The issue of outsourcing received a lot of attention this past year, mostly in a political context.
The issue centered on the concern raised by some that the movement of jobs from U.S. facilities to foreign plants was escalating at an alarming rate and what that exodus was doing to the American worker.
At least one manufacturing industry representative believed the issue was blown out of proportion.
“Offshoring, or outsourcing, has been going on forever, and will continue to go on,” said Bill Canis, executive director of The Manufacturing Institute, the educational and research affiliate of the National Association of Manufacturers. “When you strip away the terminology, we’re really talking about being competitive and outsourcing some processes, primarily to domestic companies, with only a small percentage going overseas.”
Canis pointed to an often-overlooked fact: There are plenty examples of “inshoring” going on — foreign companies that have decided to establish operations in the United States to be closer to the American consumer.
Twenty-five years ago, the state of Ohio was able to convince Honda to site its first North American facility in the Buckeye State. From humble beginnings in Marysville, Honda has grown to five plants and a research and development center.
A recent study by Honda highlighted the economic impact of the automaker in Ohio:
§ Honda currently employs 16,000 Ohio residents.
§ Since 1979, Honda has invested $6.1 billion in its Ohio facilities.
§ Honda purchases $7 billion in parts and materials from Ohio suppliers annually, $2 billion of which goes to Honda facilities in other states.
§ There are 154 Honda suppliers in Ohio.
§ There are Honda suppliers in 52 of 88 Ohio Counties
§ Honda suppliers employ nearly 41,000 Ohio residents.
Investments by the state include $27 million in direct incentives and $64.4 million in related roadwork improvements. For every dollar in direct incentives, Honda has invested $226 in its Ohio operations.
“Honda is proof that strong relationships, targeted incentives and continual nurturing can combine to produce a significant return on investment,” said Bruce Johnson, director of state development for Ohio. “The presence and growth of Honda of America during the past 25 years is the perfect economic development success story, demonstrating how good things result from investing in good companies.”
During the past decade, southern states have certainly picked up on the inshoring model. Alabama, Mississippi, South Carolina and other states in the region have successfully created automobile manufacturing sectors by luring foreign automakers. When you factor in the supplier base that comes with an automobile manufacturing facility, the economic impact is enormous.
Honda’s investment in Ohio (and elsewhere across the country) proves that the global economy is a two-way street. While ED directors, and the community as a whole, might be stung by the announcement that a particular company is shifting much of its manufacturing operations overseas, there is nothing standing in the way of those communities going out into the world and finding new projects.
But you can’t do it sitting behind your desk. You have to invest in traveling to other parts of the world to meet with company executives. Trade missions are a great way to introduce yourself and your community to executives living thousands of miles away.
And be prepared to be unsuccessful at first.
Since 1986, the city of Troy, Ohio, a community of 30,000 near Dayton, has competed globally, sending trade missions to the Far East every three years — an accomplishment that equates well with much larger cities.
The trade missions were launched in response to a series of economic challenges that severely impacted the community in the early 1980s, said Chuck Cochran, president of the Troy Development Council.
“It was our belief that we had to go directly to vibrant markets to find and attract growing companies,” he said. “As it happened, our reasoning was correct, but our first target was not.”
Initially, the community focused on firms in Europe, believing it was a logical target considering the large number of European companies that had established operations in Ohio and neighboring states.
That first mission, however, revealed that the European economy was not very dynamic in the early 1980s and few companies were in an expansion mode. The mission came home empty-handed.
While other communities may have curtailed their efforts, Troy did not.
“The European mission was an excellent experience,” Cochran said. “We learned that trade missions demonstrate a community’s commitment to overseas firms and set a community apart from those that do not engage in trade trips.”
The community then focused on Japan. In the mid-1980s, Japanese firms were aggressively investing in the United States. (Troy is about 60 miles from Honda’s Marysville plant.)
The first trip proved so successful that subsequent missions have been conducted every three years since then. They now include regular stops in Hong Kong and China.
The first Far East trade mission deliberately focused on suppliers related to Honda’s Marysville facility. Instead of attracting a supplier, Troy landed Honda’s training and international distribution center. It opened in 1986 and now employs 350.
A second major project soon followed. City and Troy Development Council officials partnered with state officials to attract Panasonic to Miami County in 1988. The Panasonic facility, the largest television picture tube manufacturing facility in the United States, employs 1,600.
These two projects ignited a steady stream of foreign-owned companies. Today, the city of Troy is home to nine foreign-owned companies providing family-sustaining wages to more than 3,000 residents.
There are another five foreign-owned companies in surrounding Miami County that employ another 1,000.
These 4,000 jobs, plus an additional 3,000 jobs created through expansion of existing businesses and recruitment of domestic firm, far eclipse the jobs lost in 1982.
“We’ve demonstrated the value of our global approach by generating a consistent and healthy return on investment,” Cochran said.
Means the article is accessible only to our magazine subscribers.
