One of the most common measure of economic activity for a region is the gross regional product (GRP). The GRP is the market value of all final goods and services produced over a given period of time and is conceptually equivalent to the national measure of economic growth, the gross domestic product (GDP). In 2012, for the 17 county region in the southeast Kansas, the total GRP for the region was $8,700 million. Out of this $5,194 were from regional earnings, $2,814 million were from property taxes generated from the region and $692 million were from taxes on production.
The following table breaks the GRP for the region by industries. The greatest value adding industries are Manufacturing and utilities (if Government was left aside).
GRP for Southeast Kansas (2012) in $Million
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Imports and Exports
The imports for the region show the amount of money leaving the region
to foreign and external domestic sources. And exports for the region show the money received in the region through foreign and external domestic sources. The chart below shows the import and export of the region in 2012.
Imports and Exports for Southeast Kansas (2012)
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The region imports 80% of its demand, over $3 billion in each Manufacturing and Government. Health Care and Social Assistance; Finance and Insurance; and Mining, Quarrying, and Oil and Gas are each around $1 billion in imports. The region exports 79% of its supply. With over $5 billion in exports the region’s manufacturing industry is the top wealth generator for the region. Utilities and Agriculture, Forestry, Fishing and Hunting are both other large exporting industries with exports greater than $1 billion.
Advanced Manufacturing Reshoring Strategy Development Project
Why are we doing this project now?
As the global economy changes, the conditions that once made it profitable to manufacture products overseas are disappearing. Companies understand the total costs of offshoring (logistics, quality issues, customer access, etc.) possibly outweigh narrowing differences in labor costs. These businesses are likely to seek domestic communities that understand their place in a global marketplace.
What is this project about?
The project is about bringing together a coalition of regional partners to 1) better understand the niche opportunities for the region in the emerging manufacturing reshoring and near shoring trend and 2) to develop a responsive strategy that leverages advanced manufacturing technologies, the region’s assets, technical workforce, education institutions and networks and coordinates a regional approach in order to be a destination location for portions of such reshoring work.
What assumptions are we making?
The project assumes that manufacturers and economic developers in the region need more information about resources and capabilities of other manufacturers in the region as well as ways that they might be able to collaborate in areas that were previously ceded to overseas manufacture.
What will be the output of the project?
The project will result in a strategy, developed with and for the region, which identifies pathways to help manufacturers and communities pursue reshoring and near-shoring opportunities. The strategy will help refine short and long term objectives and a plan to achieve them.
What are the first steps?
Short-term plans are:
o Understand the manufacturing basis and strengths of the region
o Understand the intersection of reshoring trends and local realities
o Understand the potential supply chain opportunities in targeted sectors
o Raise awareness about reshoring/nearshoring as potential opportunities
o Begin the network weaving process.
What are the goals of the project?
o Identify new business opportunities for the region’s manufacturers
o Cultivate collaborative opportunities among the region’s manufacturers
o Identify new skills and technologies for potential future investment
o Stimulate manufacturing entrepreneurial activity within the region
o Identify new employment opportunities for interested youth
o Strengthen the global competitiveness of region’s manufacturing sector
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The graphic above provides an overview of the Advanced Manufacturing Reshoring Strategy Development Project. The summary of the project can be found here.
The graphic shows the various components of the project, how they relate and provides input to the formation of the Manufacturing Reshoring Strategy. The process of strategy formulation will start with analysis of what already exists in the region and the trend in reshoring to figure out the potential areas of opportunity.
The regional context is derived out of data analysis and visualization of the data collected. Visualizations are being created from data generated in the Industry and Cluster Analysis, Asset Mapping, and Skillshed Analysis activities. The Industry and Cluster Analysis activity identifies growing and declining sectors and quantifies their importance to the region. The Asset Mapping activity provides a comprehensive view of the regional assets that can help businesses become more innovative and grow and take advantage of the reshoring opportunities. The Skillshed Analysis identifies the education training needs to bridge the gap between the current workforce skills and the business needs in industry sectors seeking reshoring opportunities.
The opportunity analysis box includes a Literature Review of the reshoring landscape and trends on the national level to identify potential industry sectors for reshoring. An Input Output Analysis goes beyond reshoring to look at Nearshoring opportunities and also an examination of Supply Chain connections that might exist in the region or be created. Both of these activities are currently being performed by AMI and will provide the research and data for the basis of the Manufacturing Reshoring Strategy.
The Network Weaving activity is being led by SEK Inc. This activity identifies and develops a network of regional partners in the region. These connections will permit the development of a Supply Chain Network Development Map by connecting businesses to other businesses both within the region as well as outside the region. By crowd sourcing information, the network can strengthen and grow as information about the region will be fed continuously into the knowledge base created through the network weaving process by bring people together and forming connections.
The Economic Development Committee along with other key regional stakeholders will develop the Manufacturing Reshoring Strategy. This strategy will lead to creation of the Supply Chain Network Development Map to connect businesses both regionally and globally. The map will identify short term as well as long term tasks required to develop the supply chain network and bring reshoring activities into the region. The other component of the strategy will be to create an Information Portal designed to inform, connect, educate, and facilitate communication among manufacturing stakeholders in the region. The usefulness of the portal will be maximized by taking informational outputs from the Network Weaving process to add to the base. The information in the portal will also be used to continue the weaving process, acting as a meeting place for the region to learn more about each other and strengthen the network.
