MAM Team

American Made Clothing Companies Find Ways To Survive As Others Chase Cheap Labor Abroad

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american made product - competitor

Labels of garments made in Bangladesh, India, China, and Pakistan (AP Photo/David Goldman)

 

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Kim Bhasin
Six dollars. That’s how much more an American consumer would have to pay for the typical T-shirt made in the U.S. rather than in a potentially unsafe factory in a poor, faraway country.
So reckons Eric Henry, chief executive officer of a North Carolina-based apparel manufacturer called TS Designs, which markets its T-shirts as both environmentally sustainable and ethically produced — two virtues sprung from the fact that it cannot compete on price while remaining in the U.S.“We decided to stay here, and it has been a difficult path,” said Henry.

Henry has been in the apparel business for three decades, enough to see nearly all of his competitors disband or head overseas in search of workers who will do the job for lower wages. Henry has taken the opposite route, shrinking the geographic scope of his supply chain and making that a marketing feature.

His company makes its products “dirt to shirt” through a supply chain that spans only 600 miles and boasts complete transparency. Customers are invited to use a website to input a special code emblazoned on the back of every shirt. The site then serves up the name, photo and contact information for every person whose labors went into creating the product, from the farmer who grew the cotton to the workers who print and dye the shirts.

His “most sustainable” T-shirt, which uses certified organic cotton, a transparent supply chain, with a patented environmentally-friendly print and dye system, costs around $14 wholesale. The same type of shirt would cost about $8 to make overseas, he estimated. In short, the $6 gap.

The difference comes down to paychecks. Workers at TS Designs in North Carolina are paid an average of $15 an hour, Henry said. The average factory worker in Bangladesh makes $0.21 an hour, according to the Institute of Global Labor and Human Rights.

“Our T-shirts cost more because of where they’re made and how they’re made,” said Henry, admitting that he can’t compete on price alone.

In the wake of the worst garment industry accident in history — the collapse of a factory in Bangladesh, which took the lives of more than 600 people — attention is again focused on the full costs of churning out low-priced goods via a global supply chain. Consumers are absorbing another reminder that bargains on store shelves in Los Angeles and Philadelphia may come at the expense of people toiling in unsafe conditions in Dhaka and Guatemala City.

For Henry and like-minded entrepreneurs in the U.S. — those seeking to buck the trends of global trade by manufacturing at home — the hope is that this consumer awareness may expand their market niche.

Online apparel retailer American Giant, for instance, does not compete with the world’s largest apparel brands on price. A men’s T-shirt bearing its label runs $24.50 — roughly four times more than its most inexpensive counterpart on the shelves at Walmart, Target or some other enormous retailer.

Ask the company’s chief executive, Bayard Winthrop, about disparity in price and he will tell you about the workmanship and quality of raw materials that goes into his T-shirts. But he will also tell you about geography: His shirts are made in America, and not on the other side of the world, in a poor country in which workers may be mistreated.

“I need to give that consumer an option for a product from a company that fits their system of beliefs,” Winthrop said.

Winthrop’s emphasis on quality is both a virtue and a necessity. Even mighty Walmart, the world’s largest retailer, could satisfy the consumer craving for low prices if it made its wares exclusively in the United States, he said.

“Can Walmart make a $5 tee in the U.S.? Probably not,” Winthrop said. “But can they make a $9 tee that lasts longer and made in the U.S.? Yes they could.”

Using hypothetical figures, Winthrop explained that if a manufacturer makes a T-shirt for $6 in the U.S., $3 of that would be fabric and design, while the other $3 would be labor. If you take production overseas, the labor cost would be less than $1. The fabric and design cost doesn’t change much, he said, especially for a simple piece of apparel like a T-shirt.

So vast is the apparel and so large the companies involved that they have hop-scotched the globe in permanent pursuit of lower labor prices somewhere new. In the United States, some 97 percent of all apparel is now imported, according to the American Apparel and Footwear Association.

This pursuit of lower prices through globalization amounts to a “race to the bottom,” said Pietra Rivoli, a professor of finance and international business at Georgetown University, and author of the book The Travels of a T-Shirt in the Global Economy.

“This industry is so mobile that it gets fixed in one place and then pops up somewhere else,” Rivoli said.

But American apparel manufacturing may eventually see a resurgence, some experts said. The garment industry is undergoing the kind of technological change reshaping many industries: Machines are increasingly attending to tasks once performed by humans. That undercuts the overall cost advantages of going overseas in search of cheaper labor. As automation emerges as a greater force in the apparel trade, that could send investment back to the United States, where mastery of machinery remains a core strength.

“Technological progress has taken away the worst part of many jobs,” said Rivoli.

Right now, complicated tasks are still done by humans, such as the manual addition of buttons and zippers to clothing. But that is changing.

“It’s gradually mechanizing,” said Rivoli. “If you can get that to be 100 percent true and it’s machines that are producing our T-shirts, then companies aren’t going to be chasing around the world for those labor costs.”

SOURCE:  Huffington Post
by
MAM Team

Where China Goes To Buy Made In USA

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Kenneth Rapoza
China loves Made in the U.S.A.

