What is Reshoring and why is it important for retail? Interview with Harry Moser CEO of the Reshoring Initiative

Interview with Harry Moser CEO of the Reshoring Initiative

TRANSCRIPT:

Darius 0:01
Welcome to the retail tech podcast. My name is Darius Vasefi. I am the host and producer of podcasts. And we speak with people that are experts and players in the retail space. And this includes technology as well as other factors that impact the lives of retailers.

So today I am speaking with Harry Mosier, founder and CEO of a nonprofit I believe called reshoring. USA. And Harry can correct me if I said anything incorrectly there. But I'm really interested in this topic, because what we've learned as a part of the pandemic is the heavy reliance of us in at least in the US on really critical products that are supposed to be coming from the overseas. And if something happens and the supply chain gets distracted, or disrupted, we are at a big risk, as well as my personal passion is the impact to the environment. And we're going to be talking about these and you know, other important ideas. So welcome, Harry.

Harry Moser 1:24
Thank you Dario. The one correction I would make is yes, we are nonprofit, and is the reshoring initiative. That is the name of the group.

Darius 1:34
Okay. So the reshoring initiative, thank you for that correction. So let's start with a background on maybe yourself, and how did you come about starting reshoring, that reshoring initiative.

Harry Moser 1:52
So background, I grew up in Elizabeth, New Jersey, right across the river from New York City. And the the biggest thing in town was Sears. for Mother's grandmother, somebody had a singer. And it stayed a factory. And Elizabeth had 5000 workers, it was two and a half million square feet, it was the largest factory of any kind in the world. My dad ran a third of my grandfather's farm and I work there summers, and I went past 20 years ago, and nothing was made there anymore. And as far as I can tell, no single products are made in the United States. Everything's important. And I, I thought about my career, in which I sold, manufacturing equipment, CNC, machine tools, foundry equipment, things like that. And company after company, industry after industry, that I wanted to sell the equipment to went out of business, they are driven out of business by imports. And so I, I said, somebody's got to do something about this. And I had been running a fairly large company, and I retired in 2010, and founded the reshoring. nation.

Darius 3:07
So personal experience, that's the that's the best kind of experience. Correct? Yeah, I mean, that's a really good example, going from the largest manufacturing facility in the world to non existent pretty much in what 30 years.

Harry Moser 3:32
It was the largest factory in the world, and maybe 1910 or something like that. And it was cool on in probably 19 guessing a or something or 80 or 90 so that's still a huge number huge numbers jobs and, and not just the jobs of the factory, but all the people who supplied them with material and steel and components and the people that cook hamburgers forth, and so on, you know, all that disappeared when that when that factory went out of business.

Darius 4:13
Right? So I think there is actually a number for every, like factory worker, there are X number of support people

Harry Moser 4:24
just two numbers that are bounced around one people talk about the multiplier effect. And that's generally looking at the the economy, the GDP, something like that. And the other one is the number of jobs and and and the numbers depend a lot on where you are in the supply chain. So So for example, if, if it's, if it's an auto assembly plant, there's seven or 10 other workers not at the assembly plant making the steel and the components and the engines and the tires and the class and everything else that feeds into that. Whereas if it's a, if it's a company that's making, let's say they're stamping out silverware, no stainless flatware, well, then there's a steel supplier. And they may be somebody who makes the tool or something like that. But there isn't anywhere near as much so so that the number of those support jobs within manufacturing can range from one or one and maybe up to seven or 10. But then the total impact on the economy can range again, from one or two, up to six, seven, depending on the industry under consideration.

Darius 5:39
Right, yeah, and probably an extreme example, on the other end is something like Boeing, that there's probably a much larger multiplier.

Harry Moser 5:50
Because there's so many components coming in from outside, and you're just just to play into our theme. Boeing, I think, with the Dreamliner, you know, the one that came out, what, 10 years ago or something, at first, they had horrible problems, because they had, they had decided to outsource to offshore, outsource to other companies and offshore outside the country, a huge amount of the components, and even some of the design, responsibility. And when the components came in, they didn't fit together, because they hadn't coordinated well enough, it was being done at such a distance. And they had to bring much of that component manufacturer back into Boeing to get control so that the pieces would go together. So it's a it's an example of the the disadvantages and disruption that can happen with distributed, widely distributed source.

Darius 6:49
Yeah, I guess they learned the hard way that building an airplane is a little more complicated than putting together a laptop. I think. Eventually, at some point, there will probably you know that there will be a way to get there. But we're far from that time right now. So so so let's talk about what is the reshoring initiative.

