Bringing it all back home

It’s a common occurrence but a sad fact of life in the business world: Lured by cheaper wages and less red tape, a company uproots U.S. manufacturing operations and sends them to China or another country in an effort to cut costs.

Harry Moser has made a crusade out of asking those companies a simple question: “You sure about that?”

Harry Moser Reshoring Initiative manufacturing Fisher College of Business
Moser brought the message of his Reshoring Initiative to Fisher in January. Image courtesy Emily Tara.

In a recent visit to Fisher, the founder of the Reshoring Initiative outlined how he’s working to broaden companies’ understanding of all the costs of offshoring – and the benefits, in turn, of keeping or moving it stateside. Sure, the price tag initially might look cheaper on paper, but factor in a host of other risks and costs that escape that first glance and the U.S. is much more competitive, if not less costly altogether over the long term (run the numbers with Moser’s handy Total Cost of Ownership Estimator).

“We’re much more competitive competing here than we are competing there,” Moser said.

At the forum, sponsored by the Center for Operational Excellence, CIBER and the Ohio Manufacturing Institute, I was thrilled to see Moser talk about the costs of offshoring from an operational excellence perspective. Based on evidence Moser presented, a compelling case can be made that running an operation offshore can create waste that would make any lean thinker shudder.

Just think about the impact the big blue ocean between your offshore plant and your customer can create. Bringing product back makes the most financial sense with large batch shipments, but what happens when demand shifts your product mix? And what about defects discovered after a product has been shipped from half a world away? Research in the pharmaceutical manufacturing realm by our own John Gray indicates offshore production – even by U.S. drug-makers – carries a greater quality risk than its American-made counterpart.

Advocates for bringing it back home, take heed: It’s easy to make the case for reshoring not just with dollars and sense, but common sense.

COE member Cardinal Health gets supply chain honors

Sometimes the scope of the machine can obscure the beauty in the little cogs that make it all work. Take Center for Operational Excellence member Cardinal Health Inc. for example: It’s a $100 billion-plus company, highly profitable, one of the largest employers in the Columbus area and manager of a network of distribution centers so vast its products can reach a staggering share of hospitals nationwide in no time flat.

It’s also an extraordinarily efficient and nimble enterprise, having navigated through the recession with few bruises, shed a piece of itself to create a new West Coast entity and plotted an ambitious expansion into Asia that could pay untold dividends in the future. It’s the efficiency and its translation into high-quality service to customers that has captured the attention of the number-crunchers at research firm Gartner, which recently named the Dublin-based company the No. 1 health-care supply chain in the nation.

To reach No. 1, Cardinal moved past last year’s holder of the top spot, Owens & Minor, which slipped to No. 5 this year. Nos. 2-4, in order, were Mercy, BD and the Mayo Clinic.

It’s reasons quantitative and qualitative that got Cardinal the honors. Gartner perused data on financials and inventory levels, combining that with other survey data and peer opinions (Cardinal’s top-notch there, in specific). The company in bestowing the honor called Cardinal “a complex combination of well-connected businesses … (that) combines the varied strengths of a medical-surgical distributor, a pharmaceutical wholesaler and a large manufacturer.”

So why all the hoopla over a health-care supply chain? Gartner gets at a key distinction that strikes at the heart of why operational excellence in the health-care realm is so important: “Losing sight of the customer, in most industries, results in frustrated tweets and blog posts about a product or service that may lead to lost sales opportunities. Losing sight of the patient, however, can reduce the quality of life for particular patients and, in the worst case, can lead to the loss of life.”

So congratulations to Cardinal, an all-star on COE’s roster that recently came to Fisher to share its lean story at our Dec. 2 quarterly seminar.

A congratulations by proxy goes to fellow COE member Abbott Nutrition, whose sister pharmaceutical operation made Gartner’s top 10.