Reshoring is a new word in the Institute of Spring Technology’s vocabulary, but its meaning is quite clear. Many end users of springs have sought to reduce costs by sourcing their springs from low cost countries. But a proportion of these end users have suffered quality and delivery problems, and now realize that price is not the only criterion to use when selecting spring suppliers. Hence, they now wish to source these springs locally to their manufacturing, whether that be in the U.S., Europe, Japan or any other so-called developed country. The BRIC (Brazil, Russia, India and China) countries, of which China is by far the most important, cannot always reliably supply spring products at the quality and price levels (when all costs are added up by an accountant rather than a buyer) that are required.
“Reshoring of jobs from China won’t happen,” according to Dr. Tim Leunig of the London School of Economics. What he means is that Chinese jobs will not come back to developed countries — and history tells us that this has never happened since the start of the industrial revolution in the U.K. For example, cotton goods for the world were made in the U.K. in the 1800s, then those jobs migrated to Japan, then to India and China, and they’re not coming back to the U.K. any time soon. Chinese jobs may migrate to other low cost countries like India, Bangladesh or even to Africa due to Chinese wage inflation — currently estimated at 20 percent in urban areas with unskilled (migrant) labor rates approaching $2.50/hour. But reshoring of products will happen.
Traditionally, springs have been manufactured at sites relatively close to where they are incorporated into sub-assemblies or finished goods. That enables “Just-In-Time” deliveries of specially designed and manufactured springs, with very little risk of disrupting a production line due to parts being delayed in transit. In the Institute’s opinion, that pattern will continue, and it is the moral of this cautionary tale.
Springs for Chinese cars will be made in China, and the most highly technical springs may be manufactured by Chinese joint ventures or subsidiaries of spring manufacturers from developed counties. To achieve the highest quality standards, Chinese or Indian springmakers will have to import their raw material. Wire quality in those countries is adequate — it may meet the specification limits — but in the Institute’s experience, wire produced in Europe, Japan and Korea in particular, is of much better quality, due to a long period of implementing continuous improvement.
Springs that require a high labor content in their manufacture will be made in lower cost countries for straightforward economic reasons. Unless manufacturers in developed countries can be inventive in automating production of labor-intensive springs (such as leaf springs and brake pull-off springs with coned down ends), they will struggle to remain competitive. But for most large volume spring products, automation is key. Springmakers in developed countries will face significant competition in the near future from Chinese springmakers who have expanded their capacity, but who are now finding less growth in their domestic market and so will seek to compete internationally. Reshoring may restore some markets, but beware you don’t lose market share to this new competition as much as you gain from reshoring. That is the second moral of this tale.
Mark Hayes is technical advisor to the Institute of Spring Technology (IST) in Sheffield, England. He is also the principal trainer for the spring training courses that the Institute offers globally. Readers are encouraged to contact IST with comments about this cautionary tale, and with subjects that they would like to be addressed in future tales, by email firstname.lastname@example.org.