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Buying Overseas Clothing, U.S. Flouts Its Own Advice

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Clothing the American Government’s Employees: In many overseas factories producing garments for the United States government, conditions are harsh and pay is low. | Photo Credit: Meridith Kohut for The New York Times

 

WASHINGTON — One of the world’s biggest clothing buyers, the United States government spends more than $1.5 billion a year at factories overseas, acquiring everything from the royal blue shirts worn by airport security workers to the olive button-downs required for forest rangers and the camouflage pants sold to troops on military bases.

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LABORING Clothing made at the Coast to Coast factory in Bangladesh is sold on American military bases. | Photo Credit: Tomas Munita for The New York Times

 
But even though the Obama administration has called on Western buyers to use their purchasing power to push for improved industry working conditions after several workplace disasters over the last 14 months, the American government has done little to adjust its own shopping habits.

Labor Department officials say that federal agencies have “zero tolerance” for using overseas plants that break local laws, but American government suppliers in countries including Bangladesh, the Dominican Republic, Haiti, Mexico, Pakistan and Vietnam show a pattern of legal violations and harsh working conditions, according to audits and interviews at factories. Among them: padlocked fire exits, buildings at risk of collapse, falsified wage records and repeated hand punctures from sewing needles when workers were pushed to hurry up.
In Bangladesh, shirts with Marine Corps logos sold in military stores were made at DK Knitwear, where child laborers made up a third of the work force, according to a 2010 audit that led some vendors to cut ties with the plant. Managers punched workers for missed production quotas, and the plant had no functioning alarm system despite previous fires, auditors said. Many of the problems remain, according to another audit this year and recent interviews with workers.

In Chiang Mai, Thailand, employees at the Georgie & Lou factory, which makes clothing sold by the Smithsonian Institution, said they were illegally docked over 5 percent of their roughly $10-per-day wage for any clothing item with a mistake. They also described physical harassment by factory managers and cameras monitoring workers even in bathrooms.

At Zongtex Garment Manufacturing in Phnom Penh, Cambodia, which makes clothes sold by the Army and Air Force, an audit conducted this year found nearly two dozen under-age workers, some as young as 15. Several of them described in interviews with The New York Times how they were instructed to hide from inspectors.

“Sometimes people soil themselves at their sewing machines,” one worker said, because of restrictions on bathroom breaks.

Federal agencies rarely know what factories make their clothes, much less require audits of them, according to interviews with procurement officials and industry experts. The agencies, they added, exert less oversight of foreign suppliers than many retailers do. And there is no law prohibiting the federal government from buying clothes produced overseas under unsafe or abusive conditions.

“It doesn’t exist for the exact same reason that American consumers still buy from sweatshops,” said Daniel Gordon, a former top federal procurement official who now works at George Washington University Law School. “The government cares most about getting the best price.”

Frank Benenati, a spokesman for the Office of Management and Budget, which oversees much of federal procurement policy, said the administration has made progress in improving oversight, including an executive order last year tightening rules against federal suppliers using factories that rely on debt bondage or other forms of forced labor.

“The administration is committed to ensuring that our government is doing business only with contractors who place a premium on integrity and good business ethics,” he said.

Labor and State Department officials have encouraged retailers to participate in strengthening rules on factory conditions in Bangladesh — home to one of the largest and most dangerous garment industries. But defense officials this month helped kill a legislative measure that would have required military stores, which last year made more than $485 million in profit, to comply with such rules because they said the $500,000 annual cost was too expensive.

Federal spending on garments overseas does not reach that of Walmart, the world’s biggest merchandiser, which spends more than $1 billion a year just in Bangladesh, or Zara, the Spanish apparel seller, but it still is in a top tier that includes H & M, the trendy fashion business based in Sweden, Eddie Bauer and Lands’ End, sellers of outerwear and other clothing.

