aspect of it. I have two kids in college and the concept of a four year traditional college, especially with COVID. I'm seeing it right in front of my face. And I think you're spot on with with redeveloping, you know that workforce into into engineers and skilled workers. So I am 100%. in agreement with that. So all right, let's end this thing up. You're here you're talking about not only the reshoring of America, but reshoring initiative. So talk about two or three things that your company specifically can help clients out. They're like, hey, what's Harry got to offer? I need more information. So here's your chance to talk a little bit about your business. I'm gonna do that. Harry, I gotta do that. Right.
Harry Moser 24:24
That's how you pay for dumping in here. Yeah, yeah. So I mentioned the TCO estimator, which is the tool to help companies do the analysis and figure out where to put the factory where to buy or source the products. I helped a company called Mori Corp, outside of Illinois, outside of Chicago use that to convince its customer to buy from them instead of China. And that was the key to winning a $60 million order. So it's a tool both for sourcing smarter and for selling smarter when you're competing with offshore that's TCO info or substitution program, a company can identify a product, a widget is something that they're really good at making, we can train them to use TCO and identify the biggest importers of those products. And then, and then our client goes to those importers and convinces the client to buy from them instead of continuing to import by showing that importer that the importer will be more profitable sourcing here, we have a somewhat similar program called supply chain gaps, that identifies the biggest gaps, the areas where we import a lot and don't make anything here. And then states can use that, and will identify the biggest foreign suppliers and the state's goal is to get them to put a factory in the state to overcome that supply chain gap. So you've got a series of programs like this to work with companies, with buyers with sellers and with government to to solve the problem. That's great.
Doug Draper 25:53
So how does our audience how do they contact you website? Phone numbers, social media and talk about that real quick?
Harry Moser 26:01
Sure. www dot reshow now.org Harry dot Moser at ratio now.org That's MOS er, and 847-867-1144.
Doug Draper 26:14
Yeah, throwing your phone number out there, man. That's, that's, that's impressive. So I'm glad that you found three ways for our audience to get in touch with you, Harry, I can't thank you enough for talking with us today. If uptime logistics had a Hall of Fame, you'd be the founding member because your depth of knowledge and ease in which you explain what the reshoring initiative is doing is phenomenal. So I want to thank you for that.
Harry Moser 26:38
You made it easy for me to actually show.
Doug Draper 26:42
Oh, thanks. Thanks. So we've been talking to Harry Moser with the reshoring initiative has given us some great knowledge and Intel and please reach out to his organization. I'd also like to thank the uptime logistics nation out there. Thanks for listening us today. Of course, it's powered by CAP logistics and you can find more information about the show in the description below. Don't forget to like and subscribe to the uptime channel. And please visit cap logistics.com and until we meet again. Enjoy be safe. Thanks again hearing. Take care guys. Bye everybody.