The bottom line rising material and logistics costs, along with currency factors and speed of turnaround, are dimming the shine of offshore sourcing by U.S. parts suppliers. But whether an all-out shift in gear is looming remains to be seen.
In a trend whose progress has been marked mainly by anecdote and example, one recent experience by Jerry Zeitler, president of Die-Matic Corp., serves as a typical illustration that "reshoring" is for real, at least for part of U.S. industry. Zeitler late one Friday received a request for quotation (RFQ) from a so-called Tier 1 automotive supplier for work then being sourced in Asia for one of the Detroit-based Big Three automakers. But "escalating material, logistics and currency" factors were prompting the supplier to review the possible recall of the work back to the United States, and it was asking for domestic companies to bid on the job.
Moreover, it wasn't likely to be just a one-off inquiry. The customer, who is looking to "localize" additional production, told Die-Matic, based in Brooklyn Heights, Ohio, to expect additional RFQs.
Die-Matic, which provides metal stampings and specializes in progressive dies and assembly fixtures, had been losing work to Asia for the past 10 years or so. Not only were the prices charged by the Chinese for tooling cheaper than domestic, but at times "they just threw it in" with the aid of subsidies as export tax rates, Zeitler said. "A lot of that has gone away," he said of the subsidies.
The trend has been increasing in the past six to nine months. "There are probably a half dozen jobs I have now and a half dozen that are in the works," said Zeitler, who thinks "this is just the beginning" of work returning to the United States. Customers are returning because of quality, currency and logistics, he said.
One contract shop that itself tried outsourcing tools and instead found it could "do it faster and easier" at home is GR Spring & Stamping Inc., which about seven years ago hired a Chinese engineer to source tools in that country but eventually decided that it was "faster and easier" not buying offshore.
"The only time we place a tooling order offshore is when our customers request it," said Jim Zawacki Sr., chief executive officer of the Grand Rapids, Mich.-based automotive parts supplier, which hasn't gone back to China for tooling in two years.
Zawacki acknowledged that GR's tooling shop wasn't initially up to the challenge of turning things around. But it adopted the concept of lean manufacturing, the production strategy geared toward achieving the shortest cycle times by maximizing value and eliminating waste.
"We weren't competitive to start with," he said. However, the company achieved its goal of slashing turnaround time from 16 weeks to 12 weeks and then to eight weeks or better to design a large tool, while some smaller tools for a domestic automotive transplant were done in two to three weeks. This has helped support GR's stamping business, and in the process of increasing its speed "we've also lowered our cost."
Two years ago, GR was asked by a Japanese automaker to design a part and deliver it to Japan in five and a half weeks, Zawacki said. Due to the quick turnaround, the customer at first thought the tools were samples instead of the finished products. "They couldn't believe it," he said.
While tooling represents just 10 to 15 percent of GR's overall sales, it also is the foundation of its business, Zawacki said. "If you're building the tool, you know you have (the rest of) the business coming," he said.
The environment that spurred reshoring also has helped some manufacturers grab work from overseas. One company that turned the tables by actually moving into a domestic market formerly dominated by foreigners is 37-year-old Texarkana Machine Co. Since 1988, the Texarkana, Texas-based company has specialized in replacement parts and subassemblies for equipment used in the finishing departments of paper mills that cut, wrap, label and palletize such products as copier paper. The original equipment is manufactured mainly abroad, especially in Germany but also in Italy. But the equipment is used heavily and certain parts must be replaced on a regular basis, said Steve Petty, Texarkana's president, and it can take as long as six weeks to deliver those parts. Petty's company took some of the parts, applied reverse engineering, put Texarkana's own spin on them and sold them at lower prices than the original equipment manufacturers (OEMs) on a replacement basis. Petty emphasized that the advanced capital equipment used by his company would cost pretty much the same whether purchased in China or anywhere else, but Texarkana's trained labor force is able to operate two or three machines per man. "And that's a selling point," he said, citing the company's computer numerical control machinery and lathes, which he said helps his company compete.
Zeitler noted that Chinese shops generally have smaller presses than their U.S. counterparts—in the 100- to 200-ton range, with smaller beds that aren't able to run a five- or six-foot progressive die. Die-Matic's presses go up to 1,000 tons.
The global recession had an impact on Chinese companies along with everyone else, as indicated by one job won by Die-Matic, he said, noting that manufacturers in that country forced to cut back weren't able to immediately call back experienced workers when conditions improved. And when production volumes returned, not only did lead times extend but quality suffered.
Meanwhile, foreign OEMs haven't been happy about the competition they've been getting from Texarkana. "They told me that they'd run me out of business," Petty said. He's still waiting. FRANK HAFLICH