Quality Progress - March 2017 - 12


No Easy Way Home
continued from page 11

More than labor

Deciding whether to produce a product in the United States "isn't
always about wages," said Ramzi Hermiz, president and CEO
of Shiloh Industries, a supplier of light-weighting materials. "[In
Mexico], energy is considerably more expensive than it is in the
U.S. And actually for some of our products, energy costs more
than the labor that goes into it."11
Hermiz said another complicating factor is trade agreements
that don't even involve the United States. Mexico, for example,
has negotiated more than 40 trade agreements with several
countries. Auto manufacturers might locate in Mexico not to
make cars cheaply and ship them to the United States but
because there are trade agreements that allow them to avoid
high tariffs on goods exported to Europe, Brazil or Argentina.12
With rising labor costs abroad, offshoring actually has declined
or stalled in recent years. U.S. jobs lost due to overseas manufacturing dropped from about 156,000 jobs a year in the mid-2000s
to about 100,000 by 2012, according to Toronto Dominion Bank.13

Reaching outsourcing limits?

Many organizations have realized the maximum benefit of offshoring, according to David Tapper, vice president of outsourcing
and offshoring services at International Data Corp., a market
research firm. As wages rise in countries providing offshore labor,
offshore providers are turning to more cost-effective solutions
such as automation and cloud-based services.14
"Another big part [of the U.S. manufacturing employment
problem] is manufacturers are very good with coming up with
more efficient ways to produce things, lessening the demand for
workers here in the United States," said Gary Burtless, an economist with the Brookings Institution. He also said that while U.S.
manufacturing output has increased more than 20% since the
recession, factory employment only climbed 5%.15
Harry Moser, the founder and president of the Reshoring Initiative, which helps manufacturers relocate to the United States,
said increased automation reduces the wage advantage for
countries such as Mexico and China, even if those countries also
automate. The jobs that are automated are usually the lowest-skill

New @ ASQ

What's on our minds

12 QP

level ones and have the largest intercountry wage difference.16
Moser explained that advancements in workforce training have
made the United States a more attractive option for manufacturers. "The availability of toolmakers, precision machinists and
welders has gotten better," Moser said. "It takes years to train
them properly, but at least companies are confident that they can
find the people they need."17

Offering incentives

Apple has been criticized by Trump and former President Barack
Obama for using a network of mostly Asian manufacturers-in
particular, Taiwan-based Foxconn-to make its products. Trump
has suggested several financial incentives to motivate Apple to
reshore its production processes.18
China's government, too, knows the importance of incentives:
It provided Foxconn $1.5 billion in government aid to build a factory there. The government recruits assembly line workers and
pays bonuses to the factory for meeting export targets.19
Peter Bryant, managing partner at business strategy consulting firm Clareo, said reshoring could increase the iPhone's price.
"If they have to absorb that price increase, that's a pretty big
margin erosion that shareholders won't like," Bryant said.20
Higher production costs also could result in less investment in
R&D and new technologies over time, according to Gary Pisano, a
Harvard Business School professor. He said this could hurt Apple
and the U.S. economy.21
"I don't want to make things the Chinese make," said Pisano. "I
want to make things the Chinese can't because our productivity
and our skill base is so much higher."22

Outsourcing to the U.S.

It's not just about U.S. organizations offshoring work away from
the states. There's also a large market for international outsourcing firms that brings workers to the United States. India,
for example, has a $108 billion technology outsourcing industry employing nearly 3.7 million people, and the United States
accounts for about 60% of the industry's revenue.23
This pipeline of talent and skills might be affected, too, if
Trump's rhetoric becomes reality.
These workers use H-1B visas (a nonimmigrant visa that allows
organizations to temporarily employ foreign workers) to fill jobs for
which there aren't qualified workers in the United States. There is a

UPCOMING EVENTS Four ASQ division and section events are planned for later this
year: The ASQ North Jersey Spring Quality Conference will be held April 13 in Whippany. Visit www.springqualityconf.org for details. ASQ's Biomedical Division will host
a conference on process validation and integrating risk management May 31 -June 1
in Heredia, Costa Rica. Visit http://tinyurl.com/bio-division-conf. ASQ's Inspection
Division will hold its conference Sept. 14 in Grand Rapids, MI. Visit http://tinyurl.com/
inspect-division-conf. ASQ's Reliability Division will co-host the Accelerated Stress
Testing and Reliability Conference Sept. 27-29 in Austin, TX. Visit www.ieee-astr.org.

March 2017 ❘ qualityprogress.com


http://www.springqualityconf.org http://www.tinyurl.com/bio-division-conf http://www.tinyurl.com/ http://www.ieee-astr.org http://www.qualityprogress.com

Table of Contents for the Digital Edition of Quality Progress - March 2017

Seen and Heard
Expert Answers
Progress Report
Mr. Pareto Head
Field Notes
Innovation Imperative
Hard Wired
Propel Forward
Life After Disruption
Work Smarter, Not Harder
Statistics Spotlight
Standard Issues
Marketplace
Footnotes
Back to Basics
Quality Progress - March 2017 - cover1
Quality Progress - March 2017 - cover2
Quality Progress - March 2017 - 1
Quality Progress - March 2017 - 2
Quality Progress - March 2017 - 3
Quality Progress - March 2017 - 4
Quality Progress - March 2017 - 5
Quality Progress - March 2017 - Seen and Heard
Quality Progress - March 2017 - 7
Quality Progress - March 2017 - Expert Answers
Quality Progress - March 2017 - 9
Quality Progress - March 2017 - Progress Report
Quality Progress - March 2017 - 11
Quality Progress - March 2017 - 12
Quality Progress - March 2017 - Mr. Pareto Head
Quality Progress - March 2017 - Field Notes
Quality Progress - March 2017 - 15
Quality Progress - March 2017 - 16
Quality Progress - March 2017 - 17
Quality Progress - March 2017 - Innovation Imperative
Quality Progress - March 2017 - 19
Quality Progress - March 2017 - 20
Quality Progress - March 2017 - 21
Quality Progress - March 2017 - Hard Wired
Quality Progress - March 2017 - 23
Quality Progress - March 2017 - 24
Quality Progress - March 2017 - 25
Quality Progress - March 2017 - 26
Quality Progress - March 2017 - 27
Quality Progress - March 2017 - Propel Forward
Quality Progress - March 2017 - 29
Quality Progress - March 2017 - 30
Quality Progress - March 2017 - 31
Quality Progress - March 2017 - 32
Quality Progress - March 2017 - 33
Quality Progress - March 2017 - Life After Disruption
Quality Progress - March 2017 - 35
Quality Progress - March 2017 - 36
Quality Progress - March 2017 - 37
Quality Progress - March 2017 - 38
Quality Progress - March 2017 - 39
Quality Progress - March 2017 - Work Smarter, Not Harder
Quality Progress - March 2017 - 41
Quality Progress - March 2017 - 42
Quality Progress - March 2017 - 43
Quality Progress - March 2017 - Statistics Spotlight
Quality Progress - March 2017 - 45
Quality Progress - March 2017 - 46
Quality Progress - March 2017 - 47
Quality Progress - March 2017 - Standard Issues
Quality Progress - March 2017 - 49
Quality Progress - March 2017 - Marketplace
Quality Progress - March 2017 - 51
Quality Progress - March 2017 - Footnotes
Quality Progress - March 2017 - 53
Quality Progress - March 2017 - 54
Quality Progress - March 2017 - 55
Quality Progress - March 2017 - Back to Basics
Quality Progress - March 2017 - cover3
Quality Progress - March 2017 - cover4
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