In The Headlines
Getting to Neutral: Re-shoring Finally Balances Off-shoring
It was not long ago that the thought of corporations bringing their manufacturing back to the U.S. seemed all but impossible. But that is precisely what is happening, and the trend is predicted to continue through the rest of the decade. American companies have been off-shoring their manufacturing for decades as a way to take advantage of low wages in places like China, Vietnam, and other parts of Asia. But now a growing number of them are rethinking that formula and are bringing at least some of their manufacturing back to the U.S.
There are a number of reasons for this shift. Wages in China have been growing roughly 15% per year over the past decade, while salaries for manufacturing jobs in the U.S. have risen on average just 2.3% over the past 10 years, according to the Labor Department. Factor in higher transportation costs, growing quality-control issues connected with goods made in China, and cheaper domestic energy costs, and the case for bringing manufacturing back home begins to add up.
Indeed, a recent survey by The Boston Consulting Group (BCG) found that more than half of the CEOs at U.S.-based manufacturing companies with revenues greater than $1 billion are planning to bring production back to the U.S. from China or are actively considering it. The top three factors cited as the drivers of where goods should be made were labor costs, proximity to customers, and product quality. In fact, more than 80% of the CEOs cited at least one of these reasons as a key factor. Other reasons included access to skilled labor, transportation costs, supply chain lead time, and ease of doing business.
Harry Moser is founder and president of the Re-shoring Initiative, a Chicago-based firm that works with companies to bring manufacturing jobs back to the U.S. “A decade ago, companies were wowed by lower wages in China and ignored all the other costs associated with manufacturing overseas,” he said. With rising wages in China as well as more favorable conditions here in the U.S., including being closer to the customer, companies can no longer make the argument that it is more economical to manufacture overseas. “The case isn’t as clear-cut as it was a decade ago,” Moser added.
Often, the pushback he gets from firms is that wages are too high domestically. In that case, his group works with the company to determine the total cost of ownership, including the duty, freight, packaging, and transportation costs associated with producing the goods overseas. In about 25% of the cases, the company finds that it makes sense to bring the work back to the U.S.
And while Moser and others believe that the re-shoring trend will continue, they do acknowledge challenges exist. “There is a shortage of some types of skilled labor, such as toolmakers and precision machinists, here in the U.S., and that can slow down the implementation of re-shoring,” Moser said. “That’s going to take a change in perception in business and the educational community that manufacturing jobs are not dirty and dangerous, but rather that they require a more educated workforce.”
Even so, Moser said he is heartened by his firm’s research. It shows that new re-shoring is balancing out new off-shoring at about 40,000 manufacturing jobs per year. “That’s the first neutral year of manufacturing jobs losses and gains in about 20 years,” he explained. A zero-sum game might not seem like anything to cheer about, but after decades of losing manufacturing jobs to other countries, it is certainly a step in the right direction.
Back to the Future – Nestlé Wants to Sell You Personalized Food
The Replicator—the “miracle machine” that synthesized food and medicine for Star Trek: The Next Generation—is the inspiration for Nestlé’s Iron Man program to produce customized nutrients. “Out comes your food at the press of a button,” says Ed Baetge, director of the Nestlé Institute of Health Sciences (NIHS) in Lausanne, Switzerland. “If we do this right, it can be the next microwave in your kitchen.”
Nestlé, which has made billions of dollars with its pricey Nespresso coffee machines, aims to one day deliver much-needed vitamins and minerals to people with a similar device. Through Iron Man, NIHS is coming up with tools to analyze and measure levels of dozens of essential nutrients, and ultimately offer supplements tailored to an individual’s needs.
The year-old Iron Man program is part of the Swiss company’s efforts to treat disease with foods and beverages. At NIHS, more than 110 scientists—including 15 assigned to Iron Man—are working on projects from identifying the molecular biomarkers of obesity to finding links between vitamin deficiencies and illnesses such as diabetes and cancer. “Iron Man is an analysis of what’s missing in our diets, and a product, tailored to you, to help make up that difference,” Baetge says. “In the past, food was just food. We’re going in a new direction,” he adds.
Nestlé already makes products for maladies such as Alzheimer’s and disorders that affect how the body processes food. But Nestlé’s research into personalized nutrition could lead to “business propositions that today we cannot imagine,” says Luis Cantarell, who heads Nestlé’s $11 billion nutrition segment.
NIHS scientists say virtually everyone could benefit from knowing more about their so-called nutrient profile, a unique signature like a fingerprint with information on deficiencies or excesses. But getting that data today is expensive, costing from $50 to more than $200 per nutrient measured, according to researchers at the University of Minnesota, so a complete profile would top $1,000. NIHS is working with Waters, a Milford, Massachusetts maker of scientific equipment, on tests to create comprehensive profiles. Many people know “…their cholesterol number, but in the future they’ll know their magnesium number, vitamin D number, and more,” says Bruce Ames, a senior scientist at the Children’s Hospital Oakland Research Institute in California.
