By Dennis Seid/NEMS Daily Journal
STARKVILLE – The advantages of reshoring – bringing jobs back to the U.S. – is a concept Guy Lipscomb can relate to.
Lipscomb, the CEO of Southern Motion, a Pontotoc-based upholstered furniture company, has never thought offshore work was right for his company.
“We didn’t see the cost reduction opportunities that a lot of companies thought they’d have,” he said. “If you look at the ‘China price’ only, you’re not looking at the total cost.”
That was the message at a conference Monday at Mississippi State University’s Franklin Furniture Institute. “Reshoring, Retaining and Growing Mississippi’s Manufacturing Jobs” tackled offshoring – sending jobs overseas – and reshoring.
The key presentation was made by Harry Moser, president and founder of the Reshoring Initiative. Moser said the total cost of ownership, or TCO, should make companies do less offshore work and bring more back to the U.S.
“So many companies focus on rudimentary costs, not the whole cost, which can add 20 to 30 percent,” said Moser. “You may have improved margin by offshoring but your quality may have worsened and your overhead costs may be higher.”
In the furniture industry, bringing cut-and-sew kits from overseas is common practice. These kits contain the fabrics used to cover the sofas, recliners, chairs, etc., and are sewn on by workers at a local factory.
At Southern Motion, there are no imported kits. Instead, the fabric is cut and sewn in-house.
Lipscomb said relying on imported work affects his company’s “credibility and integrity.”
“For cut-and-sew kits, you’ve got to take them off, line them up, inspect them and there’s a certain percentage that’s unusable.”
Lipscomb said relying on his own workers ensures quality of the product and allows flexibility that otherwise can’t be found by relying on work done offshore.
“Our philosophy is we can do it with the people we already have,” he said. “Although the labor costs are higher, we know what we can adjust, we know what we can ship.”
Something must be working well – Southern Motion recently expanded into a second facility in Baldwyn and employs more than 1,000 employees company-wide.
The “China price” has long been the bane of U.S. manufacturers, who see Chinese companies offer significantly lower up-front prices for their goods. The under-valuation of the Chinese currency, the yuan, also reportedly makes U.S. goods 40 percent higher. But Moser and others at Monday’s conference said rising labor costs in China have eroded the “China price” advantage, and the gap is narrowing.
Chinese labor is still cheaper, but the total cost of doing business in China is forcing companies to bring jobs back home. According to a recent MIT study, 61 percent of larger companies are considering bringing manufacturing back to the U.S. Forty percent of contract manufacturers have done reshoring work this year.