The All Orders Approach to Sales Orders

May 20, 2015 at 11:33 AMRachel

It is widely understood that having a proper and concise system for creating and filling sales orders is crucial for proper allocation of resources to complete a sale. Need more reasons on why you need to get a handle on your sales orders? Check out our post about why you need a sales order here.  Now, the question is how can NumberCruncher change the way you approach your sales orders?

With All Orders, the sales order process is dynamic and seamlessly integrated with QuickBooks. All Orders allows the user to create sales orders with multiple shipping and release dates, thus eliminating the need for multiple sales orders. A single sales order can support multiple ship-to addresses as well as items considered to be inventory and non-inventory. Features like this allow the user to create a single sales order that meets a variety of needs.

Is an item running low or out of stock? The sales order screen includes information about the availability of items in the order. If stocks need to be refilled, purchase orders can be created in seconds. This new purchase order is linked to the sales order and items are held for matched the sales order as they are received by the warehouse.  Once the purchase order is received, the underlying sales order can be satisfied automatically. No need to check back and forth on an purchase order to know when to update the SO. Upon filling a sales order, All Orders creates a ‘shipper’, from here an invoice is created in QuickBooks with the click of button.

If a user is transitioning to All Orders after using QuickBooks for their sales orders, the transition is simple. Existing sales orders can be imported directly into All Orders from QuickBooks. The linked sales, work, and purchase orders as well as the integrated pick lists and ship docs are designed to reduce errors and improve efficiency.

All Orders  by NumberCruncher provides solutions for your inventory and order management needs. For more information or to request a free trial, visit our website.

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Bill of Materials for Food and Beverage Manufacturers

October 27, 2014 at 2:52 PMIan Benoliel

An important tool for manufacturers is the Bill of Materials also known as the BoM or recipe.     The bill of materials is a listing of the raw materials and work in progress and the quantities of each needed to manufacture a finished product.      The bill of materials has multiple purposes including:

  • Pricing: A labor and overhead element can also be included in the bill of materials. By listing each raw materials and associated labor you can derive a cost for your products. You then compare that to the market price to ensure you will be producing profitablly.
  • Production: The BoM is the basis for manufacturing the product. It is used for pick sheets and routing. It can also be used for raw material back flushing.
  • Purchasing: The BoM is used to forecast the raw materials demand based on the quantity of finished products that needs to be produced.

Indented bill of materials

The term indented bill of materials refers to a product that has multiple stages of production. The typical manufacturing process has at least one work in progress stage and packaging stage.   At each stage the product is inventoried which implies that a seperate SKU or Item should be created for each stage. The indented bill of materials will show a hierarchical nature of a finished goods with the top level reprsenting the finished product which may be comprised of raw materials and work in progress. The following is an example of 2 stages in production:

  • Batch: The raw ingrdedients are mixed and one or more batches are created. Lot or batch #s are used to distinguish between batches made at different times. The bill of materials will contain the raw materials necessary to create the batch.
  • Package: The batch will be combined with other raw materials to create the finished product. The bill of materials will contain the quantity per of the batch necessary to create a unit of the finished product.

Routes vs. Stages

A stage is different than a route.   A route refers to a step in the production process to achieve a certain stage.  For example in producing the batch there may be mutiple steps including pouring, mixing, cooking, cooling etc.   You draw the line between a step and a stage by determining if you need to keep track of the inventory of work in process (WIP). If you need to inventory WIP then it should be a stage and it should it have its own SKU and bill of materials.  Otherwise it should be a route or step.

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Why do I need a sales order?

May 16, 2014 at 3:11 PMIan Benoliel

A sales order is an internal document that records a sales to be made in the future. It helps the company plan for the resources that are required (inventory or labor) to complete the sale. The sales order records a customer's originating purchase order; in other words the customer's purchase order is the originating document which triggers the creation of the sales order. The sales order, sometimes abbreviated as SO, may be for products and/or services. Each sales order should have on it an order number, the customer name, billing and shipping addresses, customer purchase order number, order date, special instructions, due date and a listing of products and services together with their quantities and prices. A sales order is primarily used in the wholesale, distribution and manufacturing industries.

