Many companies moving manufacturing back to U.S.
October 25, 2010
For some, it's about reducing their shipping costs and carbon footprint. Others are finding labor isn't as cheap as they expected, or workmanship is poor. And there is a growing consumer push to buy from companies that make their goods in the United States and create jobs.
"As consumers, we've really forgotten how important manufacturing is and what it's all about," said Rob Akers, chief operating officer for the National Tooling and Machining Association.
When Oxnard, Calif., footwear company Sockwa Inc. started in 2007, it was a practical decision to manufacture in China, said CEO David Zasloff. It didn't make sense to start in the U.S., knowing production would need to move to China when the company and its sales grew.
"That was where the industry was," he said.
But although the factory in China that makes the soles has produced high-quality items and cost savings, Zasloff has been working with another factory that isn't managed well, creates a lot of waste and keeps saying it needs to increase prices.
He wants to bring at least part of the production back to the U.S. to more rapidly bring new products to market and have more control over production. His previous company manufactured here, and he loved the control, quality and speed to market.
"There are so many steps I have to take," Zasloff said. "Ultimately, I would love to make all of it here."
Businesses seeking a return to domestic production -- some call it "re-shoring" -- are doing it for a lot of reasons, said Bruce Stenslie, president and CEO of the Economic Development Collaborative of Ventura County, Calif.
Like Zasloff, business leaders often cite issues such as quality, control over logistics and distribution, changing and increasingly volatile offshore labor dynamics and costs, integration of research and development with production, and wanting a more immediate connection with consumers and shorter delivery cycles, Stenslie said.
"We hear routinely that manufacturers like the offshore model because it allows them access to capacity to ramp up fast to meet spikes in demand, but volume isn't the single and most important variable when product specs change rapidly, and offshore production capacity lags on such changes," he wrote in an e-mail.
Also, many companies have cut inventories extremely low for savings during the economic downturn, but that means they need to restock more quickly, which can be a challenge when parts are shipped from overseas, Akers said.
The National Tooling and Machining Association makes the argument that going local can reduce total costs and offer other benefits.
Companies went abroad seeking cheaper labor. "The big splinter in our hand has been China," Akers said. Before that, it was Mexico, and before that Japan.
"We're going to continue to go through those waves of looking for a cheaper cost," he said.
But while foreign operations may make sense to serve foreign markets that may no longer be the case for shipping products back to the United States.
"Since this last recession ... our manufacturers have really looked at and utilized technology to be more cost-competitive," he said.
George Melamed, CEO of UDASH Inc. in Simi Valley, Calif., said his custom-manufacturing company has seen some production once being sent to China and the Far East being sourced back to Southern California. UDASH makes precision parts for various industries.
He said it is primarily because of frustrations with the language barrier, problems getting parts through U.S. customs and a lack of consistent quality -- important in precision parts used for aerospace and some other commercial uses.
UDASH has worked to capture that returning business.
"Our company has seen some orders for machined parts once produced overseas because we have implemented a lean manufacturing program," Melamed wrote in an e-mail.
The company has kept its operating costs low and offers hands-on customer service, he said.
But just as there are challenges in sourcing abroad, doing that work here can have its hurdles, too, Zasloff has learned.
"The big problem is my product is stitched by hand," he said. "Stitching by hand typically doesn't happen in the U.S."
Zasloff said one idea is to automate the process, but there isn't a machine that can do it for his footwear.
A mechanical engineer by training, he's pondering that problem.
"If you could change how people sew clothes and take that all back, where each country sews its own clothes," it would be revolutionary, he said.
(Allison Bruce is a reporter at the Ventura County Star in California.)