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would love to explore with uh both of
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you uh marison Scot some of the reasons
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why reshoring is picking up steam and
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and Morris starting with you uh what are
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some of the primary factors uh that are
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driving the phenomenon of reshoring okay
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that's a great question and you know
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we're actually conducting research on
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this and traveling to different places
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around the world to work with companies
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to get their perspective on what are the
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drivers of this phenomenon which is uh
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just to go back to the earlier point
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this is not just one directional
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companies are most global companies are
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managing what I would call a network of
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sources and destinations they have
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factories they have places where
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services are generated where value is
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added and most global companies are you
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know have to manage the the flow of of
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information the flow of material across
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this network and in so doing there are
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many factors therefore which affect the
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decision of where do I make something or
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where do I Source something which is you
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know what are the drivers so so we can
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go through them cost is obviously a very
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obvious one and there's this notion of
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landed cost which is the fully loaded
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cost of a product to get to a market
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which takes into account all of the
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fixed and variable costs and
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transportation costs of all the stages
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of manufacturing and sourcing and so
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when you get to bring your product to a
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particular country a particular Market
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that landed cost becomes the basis of
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your competition and so labor is can be
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a big driver of that but there are many
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other cost components so that's one
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thing cost but even in cost we have to
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expand the perspective Beyond just the
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landed cost to what I would call cost of
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ownership the life cycle cost you many
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products are owned and used over a life
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cycle uh computers Aerospace automobiles
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it's not just the product cost of
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getting the product into the hands of
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the consumer it's what is the full cost
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over the lifetime of use of that product
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and then we get into after Sal service
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and support and maintenance issues as
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well but cost however we want to measure
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it how carefully we want to do it is a
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major driver the second Big Driver is
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risk there's lots of risk and when we
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start operating globally the risks
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compound not only do we have the usual
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Market risks of price and demand we also
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have foreign exchange Vari volatility in
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foreign exchange
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and other Financial aspects can wipe out
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overnight the profit of a global company
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and a well-crafted strategy of where to
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Source based on costs can be rendered
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completely obsolete you know in the
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twinkling of an eye and so there's a lot
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of how do we mitigate that risk how do
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we absorb that risk so our research has
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shown a lot of people have studied this
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that you have to combine the option
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value of the manufacturing Network with
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financial options so we have real
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options and financial options basically
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what I'm saying is if you have different
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sources for which you can go and I uh as
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conditions change as contingencies occur
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prices demand availability of Labor uh
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natural disasters all kinds of risks
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companies can shift if they've invested
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upfront if they've purchased that option
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built those plants developed those
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processes hired the right people then
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they have flexibility so flexibility has
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become a very important
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issue and then the final one I'll
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mentioned we could go on but technology
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is have become a very important issue
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there are those who say that this whole
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argument about labor costs and
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Manufacturing has become moot because of
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automation we now have lowcost robots
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that are highly flexible that can
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actually assemble do the the the the
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fine motor skill assembly that we could
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only have people do and some companies
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are Outsourcing so there's a reshoring
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of Phillips for example has brought back
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the Assembly of razors electric shavers
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from China back to the Netherlands in a
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factory that has about a 100 robots and
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I don't know 10 people and it's more
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productive than the sister plant in
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China so can we automate our way out of
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this and then another point that was
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mentioned is the availability of skills
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and then so another theory that says it
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has to do with Innovation if you
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Outsource manufacturing you lose the
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ability to develop new products and once
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it leaves it won't come back so there's
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a lot of competing theories a lot of
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competing arguments and a lot of
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tradeoffs but I'd say fundamentally it's
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cost Risk Technology and Innovation
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right thank you for that very uh you
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know comprehensive overview of the
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factors now specifically in the
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technology space or the IT industry
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Scott what are you seeing as some of the
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primary drivers of reshoring in your
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experience I think the biggest one is
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the talent availability uh factors if
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you look at um you know large
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engineering schools across the us over
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the last four years most of them have
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seen at minimum a 10% increase in
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enrollment so if you go back four years
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you're talking about a 40% increase in
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enrollment and engineering that's a lot
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more kids in the market and there's a
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little bit of a trickle down effect that
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happens there I think uh universities I
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think uh you know uh community colleges
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even high school systems are starting to
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realize that there's jobs in technology
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and so they're starting to enable and
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and push kids that way who who have an
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acclamation to doing that we're seeing
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uh major universities you know we we
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have a partnership with the University
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of Florida whose engineering school is
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now close to 8,000 kids that is just a
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huge number and that's very good news
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for the United States that big programs
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like that are are starting to become
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available but we're also seeing
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community colleges step up and you see
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um a lot of magnet schools at the high
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school level starting to emerge where
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they are just focusing on engineering or
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technology so kids are starting to get
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uh into Tech early on um they become
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very tech-savvy at an early age by the
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time they get to uh College they're very
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well prepared by the time they get to a
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company like M tree they're ready to hit
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the ground running with minimal training
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so I think the biggest factor of all is
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the increase in the size of the talent
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pool that's happened here in the US and
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I think it's really driven by the fact
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that there's a lot of jobs in the tech
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space that are open the other main
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factor is that and we talked about this
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earlier that the cost of of of
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Outsourcing or offshoring has increased
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to a point where there's not a lot I