So you may be asking, why don’t I just do an invoice or sales receipt and bypass the sales order altogether? In certain circumstance, you can bypass the sales order if the sales is immediate (e.g. in retail). In all other cases a sales order should be created.

Typically, after the sales order is created, a pick ticket is generated to instruct the warehouse on which product to pick. Once the packing list is created you may determine which products are on ‘back order’.

The sales order is tremendously useful as a planning tool. With the sales order you can

  1. estimate future sales
  2. helps you estimate profitability on an order before accepting the order
  3. can be used send out an order confirmation
  4. assist customer service in tracking order status
  5. determine what stock needs to be ordered from suppliers
  6. for manufacturers, the sales orders can be used to plan production orders.
  7. determine your order fulfillment efficiency: e,g, Lead time - the time between the date that your customer placed the order and
  8. determine back orders - how many orders have shipped completed

All Orders by NumberCruncher is an inventory and order management system that help you manage sales orders.

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The Missing Link – Reserving a Purchase Order for a Specific Sales Order

April 8, 2014 at 5:52 PMIan Benoliel

“Why can’t I just tell the customer when their shipment is going out the door” exclaimed Harry.  “Their order has been sitting there for 2 weeks and stills no shipment; they’re our biggest customer!”

Everyone on the room was very quiet not wanting to send Harry over the edge. Finally Kelly spoke “Well it seems there were a bunch of sales orders that came in before theirs so when we received the purchase order from the supplier we filled those orders first”.  There was no way to tell that product should have been shipped to a different customer.

Something struck a chord in Jack’s mind. “You know the guys down the street had the same problem until they started using All Orders by NumberCruncher.”   Jack continued, “When they create a sales order for certain customers in All Orders, they link it to a purchase order.  Once they’re linked to one another the quantity on the purchase order is reserved for that customer and it cannot be diverted to another customer.  In addition, the links to the sales order are visible on the purchase order so it’s easy to tell which orders should be filled when a purchase order is received.”

Everyone, including Harry, was impressed.    “What are we waiting for?” said Harry, “Let’s get a demo of All Orders ASAP!”

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Reorder Point and Order Cycle factor

October 24, 2013 at 5:26 PMIan Benoliel

A reorder point is great tool to identify which products to order from your suppliers.   Generally the reorder point is defined as lead time demand plus safety stock.     So lets say your lead time is 30 days and during that period your usage will be 70 units and safety stock is 30 units making the reorder point 100 units.    Now lets assume you have 105 units in stock and your next PO will be in 30 days.     This product will not be flagged for reorder because it is not below the reorder point.   By the time you issue your next purchase order,  you will have 35 units left or 15 days supply but the product will not arrive for another 30 days which will result in back order of 35 units!   

To avoid this issue, safety stock should include a factor for order cycle which is generally demand until the next order cycle.  Revisiting the above example, if the reorder point where to include 170 units then the product would be flagged during the reorder analysis and a back order avoided.   

 

 

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Batch Control and Tracking for Food and Beverage Manufacturers

October 7, 2013 at 10:02 AMIan Benoliel

How to control and track batches

One of the questions I get asked a lot is how to control and track batches that go into multiple pack sizes. Here is the scenario. A manufacturer of juice creates several batches of juice each day. As part of their manufacturing process, each batch is stored in a temperature controlled environment for a period of time until it is poured into several pack sizes.

Create a multi-level bill of materials

A bill of materials or BOM is also known as the formula, recipe, or ingredients lists. It is simply a list of the ingredients and their quantities of each needed to manufacture a product. However many food manufacturers create a multi-level or indented bill of materials structure. The first BOM would be for the batch and would contain all the raw materials or ingredients to create one unit (pound, gallon etc). The second BOM would be for each pack size that you sell. One of the ingredients in the pack BOM will be the batch BOM. For example the pack size for a 4 ounce pack may contain 4 ounces of the batch, a carton and label.

