“Take the time to do the analysis on what the true costs are of dealing with offshore companies. The quoted price will be very attractive, but the other costs add up quickly and, we have found, are substantial,” says I-Con Systems CEO Shawn Bush.
Photo: Norma Lopez Molina
With the cost of machinery coming down, Eric Higgs, CEO of LumaStream, moved his LED lighting company’s manufacturing from Taiwan to St. Petersburg.
Photo: Bob Croslin
Roger Murphy, president of Hy-Lite/U.S. Block Windows, cites high shipping costs and logistical headaches as some of the reasons for reshoring work that his company had done in China.
Photo: Michael Spooneybarger
Manufacturing
Not Made in China
A number of factors are driving Florida companies to move operations back to the Sunshine State.
I-Con Systems, a Seminole County company that makes plumbing control systems for correctional institutions, had been manufacturing its components in China for about a decade when CEO Shawn Bush began thinking about moving manufacturing operations back to Florida.
Like most manufacturers, Bush says he was originally lured to China by lower labor costs, but had encountered a number of problems in dealing with his overseas manufacturer, including the language barrier, a lack of consistent quality and a time lag in receiving material.
A critical moment came when all three problems occurred at the same time with a key vendor. “We had a large shipment that was delayed by a vendor, and when it was received, it did not pass our quality control,” says Bush, who was unable to communicate with the vendor to explain the issue and get it corrected in a timely fashion.
After scrambling to save the customer and the project, Bush decided that the offshore relationship was not working and began acquiring equipment, personnel and the skills to bring the key items in-house to his factory in Oviedo in Seminole County.
“We began moving manufacturing about two years ago and now do 90% of our manufacturing in-house,” says Bush, who has hired 15 additional workers and purchased more than $300,000 in equipment to aid his growing manufacturing operation.
The “reshoring” trend has picked up pace across the U.S. as labor costs in China, India and other countries have begun to rise. While American wages have flatlined over the past several years, wages for the typical Chinese factory worker have increased almost sixfold over the past decade, from 62 cents an hour in 2003 to about $3.50 an hour today.
High Concentration
Counties where manufacturing jobs are at least 6% of total employment.
| County | % of Jobs in Manufacturing |
| Taylor | 22.2% |
| Dixie | 16.4 |
| Brevard | 11.0 |
| Putnam | 10.4 |
| Wakulla | 10.3 |
| Madison | 10.2 |
| Manatee | 8.4 |
| Pinellas | 8.0 |
| Gadsden | 7.8 |
| Polk | 7.5 |
| Columbia | 7.4 |
| Marion | 7.3 |
| Levy | 6.5 |
| Nassau | 6.4 |
| Source: Florida Department of Economic Opportunity, Bureau of Labor Market Statistics, Quarterly Census of Employment and Wages, in cooperation with the U.S. Department of Labor, Bureau of Labor Statistics. Data from 2012. *Data not available for Hamilton, Liberty, Suwannee, Union and Washington counties. |
|
Although that’s still dramatically lower than the average hourly wage of around $19.30 for a U.S. factory worker, the higher productivity of American workers means China’s labor-cost advantage drops to about about 55%. In addition to wage inflation, a higher rate of employee turnover, a sharp rise in China’s currency and intellectual property theft are also driving up manufacturing costs in China, along with the costs associated with difficulties like those Bush encountered. The natural gas boom, meanwhile, has dramatically reduced energy costs for U.S.-based factories.
As the manufacturing cost difference between the U.S. and China shrinks, it often makes better sense to bring production closer to market, says Dave Sievers, a principal at the Hackett Group, a Miami-based consulting firm that advises manufacturers on offshoring and reshoring.
Sievers also says that companies that manufacture closer to home can be more responsive to customers who need finely tailored specifications or customized changes to the products they’ve ordered. “It tends to be better to have the production closer to the market,” he says, “so it’s easier to provide those value-added services, so you can be more responsive.”
When U.S. Block Windows, an acrylic block window manufacturer in Pensacola, bought out Hy-Lite in 2009, Hy-Lite was outsourcing most of its injection molding to China. Roger Murphy, president of Hy-Lite/U.S. Block Windows, says steep shipping and warehousing costs and logistical headaches convinced the company to bring that work back.
Research from the Hackett Group shows that companies begin to consider outsourcing when the cost of manufacturing overseas appears to be 20% less than making goods in the U.S. But companies that have outsourced jobs will consider moving them back when that cost gap narrows to 16%. The consulting firm predicts that the “total landed cost gap” with China will reach 16% some time this year.