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The garment factory in the Codevi industrial park in Haiti makes camouflage clothing for a military contractor. | Photo Credit: Meridith Kohut for The New York Times

 
Like most retail brands, American agencies typically do not order clothes directly from factories. They rely on contractors. This makes it challenging for agencies to track their global supply chain, with layers of middlemen, lax oversight by other governments, few of their own inspectors overseas and little means of policing factories that farm out work to other plants without the clients’ knowledge. When retailers, labor groups or others inspect these factories, the audits often understate problems because managers regularly coach workers and doctor records.

The United States government, though, faces special pressures. Its record on garment contracting demonstrates the tensions between its low-bid procurement practices and high-road policy objectives on labor and human rights issues.
The Obama administration, for example, has favored free-trade agreements to spur development in poor countries by cultivating low-skill, low-overhead jobs like those in the cut-and-sew industry. The removal of trade barriers has also driven prices down by making it easier for retailers to decamp from one country to the next in the hunt for cheap labor. Most economists say that these savings have directly benefited consumers, including institutional buyers like the American government. But free-trade zones often lack effective methods for ensuring compliance with local labor laws, and sometimes accelerate a race to the bottom in terms of wages.

Along a dirt road in Gazipur, about 25 miles north of the Bangladeshi capital, riot police fired tear gas shells, rubber bullets and sound grenades in a fierce clash with garment workers last month, sending scores to the hospital. The protesters demanding better conditions included some from a factory called V & R Fashions. In July, auditors rated that factory as “needs improvement” because workers’ pay was illegally docked for minor infractions and the building was unsafe, illegally constructed and not intended for industrial use.

Unsafe and Repressive

Like dozens of oth
er factor
ies in the area, V & R makes clothes for the American government, which is constantly prowling for the best deals. In interviews, workers at a half-dozen of these suppliers described the effect of such cost pressures.

At Manta Apparels, for example, which makes uniforms for the General Services Administration, employees said beatings are common and fire exits are kept chained except when auditors visit. The local press has described Manta as one of the most repressive factories in the country. A top labor advocate, Aminul Islam, was organizing there in 2010 when he was first arrested by the police and tortured. In April 2012, he was found dead, a hole drilled below his right knee and his ankles crushed.

Several miles from Manta, 40 women from another supplier, Coast to Coast, gathered late one night to avoid being seen publicly talking to a reporter. Dressed in burqas, the women said that prices of the clothing they make for sale on American military bases are now so cheap that managers try to save money by pushing them to speed up production. In the rush, workers routinely burn themselves with irons, they said, often requiring hospitalizations.

Work does not stop, they said, when it rain pours through a six-foot crack in the ceiling of the top floor of the factory — a repurposed apartment building with two extra floors added illegally to increase capacity. Even after the manager swipes their timecards, they say, he orders them to keep sewing.

While giving a tour of the plant, the manager described the building crack as inconsequential and too expensive to repair. He denied the workers’ other allegations. The owner of Manta declined to comment.

Conditions like those are possible partly because American government agencies usually do not know which factories supply their goods or are reluctant to reveal them. Soon after a fire killed at least 112 people at the Tazreen Fashions factory in Bangladesh in November 2012, several members of Congress asked various agencies for factory addresses. Of the seven agencies her office contacted, Representative Carolyn Maloney, Democrat of New York, said only the Department of the Interior turned over its list.

Over the summer, military officials told Representative George Miller, Democrat of California, that order forms for apparel with Marine Corps logos had been discovered in Tazreen’s charred remains but that the corps had ties to no other Bangladeshi factories. Several weeks later, the officials said they were mistaken and had discovered a half-dozen or so other factories producing unauthorized Marine Corps apparel. On Sunday, the owners of Tazreen and 11 employees were charged with culpable homicide.

President Obama has long pushed for more transparency in procurement. As a senator, he sponsored legislation in 2006 creating the website USASpending.gov, which open-government advocates say has made it far easier to track federal contracting. However, procurement experts fault the website for requiring agencies to name their contractors, but not identifying the specific factories doing the work. Some states and cities already require companies to disclose that information before awarding them public contracts, said Bjorn Skorpen Claeson, senior policy analyst at the International Labor Rights Forum.

