October 3, 2011 | last updated June 1, 2012 3:46 pm

Outsourced manufacturing coming back? | Conference focuses on 'Made Lean in America' as way to lure jobs back

Reshoring still is a dream to Connecticut's industries.

The cries to bring jobs in the state's industries — particularly manufacturing — back from foreign lands grew stronger in the past year, but even the most reasoned arguments haven't been enough to stem the tide of offshoring production to lower cost countries.

"It has certainly been a topic that's been hot for about a year now," said Jerry Clupper, executive director for the New Haven Manufacturers Association. "Lots of little things make reshoring more attractive."

The argument goes: when total cost is considered, production is cheaper locally; there is less concern about quality and intellectual property theft when dealing with a domestic company; and with new lean practices, more streamlined production lowers domestic costs.

"Company after company has learned by keeping things closer together, that leads to a stronger overall value chain," said John Shook, chairman and CEO of the Lean Enterprise Institute, based in Cambridge, Mass. "I see a lot of companies bringing things back."

Shook is speaking this week at the Northeast Shingo Prize Conference on Oct. 5 in Springfield, Mass., an event that focuses on ways Northeast companies can streamline their production and honors those who already have. The topic for this year is Made Lean in America, focusing on reversing the outsourcing trend through best practices.

When major manufacturers — starting with the automotive industry — began outsourcing in the early 1990s, they were focused strictly on production expenses. The cost of labor in places like Mexico, China and India is cheaper than in America and will be for the foreseeable future.

But outsourcing also created a number of huge headaches for those manufacturers, Shook said. The logistics of transporting a completed product from Asia — as opposed to a domestic location just down the road — grew increasingly complex.

Other expenses rose too. Setting up a new production location in a foreign land can be pricey. And there is travel for executives and research and development employees teaching foreign employees new processes.

And there were other concerns. Products were not meeting quality standards. And difficulty enforcing intellectual property rights in certain countries, such as China, created an increase in illegal copying of products and processes.

When looking at the total cost of manufacturing a product, the overall expense is almost always lower when going with a higher-priced labor domestically than lower-cost labor in another country, Shook said.

"That comes as a surprise to many, going against what has been the traditional thinking for the last 20 years," Shook said.

Shook believes a couple of high-profile reshoring efforts — such as Fairfield conglomerate General Electric reshoring appliance manufacturing jobs to Kentucky — will turn the tide. But so far, Connecticut's manufacturing industry is still waiting for the dream to become a reality.

Suppliers in the aerospace industry, one of Connecticut's largest manufacturing subsectors, still are being encouraged by the larger manufacturers such as East Hartford's Pratt & Whitney or Stratford's Sikorsky Aircraft Corp. to work with overseas firms, said Al Samuel, executive director of the Aerospace Component Manufacturers Inc., a Connecticut trade association.

"Some of our members have commented that they do see some (reshoring), but it is mostly from small companies doing it because of cost or logistics problems," Samuel said.

John Womer, president of Woodbridge tool case supplier The Plastic Forming Co. Inc., said the size of the American tool manufacturing market is steadily shrinking.

Plastic Forming sells double-walled cases for tool makers to group their products together before selling the package to consumers, such as for a socket wrench set. When domestic tool makers shift their production offshore, Womer said, his company would lose the account, as the foreign country usually has a supplier for carrying cases and Plastic Forming can't compete.

Some of Plastic Forming's customers have brought production back to America because the expense of foreign production wasn't working out, but the overall domestic manufacturing base is getting smaller, Womer said.

To compensate, Plastic Forming will start selling cases directly to the consumer starting in the middle of October, hoping to break into markets with cases for boating, photography, emergency response and sporting goods. Womer said the cases will be 40 percent cheaper than the competition.

"The handwriting is on the wall that we need to do something different," said Womer, whose company employs 45 people with $6.5 million in annual revenues.

But there is reason to be optimistic that reshoring will reverse offshoring in the near future. As more companies evaluate foreign production using the total cost model, production may become local once again.

"It is better to be near your customers," said Gary Francoeur, president of Suffield-based Arcor Laser Services. The company, founded in 2004, helps manufacturers of medical devices, firearms and aerospace parts develop new products using laser processing.

As the amount of work grew, Arcor outgrew its original location and recently moved into a 12,000-square-foot space in Suffield, nearly double the old facility in Windsor.

Francoeur said he considered relocating the company to a state with cheaper production costs, but many of Arcor's clients are in Connecticut, making it important to keep Arcor's facilities local — even if its costs end up being higher.

"We are always bringing in the latest technology to stay competitive in the industry," said Francoeur, whose company employs 50 people. "We don't want competition from offshore taking our work."

Arcor has advantages over offshore companies when competing for local work, Francoeur said. Particularly when a client is developing a new product, there's a lot of back and forth between Arcor and the customer, which would be slowed significantly if the client had to wait days for a project to be shipped from an offshore company.

New products tend to be more sensitive to copying and intellectual property concerns, and clients trust local companies more when dealing with sensitive information, Francoeur said.

"Hopefully, we will still see some more stuff coming back here," Francoeur said. "People are getting smarter and wising up about keeping things local."

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