China’s Favorite U.S. States in 2012

The No. 2 economy kept its spot as the third largest importer of U.S. goods last year, second only to neighborly Canada and Mexico.“The U.S.-China trade relationship strengthens America’s economy and creates well-paying jobs for many American workers across the country,” said the U.S. China Business Council’s President John Frisbie.

In 2012, China purchased nearly $109 billion worth of  U.S. goods, from soybeans to scrap metal, electronic components to heavy machinery.  China will undoubtedly play a significant role as importer of Made in USA as locals keep getting richer. Some estimates forecast that China may have nearly 600 million middle class consumers by the end of the decade, as measured by the World Bank’s definition of middle class.

“Our exports to China remain a bright spot for many companies, particularly with European demand weakening,” said Frisbie in a statement last week.

Even though China’s economic growth slowed last year, growth in U.S. exports to China rose 6.5% from 2011, representing an increase of $6.6 billion.

Here’s a look at the top 10 states where Chinese companies go shopping for Made in USA.

SOURCE:  Forbes
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MAM Team

Bill Would Create Made in California Label

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american made car

Backers of the legislation to create a “Made in California” label include electric-car maker Tesla Motors Inc., a group of San Francisco Bay Area green-tech firms and small-business advocates. But some business leaders see problems ahead for the concept. (Jane Tyska, Contra Costa Times / April 11, 2013)

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Marc Lifsher
The legislation, for manufactured products, would enhance the state’s reputation for making environmentally safe and energy efficient products, a senator says.
A “Made in USA” label has long been seen as an advantage in marketing a product. Now there are in-state manufacturers that want to see the adoption of an official label that declares Made in California. State Sen. Ellen M. Corbett (D-San Leandro) has introduced legislation to require Go-Biz, the governor’s business development office, to come up with a plan — including the new label — to promote California-manufactured products. The bill, now before the Senate Appropriations Committee, would enhance California’s reputation for making environmentally safe and energy efficient products, Corbett said. Backers of the legislation include high-end electric-car maker Tesla Motors Inc., a group of San Francisco Bay Area green-tech firms and small-business advocates. But some business leaders see problems ahead for the Made in California concept. Deciding whether something is made in California could be tough considering how complex manufacturing can be today, warned Jock O’Connell, a Sacramento-based international trade expert with Beacon Economics. Look, for instance, at international supply chains, especially for high-tech products such as aircraft that use parts made on multiple continents. “I really see a good intention here,” O’Connell said, “but it’s a piece of legislation that in practice is nearly impossible to implement.” Sales-tax sharing California cities increasing are using tax money to woo companies or to keep them, but some lawmakers are urging caution. Amazon got a share of new sales taxes receipts collected by the cities of Patterson and San Bernardino when the giant Internet retailer agreed to put its distribution centers and new jobs there. In addition, the Bay Area city of Martinez agreed to share tax money with an industrial firm that threatened to leave town. Last year, state Sen. Mark DeSaulnier (D-Concord) said he was contacted by the city manager of Martinez, who was concerned about such tax giveaways. The lawmaker recalls the manager pleaded, “We need you to save us from ourselves.” As a result, DeSaulnier — a former city councilman and county supervisor — has a bill requiring local governments to make an independent cost analysis before granting any tax subsidy of more than $1 million to a proposed developer. “In today’s global economy,” he said, “it is imperative that our cities have the best possible data as they negotiate with large corporations.” The bill, SB 673, won approval from the Senate Governance and Finance Committee last month. But it still faces formidable opposition from the League of California Cities, which blasted the bill for having “a clear anti-development bias.”
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MAM Team

All American Clothing Co. Launches New Tee Shirt Products that are ‘Grown and Sewn’ in the USA.

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The ‘poster child’ for USA made clothing continues to grow as they create new products.
All American Clothing Co. today announced a new line of tee shirts. Three new styles have been designed and added to its inventory with high quality expectations. They are also sold at an affordable price that will allow anyone to wear a USA Made tee shirt. All American Clothing Co. allows the consumer to rate the product and help the manufacturer make adjustments to the design and pattern of their items. This allows the consumers who care about USA made products to make suggestions for the next production line. This process has helped the American made clothing company grow in recent years as they continue to listen and develop a strong relationship with their customer base. A great relationship with its customers has resulted in a high level of return buyers.

The new USA made tee shirts are available in the three styles of a ‘Freedom Eagle Seal’, ‘Logo Tee’, and ‘Premium Quality Denim.’ All feature a distressed design printed on the front of a heavyweight 6.1 oz, 100% cotton American made tee shirt. The All American style and durability of the tees make them perfect for work or play. The new tee styles will join a wide selection of American made jeans, short, shirts, footwear, and accessories.

One purchase from All American Clothing can help the American economy in many ways. For example, the clothing is made in the USA, the box it was shipped in was made in the USA, the website is hosted by a USA company, the shipping companies are all from the USA, and the people who make and deliver the clothing are U.S. citizens. Purchasing one made in USA shirt or a pair of jeans affects many jobs in many different industries.

About All American Clothing Co.