Federal officials still have to navigate a tangle of rules. Defense officials, for instance, who spend roughly $2 billion annually on military uniforms, are required by a World War II-era rule called the Berry Amendment to have most of them made in the United States. In recent years, Congress has pressured defense officials to cut costs on uniforms. Increasingly, the department has turned to federal prisons, where wages are under $2 per hour. Federal inmates this year stitched more than $100 million worth of military uniforms.

No sooner had the Transportation Security Administration, or T.S.A., signed a $50 million contract in February for new uniforms for its 50,000 airport security agents and other workers, than the agency was attacked from all sides.

Union officials, opposed to outsourcing work overseas, objected because the Mexican plant making the clothing, VF Imagewear Matamoros, was the same one that had treated uniforms with chemicals that caused rashes in hundreds of T.S.A. agents. Congress called an oversight hearing, where some lawmakers questioned why two-thirds of the uniforms would be made in foreign factories, saying the deal was a missed chance to stimulate domestic job growth. Other lawmakers faulted the agency for spending too much money on clothing, especially on the cusp of a federal budget crisis, no matter where the merchandise was made.

“Bottom line,” John W. Halinski, T.S.A. deputy administrator, told Congress, “we go for the lowest-cost uniform, sir.”

The hunt for lower costs and the expansion of free-trade pacts have meant that more of this work is being done abroad, often in poor countries where the Obama administration is trying to spur competition and development.

In Haiti, for instance, trucks loaded with camouflage pants, shirts and jackets, some of them destined for American military bases, idle in front of a factory called BKI.

Next year, BKI managers hope to double the amount of camouflage clothing made for the American government, part of a contract worth more than $30 million between a division of Propper International, a Missouri-based uniform company, and the General Services Administration, which outfits workers for more than a dozen federal agencies.

Three years ago, much of this camouflage clothing was made in Puerto Rico, where workers earned the minimum wage of about $7.25 an hour. By 2011, many of these jobs moved to a factory in the Dominican Republic called Suprema. Wages there were about 80 cents per hour and unpaid overtime was routine, according to workers in recent interviews and a 2010 audit. Since then, most of these jobs have migrated again, this time to BKI in a Haitian free-trade zone called Codevi. Average hourly wages at BKI are about 8 cents less per hour than those at Suprema, according to workers.

Standing near the factory entrance, several BKI workers said they were proud of the clothes they made for the American government. “We push hard because we know they expect better,” said Rodley Charles, 29, a quality inspector at the factory.

But there is basic math: the average pay of 72 cents per hour (which is illegal and below Haiti’s minimum wage) barely covers food and rent, said Mr. Charles, who has since quit, and two other BKI workers.

These wage pressures may soon intensify. Codevi will soon face new competition from another industrial park called Caracol, which is being built partly with money from the United States Agency for International Development as part of reconstruction efforts after the earthquake of 2010.

American officials predict that Caracol will eventually create 60,000 new jobs. Current wages there? About 57 cents per hour, or roughly 15 cents less than typical wages at Codevi.

Big Business

At a military store in Bethesda, Md., Tori Novo smiled as she looked over a pair of $19.99 children’s cargo pants made in Bangladesh that sell for $39 in most department stores. The best part of living on base, said Ms. Novo, a 31-year-old Navy recruiter, was “savings like these.”

Known as exchanges, these big-box stores on military bases around the world offer a guarantee: to beat or match any price from rivals. That promise puts the exchanges in direct competition with the deep discounts offered by stores like Gap and Target. It also adds to already intense pressure to lower costs by using the cheapest factories, industry analysts say.

These stores, run by the Defense Department, do big business, selling more than $1 billion a year in apparel alone. Exempt from the Berry Amendment, the exchanges get more than 90 percent of their clothes from factories outside the United States, according to industry estimates. The profits from these tax-free stores mostly go toward entertainment services like golf courses, gyms and bowling alleys on bases.
Though the Government Accountability Office criticized the exchanges over a decade ago for exerting less oversight than private retailers and for failing to independently monitor their overseas suppliers, little has improved.