Harry Moser 7:15
So reshoring initiative is a biggest nonprofit. And our mission is to train 5 million manufacturing jobs to the US from offshore, a combination of reshoring, which is done by US companies think feature motors, for example, and FDI, foreign direct investment, which is done by foreign headquartered companies think think Toyota, but in both cases, when they choose to manufacturer, that component or the product in the US for the US market, instead of shipping it here from somewhere else, they're doing so because they decide they're going to be better off that they'll be more profitable by doing so. So the logic is the same for reshoring. And FDR, so we, our job is to bring 5 million of those jobs back, and we pick 5 million, because that's the number that it will take to balance the goods trade deficit. Again, the trade deficit is the difference between our imports and our export. So we import 900 billion with a be more than we export. And it will take about 5 million US manufacturing workers at current levels of productivity to produce that amount of goods. That's our objective. The way we do it, we first we document the trend. So we're the only source of data on the trend. So if somebody if a listener wants to find what kind of products are being reassured by what companies to what states from a countries, for what reasons, you can find all of that for free on our website, reassure now.org. As we document it, we promoted I'm doing this today. And I'll do seven uranium podcasts and webinars and conferences this year around the country. And we do write an article into a month we get interviewed for the media the like print media there once or twice a month. And then we enable it. So we have tools to help brands or manufacturers or retailers make smarter sourcing decisions. So right now, the tendency for those companies is to say Where can I buy it for less? And if I can buy it, say in China for seven, and it's going to cost me 10 in the US pretty black and white decision, get it in China review wherever we are wherever that cheaper prices. And we say no, that's not the right way to do it. You have to consider not just the fop rackswitch price, but also that they do And afraid and the carrying cost of inventory, the chance of stocking out the quality differential the the value of a Made in USA label, which in some cases can be can be quite important. The ESG considerations and environmental, social corporate governance they, because when you produce the product in the US, instead of making it somewhere else, and shipping it here especially, is reduced by 25% or more. So, this is a whole series of reasons like that, and our TCL estimator helps the companies quantify all those considerations, and so they can make a bottom line decision.

Darius 10:51
So, I think the, the concept itself and in what you explain, is not really hard to understand. So, that's one of my questions is that, how do people actually only look at the costs of labor, when they think about offshore manufacturing, when it's so easy to understand all the other factors? I'd say most,

Harry Moser 11:22
when they put a factory somewhere, they typically look at the cost of labor, when they, when they're buying a piece of clothing and appliance pots and pans, something from, say, a Chinese vendor or us vendor, they look at the fob price or the experts price. And and one reason they do that is it's it's a big piece of the total cost like 70, or 80%. And it's a hard from number No, except for maybe changes in currency or something like that. The base of his heart, you know, it's a rock, you know what it is, that's when if that procurement person has to start making decisions about political instability, risk of the other country, or the natural disaster risk, or the probability of stocking out, or how much overstock will we have, or the value of a made USA label? Well, those are more subjective, those require a lot more analysis and study. And so the tendency has been for the, the NBA types to parachute into the companies look at what's being done, say, we can save millions by buying that in China, India, Mexico somewhere, and, and they get a bonus for doing so. buying the cheap, lowest price, even if they've not bought the lowest total cost. And so the culture has supported going for the lowest price. And so our challenge is to get the board of directors, the CEO, or whomever the vice president of the company say no, we're not gonna do that anymore. We're going to look at the total cost, and consider all the factors that are that should be considered.

Darius 13:09
Yeah, that's an important thing I want to come back to is education. I want to talk about or even universities and MBA programs, even talking about the, like the impact and the really the true costs of offshore manufacturing. And before we do that, I want to ask you, so 5 million is the goal. In what timeframe? Is there a timeline target? Tv nice, we got it done while I'm still alive. Well, that that extends it out about 100 years Come on.

Harry Moser 13:46
So I think realistically, the first let's put it in perspective, but when we started, and I don't think I mentioned this when we started in 2010. In that year, 6000 jobs were announced coming back. And last year 2020. In that year, 160,000 were announced, and this year, we think 200 to 240,000. Jobs announced going back, but at the same time, there were some jobs, they were short, there are still companies moving some work to China, Mexico, etc. Not as fast as they were 15 years ago. There's still some some loss of leakages that right. So, so we, we'd say we need to get our 150 200,000 a year up to 300,000 or so 400,000 and keep it there for 10 or 15 years to get to the 5 million. And the one reason it will take that long for two reasons. First, you have to build factories and buy equipment because because as most of you know, most us factories right now are running flat out that's why you can't get ships in the US. steel and the aluminum and all this other stuff that that's plastics, all these kind of things that are needed, everybody's running flat out. So there's no capacity for 40% increase. That's what we're talking about 44 0% increase in US manufacturing. And so we have to build more factories, buy more equipment, and put most difficult, we have to convince more, let's say high school students, that the there's a better solution of going into an apprenticeship and becoming a toolmaker or a machinist or welder, a chemical technician, something like that, rather than going on to university and studying sociology, anthropology, you know, we're heavier, because the, by going into that skilled when people call trades, I call professions, you avoid the tuition, you avoid the debt, you start making money immediately, in the apprenticeship, and, and over most of the life of the career, that person will make more than the average at least liberal arts graduate. Well, I did, I did a study. I compare toolmakers A toolmaker apprentice to a history graduate and I had the data as a function of number of of age and how much they were making. And at the age of 49, the toolmaker should have a net worth a million dollars higher than the than history major. But the guidance counselor's don't show that to kids, because the guidance counselor and the high school are measured by what college what universities and how and what percentage of the kids go to university from their high school, not by how many 10 years later, I have a really good job.