All American Clothing is a success story that continues to prove the American dream can still be achieved. The entire company supports a “USA Made passion” as they strive to foster loyalty among customers. All American Clothing Co. is conceivably the poster child for American made small business success stories. To find out more about the passion and effort it takes to build a business in today’s economy please visit http://www.allamericanclothing.com.

The ‘poster child’ for USA made clothing continues to grow as they create new products.
SOURCE:  PR Web

Logan Beam
All American Clothing Co. 
888-937-8009

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MAM Team

How American Excess is Destroying Lives Overseas

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by: Zainab Akande
Check the tag of the clothes you’re wearing, either now or sometime after you read this article. There is always small printed text that informs the customer where that item of clothing was made. More often than not, the name of some far away country completely unrelated to our daily lives is listed. The one we Americans are probably most familiar with is the one that reads MADE IN CHINA. But we are going to begin with Bangladesh.
Bangladesh is a country located in South Asia, a part of the Bengal region bordering India and Myanmar (Burma). It is one of the most populated and densely populated countries in the world; high rates of poverty are a major problem among other human rights issues.

Just last week, a clothing factory in the country collapsed, with the body count now at over 500. Police have arrested the building’s engineer, who claimed the building was unsafe as-is, but allegedly played a part in adding three more floors to it regardless. The clothing factory itself was a station that produced American goods on the cheap cheap for large business chains such as J.C. Penny, Walmart, and H&M, to name just a few. This recent event has placed a lens of scrutiny under Western retailers for outsourcing cheap labor, but cheap labor overseas has always been an issue. It is American business and consumption that are driving forces behind the dismal conditions of oversea factories. Of course, it’s a reality that most businesses want to keep quiet and it’s something we may have heard in passing but want to ignore—because changing our shopping habits entirely would be a pain.

On the flipside, Bangladesh’s problematic clothing industry makes up for 80% of its exports.

Let’s pause for a moment and talk about China.

Back in February, I wrote a piece on how Chinese New Year celebrations were dampened by the country’s ongoing smog crisis. Since then, smog levels have not gotten any better. They’re hitting nearly decade-level highs in Hong Kong and ruining chances at a healthy upbringing for children growing up in urban cities. Goodness forbid if we were faced with these types of environmental hazards across America — but since it’s China, the average American could probably care less. But why is it that China is so steep in air pollution? Because of all its factories — and what are those factories producing? Cars that Americans drive, clothes that Americans wear, toys that American children play with, computers that Americans type with, the list goes on and on. The kicker is that this production occurs in the same sweatshop, underpaid conditions as Bangladesh, Haiti, the Dominican Republic, and other places.

In light of the Bangladesh factory collapse, Disney is pulling from developing countries all over, but such drastic movement leads to a loss in jobs. What companies can do is flex their financial muscles and influence for an improved quality of work conditions overseas. Then again, that requires time, effort and resources — three elements that American companies probably aren’t aiming for in their desire to get their goods produced quickly, cheaply, and exported for more than a worker’s measly paycheck.

What we can do as consumers in order to shop more ethically is to research and spread the word. It’s our duty as consumers of these products to speak loud for the voices that suffer to provide for us.

SOURCE:  PolicyMic.com

About the writer:
Zainab is an undergraduate student born and raised in New York City, studying mass communications and journalism at the University of Delaware graduating in May 2013. Her interests include politics, fashion, writing, the media arts, travel, unhealthy doses of pop culture, intersectionality, and cultural criticism. She has written for university’s school newspaper, The Review, in addition for the Intellectualyst, a progressive online newspaper. Currently, she is a writing intern at PolicyMic. In 2011, Zainab assisted in research with University of Delaware’s Dr. Danilo Yanich which has since then been studied by the Federal Communications Commission and discussed in the New York Times. She is a member of three national leadership and honor societies. Currently her passions lie in the BBC rendition of Sherlock, philosophy, blogging, and books. Blog: In Medias Res

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MAM Team

The Walt Disney Company pulls out of Bangladesh: Will that make workers safer?

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By Peter Grier
Staff writer
The Walt Disney Company pulls out of five developing countries – including Bangladesh, site of a devastating building collapse of a garment factory – telling licensees of Disney-brand items of its decision to phase out production there. Critics say pulling out is not the best response.

The Walt Disney Co. is pulling out of Bangladesh and several other developing countries, in part because of fatal accidents in factories that produced branded merchandise for Western firms. Announcement of the move follows last week’s collapse of a Bangladesh garment factory building, a tragedy that may be the worst such accident in world history. The official death toll is now more that 500 and keeps climbing as rescue workers continue the slow process of working through building rubble.

American made - no job

A Bangladeshi woman looks at a wall filled with portraits of missing persons near the site of a garment factory that collapsed last week in Savar near Dhaka, Bangladesh, Friday. Disney pulls out of Bangladesh and several other developing countries, in part because of fatal accidents in factories that produced branded merchandise for Western firms. | Ashraful Alam Tito/AP

 

Disney officials said their pull-out decision was actually made in March, after a fire in a Bangladesh factory last November that killed more than 100. The company has told licensees that it wants to phase out production of Disney-brand items made in Bangladesh, Pakistan, Belarus, Ecuador, and Venezuela.Disney said it relied on World Bank Governing Indicators, which measure rule of law, corruption, and other national characteristics, to help make its decision.