This RBEG Reshoring Summary is a summary of the aims, goals, and activities of the Southeast Kansas Advanced Manufacturing Reshoring Strategy and is a component of the Project 17 economic development strategy.
This RJIAC Proposal Summary describes the overall aim, goals, and activities of the 17 county regional economic development project in Southeast Kansas known as Project 17.
The Advanced Manufacturing Institute and Industrial and Manufacturing Systems Engineering department at Kansas State University seek a Network Administrator (Computer Information Specialist) to maintain and manage all information technology (IT) activities and functions. The primary responsibility of this position is to manage and maintain all aspects of a Windows-based operational environment including server hardware and software within a VMware enterprise-level environment.
The position requires a two-year technical degree related to Information Technology, CompTIA A+ certification and five years of experience in Network (LAN) administration.
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The Insourcing Boom details the emerging reshoring trend. It draws from the GE CEO Jeff Immelt’s commitment to reshoring and the revitalization of it’s Louisville, KY Appliance Park. Included also are other industry examples and trends that are reshoring manufacturing.
The article lists several of the global changes that affect a company’s sourcing decision:
At Appliance Park, this model of production—designed at home, produced abroad—had been standard for years. For the GeoSpring, it seemed both a victory and a vulnerability. The GeoSpring is an innovative product in a mature category—and offshore production, from the start, appeared to provide substantial cost savings. But making it in China also meant risking that it might be knocked off. And so in 2009, even as they were rolling it out, the folks at Appliance Park were doing the math on bringing it home.
Even then, changes in the global economy were coming into focus that made this more than just an exercise—changes that have continued to this day.
- Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.
- The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home. (Natural gas now costs four times as much in Asia as it does in the U.S.)
- In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18 percent a year.
- American unions are changing their priorities. Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.
- U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.
These are but a few costs companies that choose to outsource are facing. Another benefit, illustrated in the article is the affect reshoring has on innovation and cost control:
The GeoSpring suffered from an advanced-technology version of “IKEA Syndrome.” It was so hard to assemble that no one in the big room wanted to make it. Instead they redesigned it. The team eliminated 1 out of every 5 parts. It cut the cost of the materials by 25 percent. It eliminated the tangle of tubing that couldn’t be easily welded. By considering the workers who would have to put the water heater together—in fact, by having those workers right at the table, looking at the design as it was drawn—the team cut the work hours necessary to assemble the water heater from 10 hours in China to two hours in Louisville.
In the end … not one part was the same.
So a funny thing happened to the GeoSpring on the way from the cheap Chinese factory to the expensive Kentucky factory: The material cost went down. The labor required to make it went down. The quality went up. Even the energy efficiency went up.
GE wasn’t just able to hold the retail sticker to the “China price.” It beat that price by nearly 20 percent. The China-made GeoSpring retailed for $1,599. The Louisville-made GeoSpring retails for $1,299.
Manufacturing cost savings are not the only recognized benefits from reshoring. With shorter product life cycles and greater market and forecasting uncertainty, a shorter supply chain can have a dramatic impact on the bottom line.
Time-to-market has also improved, greatly. It used to take five weeks to get the GeoSpring water heaters from the factory to U.S. retailers—four weeks on the boat from China and one week dockside to clear customs. Today, the water heaters—and the dishwashers and refrigerators—move straight from the manufacturing buildings to Appliance Park’s warehouse out back, from which they can be delivered to Lowe’s and Home Depot. Total time from factory to warehouse: 30 minutes.
Outsourcing has soft cost implications hidden as well:
But many of those hidden costs come later. In the first blush of cheap manufacturing, it’s easy to overlook the slow loss of your own skills, the gradual homogenization of your products, the corrosion of quality and decline of innovation. And it’s easy to assume that globally distributed production will hum along more smoothly than it often does in practice: however strong the planning, some of those shipping containers will be opened to reveal damaged or substandard goods, and some of them won’t have the number or variety of goods a company needs at that very moment. “All you need is to have to hire one or two 747s a couple times to get product here in a hurry,” says Shook, “and you lose those savings.”
Fortunately, there are resources and organizations that are actively working to help businesses bring operations back to the US.
Harry Moser, an MIT-trained engineer, spent decades running a business that made machine tools. After retiring, he started an organization called the Reshoring Initiative in 2010, to help companies assess where to make their products. “The way we see it,” says Moser, “about 60 percent of the companies that offshored manufacturing didn’t really do the math. They looked only at the labor rate—they didn’t look at the hidden costs.” Moser believes that about a quarter of what’s made outside the U.S. could be more profitably made at home.
The Reshoring Intiative has a Total Cost of Ownership Estimator tool to help companies with the aforementioned math.
Advanced Manufacturing Institute receives Economic Development Award of Excellence.
A program developed and led by Kansas State University’s Advanced Manufacturing Institute that helps rural companies and communities compete in the marketplace is being recognized for excellence and as a national example.
KOIN, the Kansas Opportunity Innovation Network, is an economic development project developed by the Advanced Manufacturing Institute. It was honored at the University Economic Development Association’s 2012 annual conference in Chattanooga, Tenn., with the Award of Excellence in the leadership and collaboration category. It also received the Judge’s Award — a new award recognizing work that is a marquee example of university-based economic development.