Use lot or batch numbers

Now that you have the bill of materials set, each time you create a new batch you assign a batch or lot numbers. Each time you create new packs you also assign them a lot number. You need to keep a record of which batch number was used within each pack you create (the lot number of the pack does not need to be the same as the batch number). Using this methodology, knowing the lot number of the pack you can trace back to the batch and even to the lot number of the ingredients used in the batch.

How to do this in All Orders

In All Orders you would create an 'Item' of type 'Assembly' for batch BOM and the BOM. You would indicate that these items have 'lot numbers'. When you create a batch you would create a 'Work Order'. You would indicate on the work order the quantities (and lot numbers) of the ingredients uses and assign the back a unique lot number. You can even print a label directly from the work order. When you create the pack BOM you would also create a work order and similarly indicate the quantities and lot number of the batch used.

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Customer Spotlight: Quality Bakery Products

October 2, 2013 at 10:33 AMHeidi Bragg

Profile:

  • Founded – 1993
  • Sales Manager – Michael Tills
  • HQ – Houston, TX
  • Industry – Bakery Industry
  • Employees – 70

Problem: The management of Quality Bakery Products knew the company needed to update its purchasing and production systems. At the time, they were using paper records of their formulations and tracking inventory by hand. Though they used QuickBooks for accounting purposes, it didn’t offer the flexibility they needed for the rest of their enterprise resource planning (ERP) purposes.

Solution: After investigating different ERP software programs, the company’s management contacted NumberCruncher, the makers of All Orders. All Orders offers a QuickBooks-compatible, affordable ERP solution. NumberCruncher’s CEO, Ian Benoliel, worked with the Tills to test and implement the software. Now, Quality Bakery Products has all their records digitized and can better meet the needs of their clients.

Mike Tills has been in the bakery products industry for over 50 years. His first job was working in his family’s bakery supply company when he was a teenager. Mike’s son, Michael, grew up with his father’s business and has been working in this industry for 8 years. Their latest venture is Quality Bakery Products, a Houston-based bakery products manufacturer and supply company.

According to the American Bakers Association, “The baking industry is a dynamic part of the U.S. economy, accounting for about $311.0 billion in total economic output or roughly 2.1 percent of GDP. Bakers, product wholesalers and retailers directly or indirectly employed approximately 1.76 million Americans in 2010.” Quality Bakery Products (“Quality”) serves both independent and in-store bakeries nationwide.

Back in 2009, Quality was using QuickBooks accounting software but still kept all their recipe formulations in a binder and tracking inventory by hand. Mike Tills wanted to find a better solution, especially for their bill of materials (BOM) needs. He began researching enterprise resource planning software options.

Mike Tills was also looking for a greater measure of security, according to his son, Michael. “My dad likes to prep for the ‘worst case scenario’ – whether it’s weather, fire, etc.” Quality Bakery Products wanted to “get with the times” to bring the company into the digital age. “We wanted the security of knowing that if our facility was in a hurricane or if some other calamity occurred, we wouldn’t have to start from scratch. It’s important that we’re able to continue doing business and have access to our formulas no matter what happens.”

After evaluating a variety of options, Quality approached CEO Ian Benoliel of NumberCruncher. NumberCruncher’s All Orders software is compatible with QuickBooks and specifically designed to meet the ERP needs of small- to medium-sized businesses. Benoliel worked with Quality as they demoed bills of materials, sales orders, purchase orders, and other functions available in All Orders.

When describing this testing period, Michael Tills says, “The team at NumberCruncher was amazing. They’re very technical, as well as being very people-oriented. While we were testing the software, Ian was personally involved and helped us configure everthing to our needs. He cared enough to help us make sure the software was exactly what we needed.” Michael spent 6 months converting all the company’s paper formulations to spreadsheets, which were then uploaded to All Orders.