“After much thought and discussion we felt this was the most responsible way to manage the challenges associated with our supply chain,” said Bob Chapek, president of Disney Consumer Products, according to a CNN report.

Are Western firms such as Disney, the Gap, and Benetton in part responsible for the conditions that lead to these tragedies in low-wage nations? Disney’s move shows that some feel their reputations are at risk, at the least, if they are tied too closely to foreign workplace tragedies.

Customers may avoid brands they suspect of abetting worker abuse. And a number of international nongovernment organizations today stand ready to publicize poor conditions found in factories linked to major nation retail brands.

But these NGOs don’t necessarily want their pressure to result in pull-outs. They want corporations to use their economic muscle to improve conditions.

The Washington-based Workers Rights Consortium, for instance, says it works with big companies and their foreign licenses to try to remedy problems before issuing public reports.

“The WRC views ‘cutting and running’ from a factory as a serious abrogation of a licensee’s responsibilities,” says the group in a statement.

Worker groups often want foreign firms to stay to preserve jobs and economic development. Some experts say the blame for tragedies such as the Bangladesh building collapse should be directed at local and national authorities who have the responsibility to protect their workers.

“By misassigning the responsibility for the recent tragedies to global retailers, western media and consumer movements allow the real culprits to get away scott-free and further diminish the likelihood of governance reform in poor countries,” wrote Jagdish Bhagwati, senior fellow for international economics at the Council on Foreign Relations, and Amrita Narlikar, director of the Centre for Rising Powers at the University of Cambridge, last month in the British magazine Prospect.

Other experts put the problem in a larger political frame. The real problem in Bangladesh has been the complex trade apparatus erected by the US, which consumes most of the cheap clothing produced in developing nations, wrote Mallika Shakya, an assistant professor of sociology at South Asian University in Delhi, in the Indian newspaper The Hindu.

Between 1974 and 2004, the US Multi-Fiber Arrangement virtually dictated, item by item, the amount of clothing that third-world countries could export to the US, according to Ms. Shakya. Potential rivals to America such as China got small quotas, while Bangladesh and other unprepared nations got large ones.

The result was that Bangladeshi authorities could not keep up with the explosive growth of their country’s garment industry.

“That is a reason why most factory buildings are found to be built haphazardly, without acquiring the necessary clearance from state agencies,” wrote Shakya.

by
MAM Team

Gallup Poll: Americans Want American Made Goods

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BY: Jeffrey M. Jones
Patriotism, Jobs Primary Motivations for ‘Buying American’.  Six in 10 say they would pay more to buy U.S.-made products
PRINCETON, NJ — Forty-five percent of Americans say they recently made a special effort to buy products made in the United States. When asked why, these shoppers mainly cited patriotic or altruistic goals related to the national economy, including creating and keeping jobs in the U.S., rather than product-specific considerations such as quality, safety, or cost.
More specifically, the most common reasons for “buying American” were to support the U.S. or to be patriotic, mentioned by 32% of adults who sought out U.S.-made products in recent months, and to keep or create jobs in the country, mentioned by 31%. Additionally 20% said that buying U.S.-made products is good for the U.S. economy in general.

Fewer Americans in the April 11-14 poll mentioned specific attributes of U.S. versus foreign products as reasons for buying American, including the perception that U.S. products are better quality (13%) or concerns about the safety or quality of products made overseas (3%).

Though a substantial percentage of Americans, 45%, say they have made a special effort to buy U.S.-made products in recent months, more, 54%, have not made an attempt to do so.

There are wide generational differences in U.S.-centric shopping habits, with older Americans (61%), aged 65 and older, much more likely than younger Americans (20%), aged 18 to 29, to actively search for products made in the U.S. Younger Americans may be more accustomed to getting their products from overseas, and with international free trade agreements increasingly common, they may not have been exposed to as much pressure to “buy American.”

In addition to differences by age, there are differences by race and place of residence, with whites and those living in rural areas showing a greater propensity to favor American-made products. There are at best modest differences by gender, income, and party identification.

Americans Willing to Pay More for U.S.-Made Products

Sixty-four percent of Americans say they would be willing to pay more to buy a U.S.-made product than a similar product made in other countries. This includes the vast majority, 88%, of those who make a special effort to buy U.S.-made products, but also nearly half of those, 44%, who do not.

Given that 45% of Americans say they are making a special effort to buy U.S.-made products, and 64% say they are willing to pay more for American-made products, there is a group of about 20% of Americans who are not actively “buying American” but who seem willing to do so, even if they end up spending more.

The question did not specify how much more consumers would have to pay for U.S.-made products than for foreign-made products, but Americans may be less willing to pay significantly more for products made in the U.S. Thus, the 64% willing to pay more for American-made products may be an upper boundary estimate.

Nearly half of young adults, 43%, say they are willing to pay more for U.S. products. However, that figure is much smaller than the 70% of Americans aged 30 and older who are willing to do the same.