Nestlé envisions feeding the data into a machine that will create tailored foods or supplements with the right levels of, say, zinc or vitamin K. The nutrients might be delivered as a powder in a capsule like Nespresso coffees, Baetge tells us. Some scientists are skeptical. “I don’t believe personalized nutrition will go down to the level of the individual,” says Ian Macdonald, head of the School of Life Sciences at England’s University of Nottingham, who says the complexity and cost will be too great.
Yet if the Iron Man research succeeds, Nestlé could benefit. Gallup says half of Americans regularly take vitamins or mineral supplements, a market valued at $25 billion in 2013, as estimated by research firm Euromonitor. Although the Annals of Internal Medicine last year cast doubt on the usefulness of supplements, usage could jump if consumers can focus on their personal nutritional shortcomings. Says scientist Ames, “Practically everybody is deficient in something.”
Sources:
1. http://cnb.cx/1iRCBNQ – CNBC
2. http://buswk.co/1qpd9Sd – BusinessWeek
The Good News Is . . .
• Sales of new single-family houses in May 2014 rose to a seasonally adjusted annual rate of 504,000. This is 18.6% above the revised April 2014 estimate of 425,000. The median sales price of new houses sold in May was $282,000 while the average sales price was $319,200. The seasonally adjusted estimate of new houses for sale at the end of May was 189,000. This represents a supply of 4.5 months at the current sales rate
• Carnival Corporation, a leading global cruise and vacation company, reported earnings of $0.10 per share, an increase of 11.1% over year-ago earnings of $0.09. The firm’s earnings topped the consensus estimate of analysts by $0.08. The company reported that revenues rose 4.4% to $3.6 billion. Management attributed the company’s performance to effective marketing initiatives and cost efficiencies, combined with a gradually improving economic environment.
• The Wisconsin Energy Corporation agreed to buy the Integrys Energy Group for $5.7 billion in stock and cash, uniting two big Midwestern utilities. The deal is just the latest combination of utility companies. Under the terms of the deal, Wisconsin Energy will pay 1.128 of its shares and $18.58 in cash for each Integrys share. The combined entity will be renamed the WEC Energy Group and will have more than 4.3 million customers in Wisconsin, Illinois, Michigan and Minnesota.
Sources:
1. http://1.usa.gov/1jnTFEH – US Dept. of Housing & Urban Development
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1qdwhzY – Carnival Corporation
4. http://nyti.ms/1r2Jj62 – NY Times Dealbook
Planning Tips
Tips for Protecting Your Summertime Fun
The summer season is upon us. Be sure you and your loved ones are covered in the event of a summer vacation mishap. It is important to evaluate your summer insurance needs. Below are some important types of insurance you may want to consider.
Pool insurance – A pool can represent a serious liability if you do not have the right amount of insurance. Regular homeowners insurance may not provide enough coverage for a pool, and some policies may even exclude pools. Pools can be dangerous, so they increase your liability risk because you stand a greater chance of being sued or having to pay someone’s medical expenses. Boost your liability coverage when you put in a new pool. And consider an umbrella policy, which increases your liability coverage beyond what you have on other policies.
Boat insurance – Homeowners or renters insurance may provide all the coverage you need for smaller, slower boats. For larger and faster boats, or personal watercraft, like Jet Skis, you will need a separate marine policy. Your premiums will depend on your boating background, the type of boat, and where you will use it. Credit history, driving record, boating certifications, and whether you own or rent a home can also affect your policy cost. Proper boat insurance will pay if your boat is accidentally lost or damaged and cover damage or injuries to others, as well as your legal costs, if someone takes your boat for a joy ride without permission.
Motorcycle insurance – If you are thinking about buying a motorcycle, weigh your coverage options first. All motorcyclists are required to have liability coverage for property damage and bodily injury that they may cause to other people in an accident. Check to see if that coverage would also protect passengers on your bike. In Northern states, bike owners who ride mostly during the warm-weather months may be able to get what is called a “lay-up” policy, which suspends all coverage during the winter except for comprehensive. That can help cut the cost of insurance for the rider.
Car rental insurance – When you rent a car for summer travel, know what your own auto insurance covers before you accept the rental company’s policy. The insurance sold at the rental counter typically includes, among other things, liability protection for lawsuits, personal accident insurance for medical or ambulance needs, and personal effects coverage for theft of your belongings in the car. You may not need all of that. Check your auto policy and your credit card agreement, which also may provide car rental coverage. Also find out whether, in the event of damage to the rental car, you will have to pay upfront for repairs and wait for reimbursement, or get reimbursed for the costs right away by your insurer. Finally, if you plan to travel into Canada or Mexico, look into insurance requirements and whether you need to take proof of coverage.
Check with your insurance agent – It is important to review your insurance needs and options with your agent before purchasing any of these special types of coverage.
Sources:
1. http://usat.ly/1i4GFtS – USA Today
2. http://bit.ly/1jAKSRl – WikiHow
3. http://bit.ly/1lqy4wn – insurance.com
4. http://bit.ly/VyL6mN – Bankrate
5. http://bit.ly/UZyfJH – Zacks.com
6. http://bit.ly/1nVnTBM – Motorcycle USA
7. http://bit.ly/1vlG47B – Ace Insured
8. http://bit.ly/1dw29rz – Bankrate