As they started began to implement All Orders, Mike Tills says another benefit was that it looks and functions much like QuickBooks. “When we started testing the software, it was very easy for our employees to learn the new software. We had very little resistance from them about adapting to the new system.”

The greatest benefit to Quality has been the flexibility of the bill of materials functionality in All Orders offers. “Our previous purchasing manager and co-founder had put the BOM information into QuickBooks, but it didn’t offer the planning flexibility we needed. All costs were static, and we were limited to just a bill of materials per unit,” remembers Michael Tills. He continues, “With All Orders, we can produce a large variety of reports, work orders, and other materials to use for forecasting. We use work orders as both a day-to-day production tool and a forecasting tool. For example, if we expect a 5,000-unit order in the near future, I can create a dummy work order to determine all the raw materials we’ll need to fill that order. And since our inventory and purchasing functions are also in All Orders, we can make sure that we have the right materials in stock at the right time.”

In the past two years, the company has added both All Orders Web and All Orders Mobile. Michael Tills says customers had been asking for the ability to order online, and the web version of All Orders has made that an easy solution for them. “We’re able to see the orders instantly and they’re integrated with all our other All Orders software functions,” he explains. “We also use the mobile function on all our scanners.” The ability to have inventory and order information available company-wide is key for Quality Bakery Products. “Some businesses are more compartmentalized. We’re a small company and we work closely together, so it’s important for us to have visibility across all job functions.”

Both Mike and Michael Tills are extremely pleased with how All Orders has helped their business, and with the continual product innovations NumberCruncher provides. Michael Tills continues, “QuickBooks sends out an update once a year, and they rarely implement product suggestions from their customers. But All Orders is always making frequent improvements to help their customers, and they really listen to our feedback.” Michael Tills concludes by saying, “We feel like we have a custom software solution designed specifically for us.”


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Importing from Overseas: Quality Control, Forecasting and Landed Costs Are Crucial

September 11, 2013 at 5:58 PMHeidi Bragg

Depending on their individual products, customers, and markets, businesses that import from overseas have specific requirements and expectations. What works for one company may not work well for another because each situation is unique. To find out more about this topic, we interviewed representatives from businesses in two very different markets. John Blichmann is the president and founder of Blichmann Engineering, based in Lafayette, Indiana. His company makes precision-engineered equipment for home brewing and winemaking. Shimon Cohen is vice president of Cherie Dori, a high-end jeweler based in Florida. Both Cheri Dori and Blichmann Engineering import products or parts from overseas, but their experiences have been very different.

Blichmann Engineering’s focus is on “quality, efficiency, and performance,” says John Blichmann. The company’s R & D efforts concentrate on developing unique products for their market. Then, the company patents these products and has some of the designs produced overseas. “We import primarily from Taiwan and China,” says Blichmann. “We use Chinese suppliers for the more common, ‘stock’ parts and fittings we use, but we send the production of our unique parts to Taiwan. Taiwan is more expensive than China (about 50% more for most of our parts), but still significantly cheaper than if they were produced in the U.S. Tooling charges there are much more reasonable than in the States, and the results have been impeccable.”

We asked Blichmann why he’d chosen Taiwan over China. “For standard components, the quality from China is fairly decent. And we purchase a few of our more simple custom parts from there, too. But we’ve had problems with high staff turnover in the production facilities, long lead times (especially around Chinese New Year), poor and inconsistent quality, and the lack of respect for our intellectual property (IP) protection. We don’t have those same issues with our suppliers in Taiwan.” For the past 10 years, Blichmann Engineering has worked with a broker in Hong Kong who inspects all shipments before they ever leave Chinese soil. “It helps that our broker was educated in the States, so he understands the cultures of both the U.S. and China,” he notes.  