Darius 16:51
Okay, yeah, I guess that's the so the, I mean, those are the incentives that are really important in in getting anything moving forward is what's the incentive for people. Everybody

Harry Moser 17:07
reaching out to the students to the guidance counselor's to parents. So they see that there is a very good alternative.

Darius 17:14
Yeah, this reminds me where I live in, in Orange County, California. One of my neighbor was a teacher or rest his soul his I guess he passed away a few years ago, great friend. He was a teacher at a local college and the shop. And he's he said basically, about 10 years ago, they just closed it down. Because they couldn't have enough students going to everybody wants to go into software and sales and business and nobody wants to do work with their hands anymore. So that's because that's not flayed up as a interesting thing to do. It's not sexy. Yeah. It used to be. In the days of the Fonz, it used to be sexy, but now it's

Harry Moser 18:08
I have this sense since we're talking retail, I have this image of, of strip malls in residential communities. And with the cutback in the needed square footage of retail of the strip malls being converted into small clean, high tech, manufacturing facilities, CNC machine shops, things like that. And, and the workers who used to sell products in the retail and live near the stores, bicycling to work, and then working in the factory making the products they used to sell.

Darius 18:52
That's amazing. I love that image vision. And yeah, I mean with CNC and I guess the new form of CNC called 3d printing. Yeah, I think that's that's very interesting.

Harry Moser 19:07
And if you compare the USA to Europe, I've worked for European companies, a lot of my career and I've been there six years 70 times. And they in beautiful towns, like medieval kind of towns kind of place you'd go to for as a tourist, you'll see beautiful homes. And right next door to the home, accompany it could be even a 500 or 1000 person company very clean. And the high school kids ride their bicycle to the factory to do the apprenticeship that their parents probably you know walk or bicycle to the job. Everybody's a good neighbor. In comparison here where we put factories in one location and homes and other than you have people have to commute 20 3040 miles to get from one place to the other so, so especially in this time of day consideration for global warming climate, etc. and getting the job near the worker has a lot of baggage.

Darius 20:09
So, just to confirm on the numbers, really what's important is not just to cut jobs that are getting started here, but what's important is the net, right? What you're looking at is the net change difference per year. So, like, if we, if we get 100,000 new jobs coming here on 200 to 200,000 go out at the same time, that doesn't help.

Harry Moser 20:35
Oh, let's say it's, it's better than 200 going out and none coming here. It is, what

if you went back to the period from say, around 2000, when China joined the WTO until 2010, then our trade deficit grew the most rapidly and and there was a lot of offshoring going lots of factories closing town after town getting decimated by that, and, and not much going back. And now that what's happened since then, is that the the rate of jobs going back has gone up dramatically, as I described, and, and the rate of especially at the factory closings or work moving offshore, has has gone down substantially. So as as a as an example of this, we did a regression analysis. So put the put the dots on the paper, you draw a line through on the lesson that fits the thoughts best. And, and if you if someone in 2010, had predicted what the US manufacturing employment would be. And then you compare that to what it actually is today, it's actually four or 5 million higher than one would have predicted 10 or 15 years ago, because we've been losing the jobs much less rapidly than we used to. And we've been bringing them back much more rapidly.

Darius 22:06
Okay, yeah.

Harry Moser 22:08
So we're going the right direction to say, we'd say we're about neutral, you know, and we need to go strongly positive. But but it's, uh, it's to get those 45 million workers to get 5 million more high school kids to decide on manufacturing, as their as the beginning of their career, instead of just going off to university, that's going to take a lot of cultural change. And so it's going to take 10 years can take 20 years to make it happen.