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mean there's still a difference between
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us and places like India but it's not as
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big of a difference and so now it makes
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uh a lot more sense to do some work here
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in the States but continue to do work
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offshore as well and get that balance
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that we talked about earlier right just
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to to drill a little deeper into uh some
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of these factors um a lot of uh what
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Morris was talking about for the
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manufacturing space uh refers to the you
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know physical property whereas in
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technology you're dealing mostly with
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intellectual property uh what what are
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some of the unique factors there that
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that go into the reshoring phenomenon
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sure and and I think you know the the
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big one there is that the kids that are
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coming out of college today are so more
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well equipped than they were 10 years
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ago they come out with you know thinking
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innov Innovation they come out with a
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drive to be entrepreneurs even um you
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know I I just talked about we've got a
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400 person us delivery Center in
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Gainesville Florida in part parip with
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the engineering school at the University
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of Florida we opened that Center up last
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year in 2012 I don't think we could have
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done that three four years ago the
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universities weren't ready for it the
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states weren't ready for it the cities
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weren't ready for it but what we're
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seeing across the country is that uh
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major universities major research
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universities the cities that they're in
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and the states that they're in are all
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starting to come together to realize
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that if they pull their efforts and they
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pull their resources they can produce
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better better talent and attract more
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companies like M Tre to set up centers
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there so that's a big change that we've
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seen over the last couple
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years uh what the to what extent is um
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currency policy the the RO of the dollar
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versus uh the RMB for example uh playing
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a f a role in uh spurring reshoring well
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it does affect the the the landed cost
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quite quite directly and and not only
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currency but also taxation and other
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forms of government incentives and
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restrictions the local content there are
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a lot of things and currency just being
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the most visible um so some countries
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like China have a somewhat controlled
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currency and uh they you know and they
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have kept the exchange rat so that the
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the cost disadvantage uh has been
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reduced uh people have argued if they
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let let it float then there would be
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higher prices and there would be less of
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an incentive to Offshore uh and of
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course the government is restricting
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that to some extent and I think every
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country is playing this game you know if
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you don't let the your currency float
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then that creates uh all kinds of
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problems in terms of imports and exports
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and costs uh but the reality is that
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governments are a main actor in this
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whole equation as they should be their
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goal is quite different than the goals
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of the multinational corporations or the
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domestic
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corporations uh they're not looking to
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to maximize profit they're looking to
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maximize the welfare of their population
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the employment of of of the population
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uh and and the opportunities for that
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population are are very important and
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they want to influence that to the
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extent they can companies on the other
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hand have to operate in this environment
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in a competitive and somewhat restricted
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environment so it has a big fact it has
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a big impact and it continues to uh and
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you know there are those who argue for
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more relaxing those restrictions and
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others you know argue in this country as
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well you know that we should restrict
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immigration we should restrict Imports
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that that would be the answer and others
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say no that's just the opposite of what
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we need to do so it becomes a very
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interesting debate and very contentious
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I'm sure yes uh Scott what do you think
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is is uh uh the the the relationship
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with the dollar and the rupe being a
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factor in uh your business uh at M and
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what do you see at M Tre yeah it's
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definitely a factor um because what it
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inevitably drives is a level of your
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profitability and depending on which way
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the rupee and the dollar are going it
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really affects the profitability of
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Indian companies and when Indian
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companies have higher profitability they
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can take that money and invest back into
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the business and it's just you know
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Common Sense and and natural business
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practices so it's important to watch and
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there's obviously no you know magic for
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figuring out which way it's going to go
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but it clearly has an effect uh and I
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think in addition to uh currency
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fluctuation you know taxation uh
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incentives and things like that are are
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certainly affecting how near Shoring can
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be done and I think states are really
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stepping up to helping companies bring
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technology jobs back to the US and
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controlling that aspect of the incentive
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incentives has been really really well
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done okay so so uh just to wrap up this
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particular part of the conversation any
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final thoughts on the factors at play
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anything you'd like to add that we
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have't tou the only comment I would make
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is I I I do see some of the the changes
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that Scott mentioned you know in terms
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of better preparation and more interest
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in technology but um we have a big gap
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in this country to overcome you know and
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if we stand back and look at you know
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all of the all of our this generation
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and how many of them are taking Science
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Tech you know the stem you know in
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engineering and Mathematics we've lost
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ground in that regard and we have to
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make it up and we have to provide High
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pain jobs for this next generation and a
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lot of you know we see Technology and
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Manufacturing as a source but uh if we
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look at the the the gross numbers
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there's still a big gap so while I'm I'm
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also an optimist uh I just put in a word
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of caution that we don't have unlimited
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time to solve this problem yeah I
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couldn't agree more uh the the we're I
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think we're in the early days of
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rebuilding our our stem capabilities the
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all the signs and all the trends are
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positive and I'm an optimist that you
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know this is going to take off and it's
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obviously going to be great for the
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country but we still have a long way to
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go we've got to uh maybe even get down
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to a level below and start talking stem
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at a at a elementary school and a Middle
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School uh you know level so that we get
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kids interested at an early age and then
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that drives Innovation and growth it's
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it's clearly a path for the the country
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to you know move into the you know
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future decades and and we've got to
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continue to fuel the fire in stem
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education
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