Americans Believe U.S. Quality Improving, but Attitudes Unchanged Since 1990

Most Americans believe that U.S. products are better now than they were a few years ago — 71% say they are a lot or a little better, while 16% say they are a lot or a little worse. However, those views are no more prevalent than they were more than 20 years ago, the last time Gallup asked the question in 1990.

Meanwhile, 52% say the U.S. has gained ground on Asian countries in terms of the quality of goods the country produces. But again, little has changed in Americans’ views on the topic since 1990.
One thing that has changed since 1990 is the rise of Chinese-made goods sold in the U.S. The 1990 question did not specify China as an Asian competitor, and Gallup did not include China in the 2013 update to ensure the current measurement is comparable with the past.

Implications

“Buy American” behavior is far from universal in the U.S., but nearly half of Americans say they actively try to buy U.S. products, and even more say they are willing to pay more for U.S. products.

Patriotism and concern for the health of the U.S. economy are major reasons behind people’s shopping for American-made products, but those attributes may be in shorter supply among younger Americans who find less appeal in U.S.-made goods. In fact, Gallup has found younger people in the U.S. ranking among the least patriotic subgroups of Americans.

If younger consumers continue to be less interested in buying U.S.-made products as they get older and future generations show a similar weak commitment to buying American, the wide generational divide in U.S. product shopping behavior could be a concern for the future market of U.S. products.

At the same time, there does seem to be a sizeable latent market for U.S. products that could be tapped, exemplified by the roughly one in five Americans who are not actively shopping for American-made goods but who say they are willing to pay more for U.S. products.

Survey Methods

Results for this Gallup poll are based on telephone interviews conducted April 11-14, 2013, with a random sample of 1,012 adults, aged 18 and older, living in all 50 U.S. states and the District of Columbia.

For results based on the total sample of national adults, one can say with 95% confidence that the margin of sampling error is ±4 percentage points.

Interviews are conducted with respondents on landline telephones and cellular phones, with interviews conducted in Spanish for respondents who are primarily Spanish-speaking. Each sample of national adults includes a minimum quota of 50% cellphone respondents and 50% landline respondents, with additional minimum quotas by region. Landline telephone numbers are chosen at random among listed telephone numbers. Cellphone numbers are selected using random digit dial methods. Landline respondents are chosen at random within each household on the basis of which member had the most recent birthday.

Samples are weighted to correct for unequal selection probability, nonresponse, and double coverage of landline and cell users in the two sampling frames. They are also weighted to ma
tch the national demographics of gender, age, race, Hispanic ethnicity, education, region, population density, and phone status (cellphone only/landline only/both, cellphone mostly, and having an unlisted landline number). Demographic weighting targets are based on the March 2012 Current Population Survey figures for the aged 18 and older U.S. population. Phone status targets are based on the July-December 2011 National Health Interview Survey. Population density targets are based on the 2010 census. All reported margins of sampling error include the computed design effects for weighting.

In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.

View methodology, full question results, and trend data.

For more details on Gallup’s polling methodology, visit www.gallup.com.

SOURCE:  Gallup
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MAM Team

Made in America Label Stages Comeback At Stores

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Mitch Lipka May 3, 2013
(Reuters) – When Roger Simmermaker went shopping for clothes at a Florida mall in the mid-1990s, he wanted to buy American, but to his frustration, he couldn’t find anything made in the U.S.A.
The experience motivated Simmermaker, an electronics technician by trade, to write “How Americans Can Buy American” – a guide to finding products manufactured in the United States, which were a scarce commodity at the time. Nearly 20 years after writing the book, he has seen a big change, with the pendulum in full swing back toward a wider choice of American-made products. They are often available without the expected higher price tag. “It’s definitely easier,” says Simmermaker, 47, who lives in Orlando and works for a defense contractor. “Especially in the last year or so, things have really changed.” Those who believe in buying American-made goods from U.S.-owned companies say it creates jobs and boosts the economy through reinvested profits and taxes. Profit-driven U.S. companies have their own reasons for locating factories, but manufacturers of goods ranging from refrigerators and dishwashers to laptops and tablets are starting to bring some of their production home, affording more opportunities for consumers with the patriotic conviction that Americans ought to buy American. Better still, that “Made in the U.S.A.” label may no longer carry such a premium price tag. That’s because production and shipping costs in China and other foreign manufacturing centers are rising. Shifting some manufacturing back to the United States doesn’t necessarily mean manufacturers have to raise prices to compensate for higher labor costs. To be sure, many industries are still dominated by imports – toys and textiles, for example. Still, Simmermaker and others who believe in buying American are seeing a broad shift. “Reshoring” advocates were thrilled earlier this year when Wal-Mart Stores Inc., the world’s largest retailer, announced it was throwing its weight behind the movement. In January, the chain – known for its extensive selection of imported goods – said it would spend an additional $50 billion over the next 10 years on American-made products, “helping to onshore U.S. production in high-potential areas like textiles, furniture and higher-end appliances.” Likewise, Apple Inc. said it planned to build some of its iMac line in the United States instead of China. Ford Motor Co., Coleman Co. (part of Jarden Corp.) and Master Lock Co. (part of Fortune Brands Home & Security Co.) all have said they’re returning some manufacturing to the United States. The list goes on. WHAT IT MEANS FOR CONSUMERS While few companies will move production for patriotic reasons alone, the public relations boost that goes with a decision to bring jobs back to the United States is gravy. “They run the numbers and say ‘We can deliver just as cheaply from a U.S. operation as we can from, say, China.’ It has some nice extra benefits,” says Dan Seiver, chief economist for Reilly Financial Advisors, a wealth management firm in San Diego, California. “Whatever credit goes with it is fine” With little pricing difference, the impact on U.S. consumers might not be that obvious. But Simmermaker and other advocates also contend that products made in the United States are often higher-quality and safer than those made elsewhere. There is a decided upside for the companies, too. Making products closer to their end-market allows them to be more nimble in terms of customizing and delivering products. That was the case with Spreadshirt, a Germany-based custom shirt maker that recently opened a plant in Nevada to supplement the output of its existing facility in Pennsylvania. In 2011, the company was running its Pennsylvania plant around the clock. To keep up with holiday demand, it was forced to send some work to a plant in Poland, said Mark Venezia, vice president of global sales and marketing for North America. But the company quickly realized that the distance hurt overall costs and speed – to the tune of about $2 more per unit. “We didn’t lose money, but, obviously, it hurt our bottom line,” Venezia said. Hunting for a new location led Spreadshirt to Henderson, Nevada, where facilities that met specifications were available at favorable terms, along with a pool of prospective workers. “We just got this incredible deal that provided us so many benefits,” Venezia said.
SOURCE:  Reuters
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MAM Team

