As originally reported in a Wall Street Journal article in April 2011, US Department of Commerce data shows that major US corporations cut their work forces in the US by 2.9 million jobs during the 2000s while increasing their employment overseas by 2.4 million.
This trend continues according to data revealed by Trade Assistance Adjustment (TAA) filings made to the US Department of Labor in a recent article in Manufacturing & Technology News. TAA provides benefits and training to workers displaced by trade and shifting manufacturing offshore. The article lists 50 companies that laid off workers in the first three weeks of July, about 80% of which were manufacturing jobs. Other types of jobs displaced were customer service, technical support, information technology, data processing and even engineering design. TPA assistance is like putting a bandage on after your arm was cut off.
While over 25 companies were shifting manufacturing offshore to China or India, it was surprising to see that Mexico was the next highest location to which manufacturing was being shifted. New data produced by the Bank of America shows the reason for this: labor rates in Mexico can be lower than China by as much as 20%, quite a change from 10 years ago when Mexican labor rates were 188% higher than China.
Other reasons for this switch to Mexico are lower transportation costs, faster delivery, higher productivity from automation, more reliable quality, and better payment terms than from China. As a resident of the border region of California and Mexico, I have seen this first hand. "Nearsourcing" to Mexico is occurring when reshoring to the US is not economically justifiable at the present time.
Our major regional organization, CONNECT, has a Nearsourcing Initiative focused on matching San Diego companies in need of outsourcing with the region's local manufacturers. "The program includes workshops that educate the region's innovation entrepreneurs on the benefits of contracting with local manufacturers, including reduced time to market, increased innovation and reduced risk and costs; and a matchmaking program that helps San Diego innovation companies in need of outsourcing to Innovate Locally, Grow Globally – to connect and contract with qualified San Diego production resources." Educational workshops and networking meetings have been held over the past two years, and manufacturers are encouraged to seek local vendors or even be matched with regional vendors by using the www.connectory.comdatabase of primary industries, developed by the East County Economic Development Council, and the CONNECT Resource Guide.
CONNECT's SME (Small-Medium Enterprises) Operations Roundtable group has also taken the lead in educating San Diego's regional manufacturers on how to use the Total Cost of Ownership Estimator developed by Harry Moser of the Reshoring Initiative, by means of a presentation I gave with a local contract manufacturer in February as an authorized speaker on behalf of the Reshoring Initiative.
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