Every time you pick up or look up a publication it seems the financial wizards invent a new word to describe a current event or transaction.
This months’ favorite word, and your favorite word going forward, is RESHORING. Nice word right? Especially since it means more bucks for material handling dealers.
I came across this word a few months back while reading a financial journal that was elaborating on the Chinese economy and how the rising costs to manufacture in China are getting to the point where, when all things are considered, they are just about a push when compared to manufacturing in the good old USA. Imagine that? Did you ever think you would hear that thought expressed again in your lifetime? Probably not.
The article pointed out that personnel costs were increasing sharply in China and along with increasing commodity costs the inflation rate in China was closing the “cost gap” between countries. It is not a 1 to 1 ratio yet but when you add in transportation costs, delays in delivery, insurance, customs issues and problems with
So is all that manufacturing coming back to the US? No, not really, because there is also another word out there and that is NEAR-SHORING. In short, getting the production closer to home where you have better control over the timing and delivery of products. So we may not get this entire reshored product, but we will get a lot of it.
Let’s assume this reshoring takes place and this resurgence in manufacturing becomes a reality. If reshoring happens what should material handling dealers do to take advantage of this situation?
First, I would assess my market and lay out a conservative estimate of new revenues to expect if manufacturing in your area picks up.
Second, I would review customer files to see who left the US to manufacture in China and have lunch with them to see who may be coming back.
Third, I would attempt to list all the services those returning to manufacture in the US might need in the way of services to help them get going again.
Fourth, I would consult with my main vendors to solicit their input of what to expect and when.
Fifth, I might want to sponsor a white paper explaining the current cost of offshore production and send it to companies in your territory who are currently in an offshore mode.
Sixth, I would put together a menu of service providers (in house and outside consultants) who could help with a transition back to the US, especially with site selection and plant lay-out.
Last, I wouldn’t invest a lot of dollars in this opportunity until you are sure the opportunity is there. The point is to be prepared so that when your market expands you will be able to deal with it.
There is no doubt that productivity increases have added to economic growth. In fact, while shop floor productivity increased costs decreased making the result even more dramatic. When asked what the reasons are behind this improved productivity the answers for the top two seem to be improved business processes and improvements in technology. If there ever was an industry where this is most important the material handling industry is it. Consequently, one hopes that dealers have taken advantage of these profit improvement activities not only in their dealership but passed on those same lessons to their customers for their benefit as well.
The economic folks believe that manufacturing and the whole economy will be pretty flat for the rest of the year, unless you find a niche to play with. But in any event manufacturing is expected to increase in the US and that can only mean more material handling profits. PROFITS, I like that word as well.
Garry Bartecki is a CPA MBA with GB Financial Services LLC. You may contact him by e-mailing firstname.lastname@example.org.