October 16, 2012
GRAND RAPIDS, MICH. (Oct. 16, 11:05 p.m. ET) — The industry is positive about bringing jobs back to North America and manufacturers have plenty of anecdotal evidence to throw fuel on the reshoring fire.
Todd Shepherd, president of Shepherd Thermoforming & Packaging Inc., gave examples of his company’s success in “turning the boat around” at the SPE Thermoforming Conference, held Sept. 23-24 in Grand Rapids.
The family-owned custom thermoformer, located in Brampton, Ontario, has landed and retained several manufacturing jobs destined for Asia, Shepherd said.
Sometimes, convincing a customer to reshore is as simple as having a conversation.
One client, who manufactured medical boots, had a difficult time getting his offshore supplier to accommodate minor trimming changes, and struggled with material inconsistency. The client was so nervous about the offshore manufacturers’ work that he was manually drilling mounting holes and making other changes himself, Shepherd said.
That, combined with high shipping costs and long delivery times, was enough to convince the client to move production to North America, he said.
The first run of medical boots had problems — incompatible glue caused cracks — but Shepherd Thermoforming was able to work with its suppliers to find a solution.
“If you think of the hassles he was going through trying to get those minor [trimming] changes, you can imagine what he would have gone through trying to solve this problem offshore,” Shepherd added.
Another client — a locally based bearing company with a plant in Hong Kong — was purchasing material-handling trays from an offshore manufacturer but was considering local production. The client needed six different models of trays and they all needed to interface with robots, so the project required a lot of technical accuracy.
Through face-to-face, hands-on interaction, Shepherd got to understand the client’s needs and build a relationship. And it helped that both companies had engineers from Poland who worked on the project together. “We call it the Polish Connection,” Shepherd joked.
In some cases, building and maintaining relationships can be the key to securing business.
An existing customer approached Shepherd Thermoforming about designing a part that he could give to an overseas company to manufacture. Not all companies would honor that kind of request, but it was a slow period for the engineering department and the company wanted to maintain its relationship with the customer, Shepherd said.
The company built the part, but encouraged the customer to look at the big picture. Shepherd Thermoforming built a case that showed, once everything was factored in, going overseas wouldn’t be that much cheaper, and the customer decided to give the company the job, he said.
Once customers look at the total bottom line, and factor in the cost and hassle of shipping, they realize manufacturing at home can be less-expensive, Shepherd added.
In his presentation, he gave several examples of other clients that have come to the same conclusion.
Sometimes, retaining jobs requires some creativity.
“Sometimes you need to do things to make a difference. Some of the greatest technologies were built during wartimes because of the pressure to do better,” he said.
An existing client turned to Shepherd after an electrostatic-dissipative clamshell, made by an offshore manufacturer, experienced several failures during testing. The last straw was a contamination issue — the shipping boxes, and the parts inside, arrived covered in mold, he said.
The client gave the clamshell contract to Shepherd and for several years, the two had a great relationship. Then a new buyer entered the picture and told Shepherd to “meet the price or lose the business” to an offshore manufacturer. It was a tough price to match, but the client was one of Shepherd Thermoforming’s top 10 customers and had other factors that made them worth taking a risk on, Shepherd said.
But the gross margins on the part were under 5 percent and Shepherd Thermoforming was giving money away, he said. The company needed a way to make the part profitable.
Shepherd Thermoforming used its continuous-improvement program and asked every department to focus on making the clamshell better. “The astonishing part was that we came up with a lot of solutions,” he said, like improved tooling and layout, and reconfigured shipping.
One solution reduced cycle time by 20 percent and has been implemented companywide. “We’re not sure that if we hadn’t focused on this job we would’ve found it,” he added.
The company also took advantage of its relationship with its material supplier. The clamshell is made of a material that Shepherd doesn’t use very often, and the company convinced the supplier to give them a discount to help keep the job in North America, he said.
Shepherd Thermoforming is now able to run the job without “cutting a check to someone,” even if profit margins aren’t as high as they once were. The client also made good on its promise to give the company more business, and the package now runs once a month compared to the three to four times per year it used to run.
Reshoring a product can require manufacturers to put in more effort and take some risks, but taking those jobs overseas can be risky for clients. Manufacturers have all seen customers come to them in a rush, hitting the panic button with a look in their eyes like a bomb is about to go off, and ready to pay any price to get the job done, Shepherd said.
“I’ve finally figured out what that’s all about: The boat didn’t show up,” he laughed.