Darius 22:42
Okay, let's talk about education. Now. It is anybody teaching any of this information in universities or colleges,

Harry Moser 22:53
what I describe, let's say, I have spoken at Ohio, The Ohio State University a couple of times, and at Georgia State, and maybe four or five others, either live or remotely. So I have I've had some presentations to supply chain, typically supply chain departments. And and I'd say most the professors were all know the term total cost of ownership. But it's not. It's not high on most of their priorities for teaching. So it's, if I had the time, I would do a really good videotape and get it out offer at all of them to use as one of their classes. But I haven't haven't done it yet. But that'd be it, that'd be a good thing to do. We do have videos, we do have archived webinars that deal with total cost of ownership and make the case on why and how companies should use it.

Darius 23:59
Okay, yeah, I mean, it seems to me this probably needs to even be more focused towards the MBAs and the business, people,

Harry Moser 24:09
MBAs who maybe make the decisions, but the MBAs but but also the supply chain people because some of them become the VP supply chain, or something like that. And, and they're going to have something to say about also that they account because the accountants, US companies and chief financial officers are known for their myopic focus on this quarter's financial results, you know, how did we make if we beat the Wall Street estimate kind of thing for earnings per share? And then when you go when you switch from offshore to domestic sourcing, there's some one time costs you have to move tooling, maybe people or maybe you have to build a new factory, that you build up some inventory before you do the transition to all kinds of things as a chief financial officer. I would prefer not to sit. So there's two really, we need a supply chain people, the NBA is the accountants all to understand that, for the long term, what we're describing is often the best choice for their companies.

Darius 25:17
What about, like the manufacturing associations in the US? Are they involved in what you're doing? Are they supporting you?

Harry Moser 25:28
The small ones are the FEMA national tooling and machining Association, the AMA Alliance for Association for manufacturing excellence, people like that are we've we've gotten the biggest fight AMT Association for manufacturing technology, people make the machine tools and things like that. They've been very, very, very supportive. The one that should be more supportive, is Nam, National Association of Manufacturers, that boots, the the gorilla, the 800 pound gorilla in manufacturing. And they they occasionally talk about reshoring, they'll say, Yes, reshoring is a good idea kind of thing. But But I've approached them repeatedly to, to offer our services out to their members, and to document the success of their members reshoring. And, and, and give Nam the political power that it would get from showing that as members were bringing jobs back to the US. And I can't get them to actually act aggressively on the subject.

Darius 26:38
What do you think is the reason

Harry Moser 26:42
you never you never know what was in someone else's mind. But I, I suspect that they have these, especially these big companies that are their members. And the big companies now have based their supply chain model significantly on importing large amounts of product and selling it in the United States. And, and to get them to change that model. To go back and build factories here, again, to hire people to redesign the product to produce it here, find supply chains here to go through all that. And into have the fourth four or five times higher labor costs here that they went away from by going there, that they those companies perceive that not as they're so in their self interest. And therefore Nam tends to promote that, I'd say the self interest of those companies, where I'd say they should be promoting the interest of the factories and the factory workers of the towns, where the manufacturing is actually taking place, and convincing their member companies that, that if they do the math correctly, if they make the right decisions, that the company will also benefit. So So one thing that I was pleased by there's a group called the Business Roundtable, like 180 200, of the top CEOs in the country. And they signed a statement in August of 2019. That said that, it whereas in the past, the only stakeholder for the company, it was a shareholder. Everything gets to be done to maximize the shareholder. And these 180 executives signed a statement saying that now, that's no longer true. Yes, yes, this shareholder, but also community, suppliers, and employees. And, and so every time I get a chance, I call on them and say, the best thing you can do to demonstrate that is to reassure us to bring work back to the communities where it used to be to the workers who, who used to have jobs to the suppliers. They used to sell you the components and the raw materials. So so I'll take this opportunity then to call on those companies to Rocco want to talk.

Darius 29:10
Okay, that's good. I'll make a note of that. Because I I personally want to get more active on this topic. And we'll talk offline how, you know, I can probably help, but I think it's too important to just sit on the sidelines and let things happen. Yeah. So yeah, sorry, go ahead.

Harry Moser 29:35
Well, one thing I want to make sure we get into, I have a fair amount of data. So far, we've been talking largely about why is in the interest of the country, you have to have the employee of the community to reshoring happen, but I've got some excellent information on why it's in the interest of the retailer, to source more product in the US, rather than what they're doing today. So whenever you want to go into that, I'd be delighted to do that.

Darius 30:07
Yeah, let's do it. Let's let's go into it right now.