The End of Outsourcing?

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After years of building what they hoped would boost profits by enhancing overseas operations, many U.S. manufacturers have become disillusioned by the lack of return on investment they had anticipated. Instead of finding cost-saving benefits overseas through outsourcing, they are finding headaches, which have spurred a growing number of American companies to head home and build upon the sturdy and sure bedrock of American stability and predictability.
This trend has come to be known as “nearsourcing.” It has been defined in professional publications as “producing products closer to where they are ultimately sold” or “the practice of getting work done or services performed in neighboring countries rather than in your own country.”Jimmy Alyea, writing for Supply Chain Analysis, provides an overview of some of the advantages American companies accrue when they move operations back home:

“The advantages of reversing low-cost supply chain strategies and embracing nearsourcing are many, including: no time-zone differences or lag time that prevents real-time communication and collaboration, fewer language and cultural barriers, lower business traveling costs to plan and oversee projects and work, shorter time to market in the case of manufacturing and reduced inventory holdings because of shortened transit times. Nearsourcing also supports the increased focus by firms on the importance of customer accommodation and fulfillment in order to achieve a strategic competitive advantage. Ultimately, a well-run, shortened supply chain is in large part dependent upon a firm’s logistical expertise.”

Many American manufacturers that have moved operations abroad have experienced a rude awakening.
American manufacturers that have moved operations to countries such as China and India have found themselves in for some rude awakenings, according to Jack Stack of The New York Times.“These countries usually require importers to pay for their goods up front and wait 90 days for the product. It also takes about 90 days to receive payment once an importer sells its product to a retailer. By the time the retailer sells the product and remits payment to the importer, it may take nine months or longer for a business to receive payment for outsourced goods. On the other hand, domestic manufacturers usually produce goods first and allow the client 60 days to remit payment. Thus, the company using nearsourcing receives an interest-free loan and payment from customers right about the time it pays the manufacturer.”
Then there is the realization by American manufacturers that were lured to foreign countries in search of cheap labor that while labor rates are rising (wiping out any labor cost advantages), they face the scourge of corruption, gripping poverty, hostile labor unions, crony courts, runaway intellectual property theft, inefficient labor, massive infrastructure deficiencies, skewed investment laws, security concerns, environmental meltdowns and host governments that expect strict adherence to their unfair and onerous rules and regulations.I recently reviewed a copy of Drewry Shipping Consultants’ Insight publication, which predicts that nearsourcing will increase, greatly tied to the uncertain growth rate of Internet shopping, for which consumers will soon demand same-day delivery. This will make it nearly impossible for companies that don’t have a domestic operational source to meet these shipping demands.

In its report, Drewry notes that after speaking to many shippers, the anecdotal evidence points to a significant increase in nearsourcing. “The trend is escalating for reasons that are easy to understand. Retailers need to offer more ‘made to measure’ goods that can be delivered to market a lot faster than from Asia. For example, a car or computer with a limited range of options doesn’t sell as well as models that can be sourced from closer to home with a wider range of cheap extras.”

American manufacturers and retailers are getting the message about the benefits of nearsourcing. U.S. retailers, in particular, are finding that they need to decrease cycle times, making it easier to constantly refresh merchandise. This keeps customers coming back into the store more often because they’re afraid of missing out on a new product.

Retailers from Target to The Children’s Place have discovered the advantages of nearsourcing. And in January of this year, Wal-Mart announced that it is increasing the sourcing of U.S. products by $50 billion over the next 10 years, hoping to boost U.S. manufacturing and jobs.