“One of the most important issues for importers is capturing landed costs, especially in an environment of rising freight charges,” says Ian Benoliel, CEO of NumberCruncher. His firm designs enterprise resource planning (ERP) software for small- to medium-sized businesses. “Having the correct landed costs will give you better margin or markup information.”

Blichmann said that as economic conditions change, his company will continue to reevaluate what works best for them. “About two years ago, we started discussions with a company in Wisconsin about making one of our major parts. At that time, we simply couldn’t afford to purchase parts from them, even though it would make things much easier for us logistically.” However, as labor (and other) costs in China increased, Blichmann revisited the idea of sourcing domestically and re-established contact with the firm in Wisconsin. “Now, we can buy from a more local supplier. We don’t have to stock up to protect against holiday shortages, and we can use forecasting and blanket orders to make sure we always have exactly what we need when we need it.” The costs are only 10-15% more than the company was paying before and, Blichmann notes, “It means a lot that we’re able to stamp ‘Made in the U.S.A.' on that product.”

Cherie Dori makes both stock and custom jewelry for a very discerning clientele. The company is headquartered in Florida, but vice president Shimon Cohen is based in Israel. “That’s a real advantage when dealing with our suppliers and manufacturers in China,” he says. “When I’m working out of our office in Florida and have a question for a Chinese colleague, the time difference really influences how long it takes to get an answer. I email him one day and he gets the email the next day. If he needs additional clarification, it takes a third day before we get the situation resolved. Here, though, our time in the office overlaps by 5-6 hours each day, so we can easily work though any concerns that arise.”

Cohen has had a much different experience than Blichmann with his Chinese manufacturing facility. Cherie Dori has been working with the same factory for over 15 years. “We’ve had good experiences with our facility in China,” Cohen notes. “We’ve been working together for a long time and each of us knows the other’s expectations. They’ve been very responsive, and we have good communication.” Cherie Dori’s production comprises 80% of the factory’s total output. “We don’t see much turnover in the management of the factory; it’s roughly the same as the U.S. And we don’t go to China exclusively for the price – we also go there for quality,” says Cohen. He continues, “The leaders are investing in machinery, investing in top-of-the-line quality. They do very nice work.”

Another benefit is that Cherie Dori’s products ship out of Hong Kong, rather than China. This circumvents a lot of potential hang-ups with Chinese customs. “Shipments basically get to Florida overnight. And returns to Hong Kong are easy: we don’t have to deal with customs.” The only negative Cohen mentioned was the fact that the factory closes for 2-3 weeks over Chinese New Year. “Our engagement rings are all custom creations. If a customer wants to get engaged on a specific date during Chinese New Year, it can be difficult for us, but we do our very best to meet their needs.”

The designer jewelry market has unique considerations. “With jewelry, it’s not just the price that’s important to the customer – it’s the aesthetic, the quality, the durability of the piece," Cohen explains. "And what we’re creating is a very high-priced, often unique product.” Cherie Dori has put procedures in place to ensure that its design, production, and shipping processes run smoothly for this specialized market, and Cohen is pleased with the results. “Importing is pretty painless for us,” he concludes.

What can be learned from these two accounts? First of all, the same methods won’t work for every industry or company. Each situation is unique, and requires due diligence on the part of business owners and/or management to confirm that the proper balance between price, quality, and efficiency can be struck. Second, having a strong relationship with someone you trust in the local area is key. For Blichmann Engineering, it’s their broker in Hong Kong; for Cherie Dori, it’s the management of their production facility. Third, as world conditions change, it’s important to reevaluate how your current production processes are benefiting the company and see if any adjustments should be made. As both Cherie Dori and Blichmann Engineering demonstrate, employing these steps can help you create a successful, growing company.

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Is the next trend in Manufacturing "Nearshoring"?

August 20, 2013 at 11:21 AMHeidi Bragg

Rising wages in Asia and increased fuel costs have led many U.S.-based companies to re-evaluate the pros and cons of outsourcing to Asia. An article in Inbound Logistics magazine explains it as follows: “Once far-flung supply chains are contracting. U.S. manufacturers are bringing production back—not necessarily all the way back to the United States, but to the Americas.” This process is known as “nearshoring.”

