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Iowa companies bringing jobs back to U.S.

They cite quality, flexibility, shorter lead times

Dale Gerstenkorn of Waterloo, Iowa, cuts material used to make a tarp at Clickstop Inc., in Urbana, Iowa, on Tuesday, Dec. 12, 2017. The company introduced the manufacture of flatbed tarps to its line of products in late 2016. (Jim Slosiarek/The Gazette)
Dale Gerstenkorn of Waterloo, Iowa, cuts material used to make a tarp at Clickstop Inc., in Urbana, Iowa, on Tuesday, Dec. 12, 2017. The company introduced the manufacture of flatbed tarps to its line of products in late 2016. (Jim Slosiarek/The Gazette)
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As energy and labor costs in China and other countries continue to grow and lead times become more of an issue in a just-in-time global economy, more companies in Iowa and the nation are onshoring or reshoring — moving manufacturing or service operations and jobs to the United States.

Onshoring involves moving manufacturing or service jobs to the United States that were not here previously. Reshoring involves moving jobs back to this country from overseas that had been here before.

Employees of U.S. Cargo Control, a business of Clickstop Inc. in Urbana, are sewing and assembling ratchet straps and fittings, products that were imported from suppliers in China before 2012.

“The major drivers for our decision were flexibility, customization, shorter lead times and being able to bend over backwards to do something for our customer very quickly if it made sense,” said Todd Kuennen, executive vice president and chief intelligence officer of Clickstop.

“Before we began manufacturing our own products, we were often at the mercy of our Chinese supplier. We never knew how much inventory we should have.

“In our business, we serve a wide variety of customers — from very large to very small. Many times, we would have a situation where a new customer needed a large quantity of something or wanted a custom size strap.”

The company didn’t have the flexibility “to fulfill our brand promise of giving customers what they want when they need it,” Kuennen said.

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“We also needed greater control over the quality of products that we were putting out,” said Chris Nelson, chief operating office at Clickstop and president of U.S. Cargo Control.

From two jobs when U.S. Cargo Control bought its initial sewing machine, Kuennen said the manufacturing department has grown to about 50 jobs, and more hiring is planned for 2018.

”It’s a big industry with a lot of large customers,” he said. “In order for us to continue to grow and service our customers the way we want to, we’re going to have to grow that area of the business for sure.”

While U.S. Cargo Control’s largest product category is ratchet straps used to secure large objects for shipping, the company also is manufacturing tarps, chain slings and large cargo nets in Urbana. Kuennen said moving additional manufacturing into the Urbana plant due to an acquisition also is a future possibility.

Expansion

Legacy Manufacturing in Marion announced plans earlier this year for a physical expansion driven by continued business growth and bringing back production from abroad.

The company, which manufactures and markets a range of service and maintenance equipment for the auto, industrial and marine markets, was awarded tax benefits in August by the Iowa Economic Development Authority Board for an $11 million, 200,000-square-foot expansion.

Legacy, a division of Weems Industries, also received incentives from the city of Marion for the project.

In its application to the IEDA, the privately owned company said the expansion would add 13 jobs.

“Legacy is committed to the continued development of superior products designed and produced in Eastern Iowa,” Mark Weems, Legacy president, said in a news release announcing the project.

A Legacy spokesman declined further comment on the company’s reshoring plans.

Global factors

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While flexibility, customization and shorter times from production to delivery are driving reshoring at U.S. Cargo Control and large international companies such as Caterpillar, Ford Motors, General Electric, General Motors and Wal-Mart, other factors also are at work, according to the Reshoring Initiative, a Chicago-based organization that advocates for the return of manufacturing jobs to the United States.

Changes in the global economy encouraging more onshoring and reshoring include:

l Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive.

l The natural-gas boom has sharply reduced the cost of operating a factory in this country. Natural gas costs four times as much in Asia as it does in the United States.

l In dollars, wages in China are some five times what they were in 2000 and they are expected to keep rising 18 percent a year.

l U.S. labor productivity has continued to improve, meaning that labor costs have become a smaller proportion of the total cost of finished goods.

The Reshoring Initiative’s 2016 Data Report released May 15 indicates 77,000 jobs were brought back to the United States, with just 50,000 leaving.

“In comparison to 2000-2003, when the United States lost, net, about 220,000 manufacturing jobs per year to offshoring, 2016 achieved a net gain of 27,000. The tide has turned,” the report noted. “The numbers demonstrate that reshoring and FDI (foreign direct investment) are important contributing factors to the country’s rebounding manufacturing sector.”

The Reshoring Initiative report showed the largest number of jobs returned to the United States in 2010 and 2016 came from Asia, with China (79,540 jobs) leading the list, followed by Germany (54,306 jobs), Japan (35,292 jobs), Mexico (19,399 job) and Canada (15,787 jobs).

The Reshoring Initiative predicts the 2017 reshoring numbers “will be flat to slightly up compared with 2016’s record level.”

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Debi Durham, director of the Iowa Economic Development Authority, expects more companies either with headquarters in Iowa or manufacturing plants in the state to bring jobs back to this country, if the corporate income tax rate is lowered, as proposed in the current Republican-sponsored tax reform plan.

“By lowering the tax rate and allowing companies to bring back cash to work for America, I believe you are going to see an unleashing of economic growth that we have not seen in some time,” Durham said. “As America gets more competitive, Iowa will get more competitive.

“The companies that will be onshoring are primarily in two categories — manufacturers and call centers. Over the years, we as a state have developed a great value proposition around manufacturing.

“You also will see a lot of the contact centers, including those in the financial industry, that have gone overseas move back to the United States. I think we’re going to see some really strong activity within the next year.”

Under the tax reform bill passed by the Senate, individuals no longer would be able to deduct their property taxes, state and local income taxes, or sales taxes. Durham said the Iowa Legislature will need to enact a bill that would negate the impact of the federal changes or Iowans will see higher taxes, which will affect its competitiveness.

“There’s a lot riding on this federal tax bill,” she said. “There’s also a lot riding on U.S. trade agreements — another piece that we need to get right.

“While I support this administration on tax reform, I don’t agree with the positions that it has taken on trade. We are a global economy and we have to have trade agreements.”

The longer as uncertainty linger, Durham added, “... it not only hurts our companies but also our farmers who sell food around the world.”

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While the cost of labor in China is rising, Durham said there always will be less expensive markets where low or no skill jobs can be outsourced.

“When we talk about manufacturing back, we’re talking about high-skilled manufacturing,” she said. “We need the jobs coming back here that actually reduce our trade deficit.

“We are looking for the kind of high-skilled jobs that pay the wages that our families can live on.”

Durham said the state’s 260-E job training program is an important incentive when companies are looking for those skilled workers. She also said Iowa’s Research Activities Tax Credit program is critical for companies looking at continued innovation.

Companies conducting research in Iowa, and individuals tied to those corporations, made $58.4 million worth of claims from the program in 2016, according to an annual report from the Iowa Department of Revenue.

Of the total claims last year, 12 companies accounted for 76 percent, or $44.3 million.

They include Rockwell Collins, which made $12.3 million in claims, Deere and Co. with more than $8 million in claims, and DuPont with about $5.1 million.

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