And now for something completely different: Good manufacturing news

The increase in foreign wages and shipping costs are just two reasons companies might return their manufacturing operations to the U.S., according to Archstone Consulting.

The Stamford, Conn.-based company said new assessments of “manufacturing and supply chain strategies” could result in scenarios in which manufacturing in the U.S. is more profitable.

Archstone said its study results are a “wake-up call for manufacturers” who might assume overseas manufacturing is the cheapest and most productive option.

“For years, the concept of off-shoring, or moving production and/or sourcing operations to a foreign country, has been the mantra of any supply chain manager looking to cut costs,” John Ferreira, principal and global manufacturing industry practice leader for Archstone, said in a statement. “Now, amid volatile oil prices and an uncertain global economic future, this analysis no longer is a certainty.”

It was never a certainty at Fort Smith-based Baldor Electric Co.

“That’s what we’ve known for years,” replied Tracy Long, Baldor’s vice president-investor relations, when informed of the Archstone report on overseas manufacturing.

Baldor designs, markets and manufacturers electric motors, motor drives and generators. The company, which operates 28 plants in five countries, employs about 7,500. Most of its manufacturing operations are in the U.S.

The late and former Baldor Chairman and CEO Rollie Boreham was often quick to remind reporters and market watchers that although Baldor competitors were rushing to manufacture overseas, Baldor would stay in the U.S. near customers and its qualified and experienced workforce.

Long said Baldor’s focus on remaining near customers — 85% of the company’s customer base is in North America — and its support base has not changed. She suggested some of the overseas investments by U.S.-based manufacturers might have been better spent on domestic operations.

“The time and energy trying to chase a low cost could be better used in your business where it is,” Long explained. “What we’ve always said is that we can best serve our customers by producing our products near them.”

Ferreira also suggests that companies investing in U.S. manufacturing could see improvements in customer service and innovation.

According to Archstone, manufacturers in the past three years have seen increases in costs related to “off-shoring manufacturing for export purposes” rather than in-country demand. Some of the increases include:
• Ocean freight costs have increased 135%, highlighting risks and cost volatility.
• The global commodity price index has risen by 27%.
• The Chinese Yuan has gained 18% in value compared to the U.S. dollar.
• Chinese manufacturing wages have risen by 44%.

The study also found several “soft cost issues” that result in reduced efficiencies and customer service. Those include:
• Slower cycle/delivery time
• Reduced supply chain flexibility and responsiveness
• Lost visibility, coordination and control over the supply chain including quality
• Bottlenecks in logistics networks (e.g., ports, transportation)

“The perceived 25-40% cost savings associated with off-shoring has previously been made possible by low labor costs, cheap commodities and favorable exchange rates – factors that no longer exist in today’s marketplace,” Ferreira noted in the statement.

The Archstone study found that almost 90% of the companies surveyed are considering changing their manufacturing and supply strategy and are being more selective when making off-shoring decisions.

Archstone also said U.S. manufacturers are more aware of the need to consider supplier price and terms, delivery costs, operations and quality costs, customer-centric supply capabilities and other situational costs before making a decision to relocate or site a new plant.