Thomas W. Derry
CEO, Institute for Supply Management ™
The Institute for Supply Management held their 98th Annual International Supply Management Conference & Educational Exhibit April 28th through May 1st in Grapevine,
TX. More than 2,000 professionals attended the ISM conference and several “instant”
digital polls were held throughout the three-day period, taking a look at reshoring and
tax concerns amongst members. Industrial Distribution’s associate editor, Abbigail Kriebs,
had the chance to speak with Thomas Derry, the CEO of ISM, about the results of those
polls and how they are affecting business and the overall economy.
ID: The recent ISM Survey focused on re-shoring and tax concerns.
How did ISM determine that these would be the topics that they
polled their audience on?
Tom Derry: One source of data was a recent CPO Roundtable to
identify hot topics that concern CPOs and VPs of supply chain
management. Other sources of data include ADR North America,
ISM’s consulting business, and Inside Supply Management, our
ID: Were there any surprises in the data?
Derry: Concerning the topic of nearshoring or reshoring, the results validated what we had been seeing in other places. About 30
percent of our companies said they were considering or planning
to bring manufacturing back to the United States, and that seems
to be pretty consistent with what we are hearing from other
sources. If you are talking about very large companies, the number
is a bit higher, and it’s a bit smaller when talking about smaller
companies. Our membership represents that whole range, so if
you want to talk about American industry in general, our number
is a pretty accurate indicator of what companies might be planning to focus on in the next twelve to eighteen months.
ID: With 30 percent of respondents reporting that they are
“likely” or “very likely” to reshore in the next year, what does this
mean for American manufacturers? How do you feel that it will
impact the supply chain and competitive outlook in the United
Derry: It is important to remember that many of these decisions
result from their company’s supply chain risk management strategies. The impact of the earthquake in Japan, floods in Thailand,
and social responsibility issues like last week’s building collapse in
Bangladesh were devastating. The increased cost of freight, along
with the need for supply chain risk management, have driven decisions to maintain supply chains closer to point of manufacture.
This means a couple of things: on the one hand, the reason
people are actively considering and making plans is that these
plans are part of a risk diversification strategy. With a more global
market, there are more natural disasters to contend with. Another
aspect of it is dealing with social responsibility issues, especially in
light of the recent headlines coming out of Bangladesh. Compa-
nies are also building closer to market because they are finding
out that the total landed cost of a multi-national and complex
supply chain can be more expensive than they had anticipated. We
are also not seeing the large differentiation in labor rates that was
part of the main reason for offshoring twenty years ago. As labor
rates are becoming more and more equalized across the globe,
and as the other factors like natural disasters and the corporate
responsibility movement enter the horizon, it all adds up to a
pretty compelling case for most companies to bring manufactur-
ing back to the states.
ID: Higher taxes and weak economic climates seem to be a theme
at the forefront of most companies’ worry list. What would have
to change in the U.S. to help eliminate some of these fears? How
will these fears translate into mergers and acquisitions or job
losses in the next 6-12 months?
Derry: Higher taxes and the weak economic climate are a current
theme on the mind of most CEOs. With the weak economic climate, sequester, and higher taxes, many manufacturing companies
have made major investments in automation, systems, and equipment for their plants. Currently, consumer spending is improving
and the productivity gains for many manufacturers have provided
high levels of profitability and increased levels of cash.
In general, I would say that the outlook most companies have