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For Some U.S. Manufacturers, Time to Head Home

More companies are assessing the true cost of outsourcing

Thirteen days before his State of the Union address, President Barack Obama held a meeting at the White House to discuss how to bring outsourced jobs back home. Among the 25 participants was Harry Moser, ex-president of machine-tool firm GF AgieCharmilles, and founder of the Reshoring Initiative, a group of companies and trade associations trying to bring manufacturing jobs back to the U.S.

When asked by the President what costs manufacturers typically ignore when making decisions on where to make products, Moser mentioned the total cost of ownership. That includes factors such as intellectual-property risk, the cost and time of travel to visit distant suppliers, and the negative impact of separating manufacturing from engineering staff back at headquarters. Using data compiled from 10 manufacturers that compared the costs of products and components made in the U.S. vs. China, Moser told Obama that when measured on price, the U.S. was on average 108 percent higher. When Moser analyzed the total cost of ownership, which includes 28 additional factors, the U.S. averaged 12 percent higher. In six cases, the total cost for the U.S. was lower than China by an average of 22 percent. “The U.S. is a lot more competitive than people realize,” he says. “Over the last several years, firms got caught up in the outsourcing trend without thinking through the costs.”