Harry Moser 30:11
Okay, so we've done, we've, we've dug deeply into apparel, especially because it's one of those areas that it has been the weakest in us, like 97% of apparel and footwear sales are important in the United States. So it's one of the things that went away first, and it's it is coming back. But it's pretty, it's not easy. But but a lot of our data comes out of the apparel sector, and, and the kind of things that can influence should influence. The retailer and the brand, are, for example, that when you have

Unknown Speaker 30:50
local

Harry Moser 30:52
sourcing, you can order your quantities later, you can order a few if you want to have stuff in November, you can maybe order it in September, instead of in January or February, and still have it available. So you can wait until you start to see what size what material what color what whatever is most popular than then adapt your ordering to the actual demand or marketplace. The second that relates to that, is that in the United States, total losses due to a combination of overstocking. In other words, having excess inventory, which was then has to be marked down dramatically to overstocking. Or stocking out not having the product when the customer comes in to buy it, that the total losses due to that is on the order of 250 billion, that's where the pay $250 billion per year. And so you can afford to pay moderately more for the product. If you can eliminate most of that 250 billion by fitting your demand your supply too much more closely. to the to the demand smaller things that should be influential. The the main American concept, the survey after survey says that, that consumers 50 60% of them would prefer to buy a Native American product, they believe the quality is higher. And they feel good about buying something made in America. Many of them 20 30% or a 10 20% more depending on what it is. And, and yet, they don't do it as often as as their as the surveys would say. And I think the main reason is because it's so hard to find. If I'm in a a typical retailer, or a home improvement place, and say I'm looking for a hammer, and I want to find that the Made in America hammer, and there's 100 hammers, yeah, how many hammers are going to have to turn over to hopefully find a label that tells me which ones made in America. So so I might call on on retailers. Like if I owned a clothing store for small boutique clothing store. And the guy I've been into them to buy something from my wife, and I say, tell me about the things here that are made in the United States, they say you got to turn all those labels over and look at it and see what they say we have no idea they don't even know much. Not much. Right? If I if I owned a store like that, I have a big sign up behind the Service Desk. And it would say ask us about products made in America. And I had the computer would always be able to spit that out. And they'd be able to hand me a list of everything in the store make America and what it is, and roughly where to find it in the store. And I believe I could be wrong, but I believe if they did that, that more people would ask for it. More people would buy the made America product. And the retailer would say Hmm, that's interesting. We're selling more made America products. Maybe we should stop or bake products, right? I think you're gonna have a sort of a self fulfilling virtuous cycle. If the retailer will get behind the effort, and especially make it make it easy for the for the customer to find that product. An example of this. I was I had some participation is with most of you're probably familiar with the with Walmart that had started off with their $215 billion made America program to increase their purchases of Native American products by 250 billion over 10 years. And now they've upped that to 350 billion and I consulted with them in the beginning. That first for a couple of years, I kid that I did it for everyday low consulting fees. And the EPA thing really tried very hard to find the main American product, they, they were somewhat rigid about not wanting to raise the retail price, because they're known for their low retail prices. But they are open to their open calls for hundreds of companies come in to pitch products to them. And I've seen company after company, pitch, and, in many cases succeed and get their main American product into the Walmart. So I've seen that, that a big retailer can do that. And I'd say if if other retailers did the same thing, that that would help to drive the trend.

Darius 35:48
Alright, so just to do a quick reset on the room, we are speaking with Harry Moser, the CEO of the reshoring initiative. And the reshoring initiative is about bringing manufacturing jobs back to the US. So if anybody has a question, please raise your hand and I will bring you up. And we can have a conversation and ask Kerry, any specific questions that you might have? So just to be clear, are you promoting against all types of offshoring?

Harry Moser 36:30
No, no, it would not be efficient for the country to import nothing. And that's what go off from what they will be importing nothing to be entirely self sufficient. And, and that's not feasible, because there's, there's minerals and, and you know, banana, bananas, pineapples, whatever, that we don't, we don't produce here. So so it's impossible to do without some import. But But we, all we ask is for companies to pray for companies is to do the math correctly, to look at all the relevant costs and risks and our data on we have data, I took the data on 108 180 cases of Chinese products, where you people use our TCL estimator, and, and 8% of those cases, the US had the lowest fob price to the factory price in 32%, the lowest total cost of ownership. And then 46%, the lowest cost if there was also a 15% Trump tariff in place. So he asked companies do the math, don't just sell for the, for the lowest fob price, do the math, figure everything out. And that the company will find that 20 30% of what they're now importing, they can bring back and be just as profitable, that might take a couple of years to work through the transitions and all this kind of things that might might keep their profits from going quite as fast for a couple of years. But think that think of the good well think think of the benefit for the companies. If first first take what happens if if we continue to let manufacturing decline. And you'll lose those jobs and there and all those multiplier effects and support jobs. And you've undercut your consumer base. Whereas if you bring back 10 million jobs with good pay, think of those additional consumers are going to be out there buying products that you want to sell. So we think it's pretty clear that not to bring everything back, we would never ask that. But do the math and find the 1020 30% that you can bring back. Now at the same time, we call on the government to recognize the fact that manufacturing costs in the US are just uncompetitive, really high. And to take steps to deal with that, like we would recommend much better skilled workforce like like the German apprenticeship programs, get the dollar down by maybe 20% dollars too high because it's the reserve currency, have a probably have a value added tax like almost other all the other countries do not not raised the corporate income tax to just use some combination of those, especially the skilled workforce, and then over over 10 or 15 years, millions of manufacturing jobs will come back because it'll be in company's self interest to bring them back.