The Marine Corps and Navy still do not require audits of these factories. The Air Force and Army exchanges do, but the audits can come from retailers, and defense officials fail to do routine spot checks to confirm their accuracy.

For example, Citadel Apparels, a factory in a seven-story building in Gazipur, has cut, stitched and shipped more than 11 metric tons of cotton boys’ T-shirts and other clothes for sale at exchanges on Army and Air Force bases in recent months. This summer, lawmakers in Congress asked the Defense Department for proof that Citadel was safe. Defense officials produced an audit conducted for Walmart, another client of the factory, showing that it had an “orange” risk ranking in July 2012, the same high level of alarm that Walmart had given the Tazreen factory before the fatal fire there last year.

While allowing the factory to stay open, the audit offered an alarming statistical snapshot.

Sixty-five percent: number of workers barefoot, some on the building’s roof. Fifty percent: workers without legally required masks to protect against cotton dust. Sixteen percent: workers missing time-sheets, a common sign of forced overtime. Most serious infractions: cracks in the walls that could compromise the building, and partly blocked exit routes and stairwells.

By January, Citadel’s auditors concluded that most of these dangers had been fixed. However, a half-dozen Citadel workers offered a starkly different picture. Virtually none of the original problems had ever been corrected, they said in interviews last month with The Times.

“We aren’t sewing machines,” one worker said. “Our lives are worth more.”

For now, Bangladesh’s garment sector continues to grow, as do purchases from one of its bulk buyers. In the year since Tazreen burned down, American military stores have shipped even more clothes from Bangladesh.

Ian Urbina reported from Bangladesh and Washington. Research was contributed by Susan Beachy in New York, Poypiti Amatatham in Bangkok, Karla Zabludovsky in Mexico City, Malavika Vyawahare in New Delhi and Meridith Kohut in Ouanaminthe, Haiti.

SOURCE:  New York Times

Bangladeshi Factory Owners Charged in Fire That Killed 112

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Delowar Hossain, owner of Tazreen Fashions Ltd. He has said that just three stories of his garment plant were legal. | Photo Credit: Andrew Biraj/Reuters
NEW DELHI — The police in Bangladesh charged the owners of a garment factory and 11 of their employees with culpable homicide in the deaths of 112 workers in a fire last year that came to symbolize the appalling working conditions in the country’s dominant textile industry.
The case is the first time the authorities have sought to prosecute factory owners in Bangladesh’s garment industry, so powerful that the state has long sought to protect owners from unionization efforts by workers and from international scrutiny of working conditions.

The fire at the Tazreen Fashions factory on Nov. 24, 2012, was later eclipsed by a building collapse in April that cost the lives of 1,100 workers and brought global attention to the unsafe working conditions and low wages at many garment factories in Bangladesh, the No. 2 exporter of apparel after China. The fire also revealed the poor controls that top retailers had throughout their supply chain, since retailers like Walmart said they were unaware that their apparel was being made in such factories.

Among those charged on Sunday were the factory’s owners, Delowar Hossain and his wife, Mahmuda Akther, as well as M. Mahbubul Morshed, an engineer, and Abdur Razzaq, the factory manager, according to local news reports.

Bangladeshi officials have been under intense domestic and international pressure to file charges against those deemed responsible for last year’s deaths. Fires have been a persistent problem in the country’s garment industry for more than a decade, with hundreds of workers killed over the years.

Bangladesh has more than 4,500 garment factories, which employ over four million workers, many of them young women. The industry is crucial to the national economy as a source of employment and foreign currency. Garments constitute about four-fifths of the country’s manufacturing exports, and the industry is expected to grow rapidly.

On the night of the fire, more than 1,150 people were inside the eight-story building, working overtime shifts to fill orders for various international brands. Fire officials say the blaze broke out in the open-air ground floor, where large mounds of fabric and yarn were illegally stored.