Countries in the Western Hemisphere now offer attractive alternatives to Asian outsourcing destinations. In the past decade, many U.S. firms have built manufacturing facilities in Mexico. More recently, IT businesses are also moving parts of their operations south of the border. In addition to Mexico, Central and South American countries like Costa Rica and Chile offer significant benefits for U.S.-based companies that want to outsource. Besides their proximity to the U.S., Latin American firms are more familiar with Western business practices than their Asian counterparts, and are often only a time zone or two away from the companies they’re working for.

The following countries are some of the emerging outsourcing leaders in Latin American:

Mexico
Mexico has already attracted a number of North American firms, and its location is obviously one of its major benefits. “Mexico has the advantage of being in close proximity to the U.S., allowing American companies to conveniently outsource their software processes to Mexican enterprises,” according to SourcingLine, a resource for top IT firms. For manufacturing companies that need to physically move product, multiple transportation and distribution methods are available at a much lower cost than from Asia. Mexico comes in at #22 on SourcingLine’s ranking of the top outsourcing countries in the world.

The North America Free Trade Agreement (NAFTA) offers many advantages to firms doing business in Mexico. Even the AFL-CIO states that NAFTA, “ ... Made outsourcing to Mexico much more attractive for U.S. companies.” Labor costs are lower than in the U.S., and according to a survey by Alix Partners, “Though security risks are a clear concern among respondents, relatively few have actually experienced supply chain disruption in Mexico. Moreover, executives appear moderately optimistic about the future of the country’s security problems; 50% expect at least modest improvement in safety and security issues.”

Costa Rica
Besides being in the same time zone as the central U.S., Costa Rica is a member of CAFTA, a bi-lateral agreement that expanded NAFTA to five Central American countries. Costa Rica has been a conflict-free democracy since 1949 and many professionals speak English. The Costa Rican-American Chamber of Commerce says that, “Over the last thirty years, Costa Rica has become an attractive country for foreign investment due to its stable government and educated population. The country has transitioned from an agricultural economy centered around bananas and coffee to more advanced sectors, attracting world-class companies such as IBM, P & G, Hewlett-Packard and Intel.”

Small-to-medium-sized businesses are enjoying the benefits of operating in Costa Rica, too. An article in Bloomberg Businessweek, entitled “Costa Rica: Cultural Similarities Make It An Outsourcing Favorite,” describes the experiences of Brian Stafford, president of a California-based software company. Stafford looked at various options in Europe and Asia before choosing to outsource his $4 million company to Costa Rica. He says:  “Costa Rica wasn't even on our radar. But they've been very easy to work with, and this allows us to get products to market much quicker." SourcingLine ranks Costa Rica #21 in its list of top outsourcing countries.

Chile
Though it may not be one of the first countries that comes to mind when someone mentions outsourcing, Chile is #11 on SourcingLine’s list. One benefit the country offers is its generous immigration policy. “In Chile, immigration rules are strikingly different than nearby nations like Brazil,” says Narayan Ammachchi, news editor for Nearshore Americas. “And IT companies can bring in as many skilled professionals from overseas countries as they want. Jobseekers from across the world are arriving by thousands and filling up the vacant positions in all sectors of the economy.”

Chile has also created educational initiatives to help meet the demand for greater numbers of well-prepared workers. “After we came the conclusion we were short, especially on ITO workers, we launched a campaign in 2009 called ‘Tu Naciste Para Ser Grande’ or ‘You Were Born to do Something Big,’” remarked Gordana Stojkovic, a Chilean investment promotion executive interviewed by Nearshore America. “(This) not only targeted massive educational institutions, but also the students themselves.” In an article by Jon Tonti, Stojkovic describes how English language programs, technical learning centers, and professional institutes work together to create well-trained graduates who are ready to meet the needs of local and international employers.