Darius 39:36
Yeah, and these are all pretty complex topics, each one of them so well, you know, I mean, I don't want to get political about it. But there is definitely politics in you know what's happening. And what I see myself I wasn't born in the US but I've lived here most of my life and what I is almost like a yo yo effect is like, for four years or eight years, we do something and then for another four years or eight years, we do the opposite. And then we go back and forth and back and forth. And what we are seeing right now after at least 40 years of me seeing this is that we are like so dependent on, you know, on outside resources for some even basic stuff, as well as really the the damage that we've done to the middle class. I think it used to be that I mean, this is what I've heard, the middle class was the strength of the the United States. And I don't know, like how you probably know a lot better what, you know what the picture is on the middle class right now? How is it shrinking? I mean, it's definitely smaller than it used to be right.

Harry Moser 40:54
The middle class was significantly hollowed out by the loss of 5 million manufacturing jobs, Overture always could pain, manufacturing jobs. And until that was hurt the middle class, and then and then the other jobs that supported them. And so like in Germany, they everybody talks about the middle standard, which is the small to medium size, family owned machine manufacturing companies that support the big companies. And that that sector of the economy is exceptionally strong in Germany used to be very strong here 4050 years ago, but it's gradually declined, primarily because of importance and, and lack of skilled workforce. So bringing the manufacturing jobs back will significantly strengthen the middle class, reduce income inequality, improve the environment, help cut the trade deficit, reduce the budget deficit, because there'll be more people working more taxes being paid by people in companies, less welfare, etc. So almost all the things that everybody's fighting about now, would be a lot easier if we had those jobs back.

Darius 42:14
Yeah, so as far as the countries that are involved in I guess the biggest deficits, we always hear about China, of course. The What do you think? I mean, who are the biggest losers? I guess if I can use that word, I don't know if it's the right word or not. If we if my if my goal is achieved? Yes.

Harry Moser 42:38
Okay. So to put to put the trade deficit into perspective, our goods, no goods, meaning things trade deficit, is about 900 billion per year. And I think our goods trade deficit with China is 250, or 300 billion per year. So China is, let's say, a third of our total goods trade deficit. But we actually have a goods trade deficit with nine of our top 10 trading partners. So Germany, Japan, South Korea, I think Canada, Mexico, Italy, France, you know, of the top 10 trading partners, the only one with which we have a trade surplus is the United Kingdom, which is obviously past its industrial peak. And, and so it is in China is certainly a piece of this and they haven't played fair. And they you know, they they steal the intellectual property, they used to fix their currency did all kinds of stuff. But but against almost all other industrial countries, and a lot of the developing countries were just not competitive. So it's so that's where we say, it isn't just a question of fixing things with China, and reducing our trade deficit with China. Because if we, if we say to China, raise their currency dramatically, or we put import tariffs on their stuff, that work will shift shift to Vietnam, Cambodia, Indonesia, and South Korea somewhere. So you need to get the US overall more more competitive.

Darius 44:21
Right. So I mean, being competitive is not just on the financial side, right? It's not just the value for the of the dollar. There's other ways to be competitive as well. Like, you know, if, if Germany is not buying more products from the US, is it just because of the value of the dollar or is it just that we just don't create that many good products anymore?

Harry Moser 44:48
We used to I cannot have residuals, and it used to be that the biggest machining tool companies in the world were in the United States back in the 1950s 1960s and baby After the biggest in the world were here. And then the dollar went up and the dollar went up. And company after company industry after industry disappeared. Because because they were not able to compete with the importance and wasn't just the dollar it wasn't it also skilled workforce was lack of innovation was not invested. He was all kinds of things. But but us businessmen aren't stupid. If they could have succeeded, they would have succeeded. So I it's finally, like, we did a survey of manufacturers and distributors. And he asked them for the products that you import, why do you import them. And the overwhelming majority said price, we don't go there for quality, we don't go there for innovation. We don't go there for because we get trips to China or Germany or something, we go there because I can buy the product for less than I can buy it here. And so if we if we don't overcome that price difference, that companies will continue to go there for the product.