But on some floors, managers ordered the employees to ignore a fire alarm and continue to work. Precious minutes were lost. Then, as smoke and fire spread throughout the building, many workers were trapped, unable to descend the smoke-filled staircases, and they were blocked from escape by iron grilles on many windows. Desperate workers managed to break open some windows and leap to safety on the roof of a building nearby. Others simply jumped from upper floors to the ground.

SOURCE:  New York Times

Polls Find Unpleasant Financial Truths

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Amid this year’s deluge of holiday spending surveys by companies trying to grab some attention, several other recent polls and studies are addressing arguably more important issues, such as financial bullying, money spent on financial literacy and whether “Made in USA” is better.
Here is a sampling.

UNFAIR FIGHT? Financial services marketers, such as banks promoting credit cards, outspend financial education efforts 25-to-1, according to a recent study by the Consumer Financial Protection Bureau. And that doesn’t even include marketing spending on the two huge areas of investments and insurance.

“When consumers receive the vast majority of their financial information from companies that are trying to promote an image or sell products, consumers have very little unbiased information,” said bureau Director Richard Cordray, who called the difference in spending “staggering.”

The report found that the financial services industry spends about $17 billion a year marketing financial products and services to consumers, but only $670 million is spent annually to provide financial education to consumers.

Where to go for unbiased financial information to educate yourself? There are many resources, including books and some blogs. A well-regarded general book, for example, is “Personal Finance for Dummies” by Eric Tyson. Always assess who is giving the information and why. The bureau hosts a site at http:consumerfinance.gov/askcfpb, as does the Federal Trade Commission, at http:consumer.ftc.gov.

CREDIT BUREAUS UNEVEN AT CORRECTING ERRORS: The good news is that thousands of consumers with errors on their credit reports are getting relief through the Consumer Financial Protection Bureau. The bad news is, credit reporting agencies vary widely in how they respond to consumer complaints, according to an analysis by U.S. PIRG Education Fund. For example, Equifax responded to more than half of consumers with relief, while Experian helped only 5 percent, with the other major agency, TransUnion, in the middle. The report used data collected by the financial protection bureau’s public Consumer Complaints Database, created to help consumers resolve problems with their credit reports.

Studies have found that millions of Americans have serious errors on their credit reports. That’s potentially a big deal because errors can hurt a consumer’s ability to get an affordable loan, rent an apartment or even land a job. Check your reports for errors once a year from each of the three major credit bureaus at www.annualcreditreport.com.

“MADE IN USA” MYTH? People might assume that products made in America tend to be more costly but are superior in quality. But a recent study, which was more anecdotal than scientific, found no evidence of either. Cheapism.com, which looks for value among lower-priced brands within product categories, sent a researcher into a Walmart, which has been touting its “Made in USA” offerings, to buy and test several items made domestically against imports.

Items included socks, towels, skillets, light bulbs and kitchen mats. The findings? The cost was about the same: U.S.-made items cost a total of $57.50, while imports totaled $55.46. But quality varied, with no clear winner.

“Although we’re happy to get on board the USA-made train, we also pay homage to value pricing and quality performance,” the report said. “We found no clear-cut association among country of origin, price and quality.”

Of course, many people prefer American-made products for philosophical or political reasons more than value reasons.

SOURCE:  Chicago TribuneBy Gregory Karp

The Transformation of Manufacturing

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Changes are sweeping the world of manufacturing. Advanced materials and innovative production technologies are maturing. Digital manufacturing techniques are gaining adoption. These technology trends are offering manufacturers new ways to compete, innovate, and grow profitably even as they face challenges from volatile energy costs, workforce shortages, proliferating regulations, and a host of evolving risks. While analysts and consultants have heralded these trends over the past few years, they are now emerging with more clarity and attracting significant investment.
SIGNALS

  • Ten of the top fifty US manufacturers have announced programs to use innovative materials or new production processes. 1
  • Workers on a Steelcase assembly line operate in an “augmented reality” environment.2
  • 3M, GE Appliances, Caterpillar, and other manufacturers have moved some production to the United States.3
  • Motorola’s new Moto X is the first smartphone to carry the “Assembled in USA” designation.4
  • Siemens created an apprenticeship program for high school graduates in North Carolina in cooperation with a local community college.5
  • Siemens and Dassault have invested billions acquiring companies to expand their manufacturing software portfolios6