Manufacturers are also being reminded that U.S. labor is very flexible with a wide range of technical skills. This is accentuated by America being by far the choice destination of highly skilled immigrants. We must remember that legal immigration has always been essential to keeping America strong and vibrant. Attracting the world’s best talent must remain an important component of our economic growth strategy.

America is finding its sea legs when it comes to restoring our economy by boosting domestic manufacturing. A survey of 750 senior business executives worldwide, conducted in late 2012 by Ernst & Young, showed the number of executives that plan to nearsource previously outsourced activities will more than double in the next three years, from 14 percent to 35 percent.

For the American economy to recover and create jobs for 26 million unemployed or under-employed Americans, we all need to pull together. And that means U.S. manufacturers must demonstrate a commitment of reducing outsourcing and adopting nearshoring approaches to their businesses. There still is no stronger seal of approval throughout the world than when a product can proudly carry the stamp: Made in America.

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MAM Team

A Return to Made in America: Why Manufacturing is Making a Comeback

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By Brad Plumer
It’s hardly news when a U.S. firm moves its manufacturing operations abroad to China. But what about when a Chinese company sets up a factory in the United States?

That happened in January, when Lenovo, a Beijing-based computer maker, opened a new manufacturing line in Whitsett, N.C., to handle assembly of PCs, tablets, workstations and servers.The rationale? The company is expanding into the U.S. market and needs the flexibility to assemble units for speedy delivery across the country, says Jay Parker, Lenovo’s president for North America.But also — and this was crucial — the math added up. While it’s still cheaper to build things in China, those famously low Chinese wages have risen in recent years. “We reached the point where we could offset a portion of those labor costs by saving on logistics,” Parker says.

U.S. firms that have long operated abroad are making similar moves: Caterpillar, GE and Ford are among those that have announced that they’re shifting some manufacturing operations back to the United States. And economists are debating whether these stories are a blip — or whether they signal the beginning of a major renaissances for American manufacturing.

It’s easy to be skeptical. So far, the effect on jobs has been modest. Since January 2010, the United States has added 520,000 manufacturing jobs — and of those, 50,000 have come from overseas firms moving here, according to the Reshoring Initiative, an industry-led group. (That includes 115 in the new Lenovo plant.) That’s a decent number, but it pales beside the 6 million factory jobs that the Bureau of Labor Statistics says vanished between 2000 and 2009.

Yet the optimists counter that the logic of a coming renaissance is impeccable. Besides the shrinking wage gap between China and the United States, the productivity of the American worker keeps rising. And the surge in shale gas drilling gives the United States a wealth of cheap domestic energy to bolster industries such as petrochemicals.

All that could combine to make U.S. factories more competitive in the years ahead, not just with Europe and Japan, but with the manufacturing behemoth inChina. This shift likely won’t mean the United States will have 19 million manufacturing workers again, the way it did in the 1980s. For one thing, automation is still a powerful force. And the types of jobs that come back will be different from the ones that vanished. Still, any significant uptick in domestic manufacturing after a decades-long decline could bolster the economy and spur innovation.

“I think it’s fair to say this hasn’t all registered in the data just yet,” says Scott Paul, the president of the Alliance for American Manufacturing. “But we’re starting to lay the groundwork where we’ll start to see a real effect three to 10 years from now.”

Laying the groundwork

So what does that groundwork look like? For many analysts, the narrowing of the wage gap between China and the United States is the most significant factor.China has been getting wealthier, and its factory workers are demanding ever-higher wages. Whereas the gap in labor costs between the two countries was about $17 per hour in 2006, that could shrink to as little as $7 per hour by 2015, says Dan North, an economist with Euler Hermes, a credit insurer that works with manufacturers.

“If you’re a U.S. company and the advantage is only $7 per hour, suddenly it may be worth staying home,” North says. “If I stay here, I have lower inventory costs, lower transportation costs. I’m closer to my market, I can have higher-quality production and I can keep my technology.”

This notion appears to be catching on. In February 2012 survey from the Boston Consulting Group (BCG), 37 percent of U.S. manufacturers with sales above $1 billion said they were considering shifting some production from China to the United States. The factors they pointed to were not only that wages and benefits were rising in China, but the country is also enacting stricter labor laws and experiencing more frequent labor disputes and strikes.

“Companies are realizing it’s not as easy to do things in China as they thought,” says Hal Sirkin, a senior partner at Boston Consulting Group who has been predicting the convergence of labor costs since 2011.

The flip side is that American workers are becoming more attractive — for a mix of reasons. Worker productivity has been rising steadily over the years. Also, BCG says, the decline of U.S. organized labor is luring companies home, particularly to the nonunion South. Unions, for their part, have often responded by allowing wages to fall in order to keep jobs in the United States. Ford started bringing back production from China and Mexico after an agreement with the United Auto Workers let the company hire new “second-tier” workers at lower wages.

As a result, Sirkin’s research at BCG suggests that some industries could slowly migrate back from China. That includes industries such as plastic and rubber, machinery, electrical equipment and computers and electronics.