Darius 46:12
So let's let's talk about what makes up that price difference. And that the total cost of I guess, ownership or manufacturing? So if we start from the labor what what are the some of the assumptions that we have at least in the US that are actually not accurate?

Harry Moser 46:37
I'm not sure. Firstly, you better gone back to why that why our costs are higher? Let me answer that first. And it's finally it's, it's higher high labor rates relative to China, India, Mexico, places like that, and, you know, 234 or 510 times as high. And, and we have failed to increase our productivity enough to balance off and to justify those higher wage rates. So, back 1015 years ago, US productivity was rising to 3% per year and in manufacturing, and the last 10 years, I think we've averaged less than 1%, maybe even less than half a percent per year. And what and I'd say why insufficient capital investment because the companies aren't busy enough, they're not making enough money, therefore, they don't invest, not a good enough skilled workforce, to high tax rates, the after after date returning isn't high enough. So. So high wage rates, insufficient productivity, to justify the wage rates?

Darius 47:49
What is how do you measure productivity? Is it like the unit production of each employee?

Harry Moser 47:57
It's the way it's measured by the government is value added per dollar or value added per hour of effort. Now there's, there's labor productivity, and there's multi factor productivity. So but labor productivity is when I look at so it's, how many widgets does your digital worker produce per hour, and the US has stagnated, it's been almost flat for 10 or 12 years. And in contrast, in China, which started with very low productivity, very much handwork, their rate of product labor productivity has risen at the rate of six or 7% per year, for the last 10 or 15 years. So there that then that is balanced off about half of their rising wage rate. So the wage rates have been going up at 10 to 15% per year expressed in their currency. And maybe half of that has been

Unknown Speaker 49:02
eliminated by the

Harry Moser 49:03
fact that they've been right raising productivity so fast. Now, why can they do that first. At first, they were copying, not start companies went over there and brought the technology and brought the equipment brought the engineering for them. But now, if you go, I hear people who go there, and they see the Chinese factories in Chinese factories are newer than ours, because they're almost all built in the last 1015 years. And many of ours were built 40 5060 years ago. They have they their engineering in their universities, something like 33% of the university students are engineers. Whereas in the US three or 5% of us engineering are engineers. In terms of toolmakers Steve Jobs, once said, The reason I don't make their product here in the US is because in the US and he was in some kind of a auditorium and In the US, I cannot fill this auditorium with engineers and toolmakers that I need to make the product. Whereas in China, I can fill cities. With such people, they have an almost unlimited supply of people with basically good skills. Why is that the Chinese population still hungry, they go into a field like engineering or tool making, where they know they're gonna make a good buck, whereas Americans aren't as hungry anymore. And they follow their dream, which often turns out to be trading not the best choice because they can't get a job.

Darius 50:36
Yeah, people are looking for easy money, you know, like, which is, which is okay. But, you know, this is, I think, you know, we, we need to be thinking about us, not just me, when we made some of these decisions, otherwise, the US that we also keep take for granted is going to be gone.

Harry Moser 51:01
Great. It's like I remember Spock saying the good of the many versus the good of the one or the few when, when he went in to fix the reactor that was wrong. Couple other points, I want to make sure we're gonna run out of time, so many are e commerce, you know, you're in retail, e commerce is important. And the nature of e commerce is that if, if I order something today, I expected tomorrow, or even today, and if there's a surge in orders, like it was on the distribution centers, under drawing COVID all of a sudden, the distribution centers stocks out. And if the only way to supply it is by surface from China or India, that can be six weeks or eight weeks, your product, their rest of its being supplied from from a US factory 100 or even 500 miles away, conceivably, in a couple of days or weeks, they could have more supply. So they so in an age of e commerce, local supply, enables that last mile delivery that everybody wants. Another thing to think about, for for retailers out there and brands Made in America is is a nice image. But a stronger image is to promote the actual facility, the actual history of the company in the facility, the actual workers are making the product to give the the consumer the chance to relate to what's actually being done to not just that it is made in the United States, but how which made if you're not staying socially bond with the company and its offer.

Darius 52:52
Okay, that's, that's very important. Something else have you mentioned to me before, again, going back to the cost is, like right now, the cost of labor in China is not, I mean, to the level of 1/3, or even one half of what it is here.

Harry Moser 53:15
I think, I think 1/3 or 1/4. Obviously, in the US, you've got a wage rate in New York City in Chicago and a wage rate in Mississippi. And any in China, you have a wage rate in Guangdong and Beijing, and you've got a wage rate 2000 miles inland. And then they can be that can be a factor of two or three difference. And so it's very hard to find that the comparables, but I'd say three, three years ago, four years ago, China was a fifth of ours, and then it got to a fourth. And now it's maybe a fourth or at 4/3. And there's also differences at the at the lowest skill level, China might be still a fifth of our wage rate. But if the higher skill levels, the experienced toolmaker that the forum in the factory manager, they can be asked for two thirds of our rates. So as is as the country, as both countries tend to automate, and go to higher tech solutions, which are necessary to make our higher wage rates competitive. The Chinese the comparable Chinese wage rate is closer to our wage rate than it is like a manual operation. So in many ways, there there are some trends that are moving in our direction.

Darius 54:48
Right, right. And I guess one positive thing about that is that they're moving up. It's not us moving down as much.

Harry Moser 54:58
They're moving up in weight. are doing no real question. They're moving up in wage the US in manufacturing. During the, I think think the great recession. For a while us manufacturing wages moved down because there were some excesses that got washed out, especially in the automotive industry at the peak, the marginal cost of an hour of low skilled worker and a lot of assembly plant was $79. At a time when China was paying $2.79 can't compete with Tim, especially when the $2 met, he worked hard. So the 79 some of those excesses got knocked out for a year or two, average manufacturing wages in the US probably fell or didn't rise. And now, now that those excesses are largely washed out, the new wages are going up here, but I think you read the statistics, I think wages now going up maybe 3%, something like that, whereas China's still going up, I believe, 10 to 15% per year.

Darius 56:12
Okay, yeah. Where I so I'm looking at your website? Is there a place on the on your website or somewhere else that shows us? Like, really in a current terms of which companies are actually sending jobs overseas? And we're, and then which ones are bringing them back to the US?

Harry Moser 56:39
Oh, we have on our website, we have a list under like, What is reshoring? And you can drill down and get to a list of all the companies we know of that have done reshoring foreign direct investment or what we call kept from offshoring. So company that was thinking of offshoring, and chose not to do so. So we have a list of, you know, 1000s of companies that meet those criteria. And then in the library, under Advanced Search, you can go in and search on different NAICS code industries, like transportation, consumer products, apparel, and, and find all the cases we know of, for that product category. And the thumbnail sketch of all the data we've accumulated on the case, and links to all the articles that we found to get even more information.

Darius 57:39
Okay, yeah, I see there is a spreadsheet that with a link to the 2020 company list. So, okay, now is that. So here, I see the name of these companies, but I don't see like how many jobs

Harry Moser 58:01
you we have that in the database, which we do not publish. But what as I said, one thing, go to the if you look in the blue bar at the top, there's a library is one of the items a data tab, and you can drop down to the main reshoring Library. And in the third or fourth row and read advanced search, you click on that. And then there's a a filters you can filter by company name, industry, country to work came back from state and went to reason it came back time period to a number of those filters you can apply. And then the system will pull up a thumbnail sketch of each company. net of filters that you apply.

Darius 58:56
Okay. Yeah. So I think that's, that's a you know, a lot of times, you know, people don't appreciate things until they see them in a graphical way. So that's why a lot of companies do these, like slides and infographics and they just bring out, you know, the numbers, they represent the significance of the numbers differently. So, I'm thinking that's probably something that I might be able to help with.

Harry Moser 59:30
That'd be great. We were always we'd love to get help from anybody. I suspect we're gonna end pretty soon. Yes, it's about that time, but where I've got these 5 million jobs to bring back so any brands that are out there any retailers, any manufacturers, any groups that want to achieve what we want to achieve, which is more manufacturing in the US? Contact me, come to reassure now.org You can email me at info at reassure now.org. I get the emails, and I respond, and I love to help you achieve our goal.

Darius 1:00:11
Awesome. One, one last question. How many people do you have helping you actually with this?

Harry Moser 1:00:20
Those who are paid maybe five or six, and they're there. I'm full time. And they're part time. I say I'm full time unpaid, and you're part time. And then, but then I have, I'd say, hundreds of people who send me articles and send me tips and give me ideas. And one really good fellow fellow on my MIT graduate, who volunteer, and he's just helped us redesign the TCL estimate. Contract Kenworth. And he just did a great job doing that and in, you know, a month or so we're gonna have have a significant revision, make it easier to quantify the qualitative factors in the TCL estimate. If he happens to hear that this night. Thank you.

Darius 1:01:16
Awesome. Yeah, that's what wonderful I think that's that this is great to hear. Well, thank you so much, Harry. It's really educational for me to to to speak with you. And I think this is an important, really important topic. So look forward to our continued conversations on this pleasure. You're a great host and I enjoyed it very much.

What is Reshoring and why is it important for retail? Interview with Harry Moser CEO of the Reshoring Initiative

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