As the United States emerges from the Great Recession, a broad array of technological and societal trends is shaping the future of manufacturing, which accounts for over 10 percent of all US economic activity.7

The technology trends that present new possibilities and questions for manufacturers include:

  • New production processes: New processes such as additive manufacturing (for instance, 3D printing) are influencing everything from product design to material selection to supply chain configuration. Additive manufacturing is already a $2 billion market globally.8
  • New materials: Advanced materials with high performance characteristics, such as carbon fiber composites, ceramics, and nanomaterials, are increasingly finding uses in large consumer-oriented markets such as automobiles, building materials, and clothing. Global demand for carbon fiber-reinforced plastic, for instance, is expected to grow 15 percent annually through 2020.9
  • Digital manufacturing: A new generation of digital design and collaboration tools is enabling manufacturers to digitally simulate the appearance, performance, interoperability, and even manufacturability of products, saving time and money throughout the product development and production process. Dassault Systèmes, a leading provider of software to manufacturers, reports that its revenues in this business segment have increased more than 60 percent in the last year.12In a cutting-edge example of digital manufacturing, Steelcase is employing augmented reality on an assembly line to boost the productivity of its workers.10

Manufacturers are increasingly looking to take advantage of these technology trends to help them navigate the economic and business challenges they face, including increased labor costs in developing countries, a talent gap at home, the intellectual property risks of global operations, and a growing regulatory burden.

Manufacturers are facing new questions

These trends raise many questions for our manufacturing clients:

  • How can manufacturers use advanced materials to differentiate themselves and improve product performance? BMW aims to differentiate itself using its new i3 electric vehicle, which makes extensive use of carbon fiber to enable light weight, energy efficiency, and distinctive styling.12
  • How can clients use new production processes such as additive manufacturing to boost efficiency? GE is using 3D printing to make one-piece fuel nozzles for its next-generation jet engine that are up to five times more durable than the 18-part nozzles made using traditional processes.13
  • How can clients implement new manufacturing IT solutions to reduce the cost of product development? Can the resulting savings free significantly more funds for innovation?
  • Where should manufacturing clients locate production facilities in light of shifting demand patterns and increasingly complex determinants of cost and risk? Though smartphone manufacturing is firmly rooted in Asia, Motorola Mobility decided to assemble its new Moto X phone in the United States to allow US customers to design their own phones and speed the phone’s delivery.14
  • How will clients need to redesign supply chains to take advantage of new materials and production processes such as additive manufacturing? Redeye, a subsidiary of 3D printer maker Stratasys, operates 3D printing service bureaus in seven locations globally, manufacturing parts to meet the regional needs of its industrial customers.15
  • How can clients gain access to workers with the skills required for increasingly sophisticated production facilities? Facing a scarcity of qualified workers at a North Carolina plant, Siemens created an apprenticeship program in conjunction with a community college in North Carolina.16
  • How will audit practices—including methods of valuing inventory—need to change as additive manufacturing becomes more widespread?
  • What tax strategies—such as R&D credits and transfer pricing—become important as manufacturers invest in innovations such as additive manufacturing and new materials?
  • How can clients manage growing cyber risks and the risks of global expansion, including geopolitical instability, corruption, and immature control systems?17


A new basis of competition

Collectively, these questions reveal that macroeconomic and technological shifts are changing the basis of competition and value creation in manufacturing. Success is no longer guaranteed for the manufacturer with the lowest costs. New materials and new processes give manufacturers across all sectors the opportunity to provide more value to their customers—including improved performance, faster delivery time, customized products, and flexible productive volumes—and capture more profits for themselves. In this dynamic environment, manufacturers cannot afford to stand still. Innovation enabled by new technology is a path to a successful future in manufacturing.

ENDNOTES

  1. Deloitte analysis.back ^
  2. Natan Linder, