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Local-for-local strategy drives U. S. expansion

April 25, 2013
On March 20, Bosch Rexroth Americas opened a new 260,000-sq-ft hydraulics manufacturing facility in Fountain Inn, S. C. The $80 million investment creates the company's largest manufacturing site in the Americas. We had the chance to discuss the significance with President and CEO, Berend Bracht.

On March 20, Bosch Rexroth Americas opened a new 260,000-ft2 hydraulics manufacturing facility in Fountain Inn, S. C. The $80 million investment creates the company’s largest manufacturing site in the Americas. We had the chance to discuss the significance with President & CEO, Berend Bracht, Bosch Rexroth Americas, Charlotte, N. C.

Why the investment in the U. S.?

A few years ago, Bosch Rexroth changed a key strategy. Previously, the target was to expand manufacturing in so-called low-cost countries and export from these regions into high-cost countries. I myself spent two and a half years as President & CEO of Bosch Rexroth China, and what we learned is that all the capacity we added in China was actually needed for the Chinese market. We faced a similar situation in South America.

With that experience, our strategy critically changed to “local for local.” That is, our production capabilities must match, to a similar degree, sales in a particular location. In North America we relied too heavily on imports. We needed to invest, and this is a key step toward increasing our local manufacturing depth.

The Fountain Inn expansion doubles the size of the facility. We’re adding more machine tools as we ramp up capacity, hiring 160 new workers over five years, launching an R&D facility, and expanding our local supplier base. We also acquired more land for future expansion. So we’re positioned for significant growth in the North American market.

What does local for local mean for the OEM?

First, OEMs are dealing with one supplier, not several around the world. Second, the supply chain is much shorter. Being local lets us react faster to market ups and downs and OEMs don’t have the delays typical with offshore suppliers. Third, on the engineering side, we can work much-more closely with OEMs to develop products suiting their specific needs. Some of our biggest customers have R&D and production in North America, so it benefits them to have a nearby contact to provide support. Local for local is our strategy but our customers, let’s say, have gently pushed us in this direction as well.

We constantly hear that manufacturing is on the decline in the U. S. What’s your opinion?

I moved to the U. S. in 1993 to develop our machine-tool hydraulics business in Detroit. Since then, we’ve witnessed the decline of industrial markets like machine tools, presses, and plastics machinery. Mobile equipment — construction and agricultural — was less affected, with large global companies like Caterpillar, John Deere, and CNH continuing to be leaders worldwide.

Now, more and more industry is moving back to the U. S. Being close to the market lets you adapt products to your customer’s needs, which is difficult when you’re offshoring. And many companies underestimated the real expense of logistics. It’s not only the transportation costs but also the additional inventory you have to hold. In some countries, a strike at the border might delay your shipments by weeks. All these aspects were underestimated, and many companies are now moving back.

In addition, foreign investment is increasing. Because Asia is no longer delivering the growth we were used to over the last 10 years, European and even Chinese companies are refocusing on other markets, including the Americas. I think manufacturing is being revived in the U. S.

Does today’s workforce have the right education and skills?

While manufacturing is on the upswing, it’s also more dependent than ever on technology and automation. In general, one of the key bottlenecks today is a qualified workforce. There is a mismatch between the skills of many available workers and the qualifications necessary for technical jobs.

Companies have a responsibility to address this problem. You can’t sit back and wait, that doesn’t work. That’s why we are partnering with educational institutions like Greenville Technical College on an apprenticeship program that trains workers first on the basics of manufacturing, then on how to set up and operate every type of machine tool in our plant — while attending college. They not only earn a full-time salary, Rexroth also covers their tuition and books. It’s patterned after apprenticeship programs in Germany. One key difference: Germany requires three and a half years, here we do it in two. But the basics are very similar.

It’s truly a win-win. The graduate is a Dept. of Labor certified machinist apprentice, has a two-year technical degree, and a well-compensated job. We gain a skilled, educated, and motivated employee who is also an asset to our community. This sort of apprenticeship program is absolutely necessary to encourage students to pursue technical careers. Compared with university students who sometimes struggle to find employment after four years, our associates have highly sought-after skills. The tables have turned a bit in that respect.

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