When most people hear the word outsourcing, they usually think of a factory somewhere in China, India, or Southeast Asia. Latin American countries, however, are working hard to change that stereotype. They want U.S. companies to realize that excellent outsourcing opportunities exist much closer to home.

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Coming (Back) to America: Why Companies are Reshoring Manufacturing Operations

August 12, 2013 at 9:25 AMHeidi Bragg

About ten years ago, labor costs in developing nations were low enough that business owners outsourced many of America’s manufacturing jobs to countries like China, India, and Mexico, to name a few. The Center for American Progress quotes a U.S. Department of Commerce statistic that in the 2000s, “U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.” A significant number of domestic jobs moved to countries with lower labor costs.

However, the economic circumstances of these countries have changed dramatically in the intervening years. Labor costs in China have risen to record highs. Some manufacturers have found that issues with quality control and the inability to quickly implement product design changes have left them lagging behind. Earlier this year, Zacks Equity Research stated the following: “One survey by the Boston Consulting Group (showed) that 37% of large American employers were contemplating transfer of manufacturing from China to the U.S.” Why are some companies, from large multinationals to small businesses, moving operations back home?

Increased overseas labor costs are one significant factor. Earlier this year, CNBC quoted Steve Maurer, managing director of AlixPartners, as saying, "The Chinese manufacturing cost advantage has eroded dramatically in the last few years. If you go back to 2005, it was pretty common for landed cost from China to be 25 to 30 percent less than the cost of manufacturing in the United States. Based on our analysis, two-thirds of that gap has closed." Maurer continued, “If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years.” As labor savings from overseas production decrease, firms are unwilling to tolerate the other undesirable effects of manufacturing outside the country.

The cost and logistical issues involved in transporting goods from overseas production facilities to the U.S. are also giving business owners pause. As energy prices in the U.S. decrease (due to newer technologies and increased domestic oil production), U.S.-based firms can realize extensive cost savings by manufacturing their good closer to home, even if labor costs are somewhat higher. Also, political stability and established transportation infrastructure ensure that supply and distribution channels function more efficiently.

Having production facilities overseas requires significant oversight in order to maintain quality control. Some companies have discovered that in addition to decreased quality of existing product designs, the ability to quickly implement changes and innovations is hampered by distance, language difficulties, and the lack of highly skilled laborers. An article in The Economist describes the experiences of ET Water Systems, a start-up from California that builds irrigation devices for businesses. Along with many other firms, ET Water Systems moved their manufacturing operations overseas in 2005. Over the next five years, however, “ … Innovation suffered from the distance between manufacturing and design, and quality became a problem, too.” CEO Mark Coopersmith then re-evaluated the differences between domestic and overseas production. “(Coopersmith) was amazed to find that California was only about 10% more expensive than China. And that was just on the immediate numbers, without allowing for the intangible benefits of making the devices almost next door.” Once ET Water Systems moved production back to California, the ability to directly supervise production saved both time and money.

Putting a “Made in the U.S.A” label on consumer goods can also lead to increased sales. Apparel company Karen Kane moved most of its production back to the U.S. after dealing with quality issues, long lead times, and delays for shipments. Besides alleviating these problems, the company noticed that, “Last year, Karen Kane dresses, blouses and jackets promoted with Made-in-USA posters at Dillard's department store posted 15% higher sales than similar non-promoted clothing” (USA Today, July 5, 2013). Many consumers prefer to purchase goods produced in America, and some are even willing to pay more for them.

As the world economy changes and workers in developing nations demand higher pay and more benefits, and as economic conditions improve domestically, more and more companies will consider moving their manufacturing operations back to the U.S. In fact, according to the Denver Business Journal, “While reshoring has accounted for only about 50,000 jobs returning to U.S. soil since 2009, that represents about 10 percent of all new manufacturing jobs created in the last three years. Experts predict the rate of reshoring to increase substantially in the next 10 years.”

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