Nor is it just China. BCG also found that the United States is on pace to have lower manufacturing costs than Europe and Japan by 2015. Already, companies in those regions have been moving production here. Nissan, Honda, and Toyota are ramping up their exports from the United States. In 2008, Ikea opened a new furniture factory in Danville, Va., to cut shipping costs. The European aerospace company Airbus has just broken ground for a new factory in Mobile, Ala.

America’s glut of cheap natural gas from shale fracking is also attracting its subset of industries. Factories being built in Texas and Pennsylvania will convert natural gas into ethylene, a key ingredient in plastics and antifreeze. An Egyptian company, Orascom Construction, is building a $1.4 billion fertilizer plant in Iowa near a natural-gas pipeline.

Most of the evidence that “reshoring” is happening is anecdotal, and there’s a limit to how far it is likely to go. For one thing, North says, the industries most reliant on cheap labor — including textiles and mass-produced clothing — will likely never return to the United States. Moreover, China has built up a formidable manufacturing infrastructure that will keep many companies there, even as labor costs shift.

“Chinese suppliers have now developed dense supplier networks that now have their own capabilities for introducing new products,” says Suzanne Berger, a political science professor at the Massachusetts Institute of Technology who studies manufacturing. “And, of course, China is a market that’s growing extremely rapidly — so many companies will want to stay in close proximity to those customers.”

But the early signs are notable. Sirkin points out that his model of labor costs didn’t predict that companies would start coming back to the United States until 2015: “We’ve already seen more movement than we expected.”

Industry has changed

Policymakers’ efforts to bolster domestic manufacturing, however, will have to take into account how dramatically the industry has changed since the 1980s.

In a recent report, an MIT task force described how the U.S. manufacturing landscape is no longer dominated by large firms such as Dupont, IBM and Kodak that could handle every aspect of production themselves. Instead, the future of manufacturing will consist of smaller firms that may not always have enough money to train workers, commercialize new products and procure financing on their own.

“There are these holes in the ecosystem, and we have to think of another way to provide all these capabilities if we want to see manufacturing revived,” says Berger, a co-author of the report.

Some firms have partnered with local universities or governments to develop these capabilities, she says. In Rochester, N.Y., for instance, the demise of Kodak meant that there was no longer a dominant company paying to train new skilled workers. So smaller firms in the optics industry banded together to plan new community college curricula and fill the gap.

In New York, the state government has tried to support semiconductor manufacturing by bringing together private firms, research labs and degree programs to share common facilities, expensive equipment, training and research.

The Obama administration is spending $1 billion to fund similar hubs around the country. The first is the National Additive Manufacturing Innovative Institute in Youngstown, Ohio, which will focus on the development of 3-D printing and other processes for manufacturing objects from digital models.

According to the MIT report, such partnerships have the potential to be far more effective than the old model of handing out tax breaks for manufacturers. That’s because they don’t leave a state or locality at the mercy of a single firm that could leave at any time.

How many jobs will return?

There’s also the key question of how many jobs are likely to come back. The United States has 11.9 million manufacturing employees, and experts tend to agree we’re unlikely to see a return even to the much-diminished levels of the 1990s, when there were more than 17 million factory positions.

President Obama has set a more modest goal of 1 million new manufacturing jobs by the end of his second term. But Paul of the Alliance for American Manufacturing says the country is behind pace to achieve even that “reasonable goal.”

The new manufacturing jobs, meanwhile, will also be different from the jobs of old. For one, many plants are now setting up in the nonunion South, and organized labor has largely been shut out of the manufacturing renaissance. On balance, all of the job gains since 2009 have been nonunion. And, unlike 30 years ago, manufacturing jobs no longer have higher average annual earnings than the typical private-sector worker.

At the same time, technological advances will continue to displace factory jobs in the United States and elsewhere. Germany and China — two manufacturing titans — are slowly losing positions because of automation. A report last fall by the McKinsey Global Institute found that the price of robots relative to the cost of human labor has fallen 40 to 50 percent since 1990, and that trend is expected to continue.

Paul, however, points out that Germany has lost jobs at a much slower pace than the United States over the past decade, which suggests that there’s room for improvement. “There’s nothing inevitable about the sort of steep declines we’ve seen here.”

What’s more, experts point out that there are still plenty of other advantages to bringing manufacturing back home. Manufacturing firms tend to spend more on research and development than other businesses, and recent research has focused on the fact that the act of building things can lead to key innovations. Procter & Gamble and Gillette are two companies known for their run-of-the-mill products — diapers and razors — that have turned innovations in the manufacturing process into a key part of their business.

What’s more, the MIT report says, manufacturing can be a potent driver of other service-industry jobs. A small company in Ohio that makes protective sleeves for pipelines, say, will be in a good position to offer technical support for oil platforms and other companies.

“We have the wrong picture if we think on the one hand there’s manufacturing and on the other hand services,” Berger says. “And the idea that we’re going to just go from one to the other is wrong. Almost all valuable things are some bundle of manufactured goods plus services attached.”

SOURCE:  Washington Post
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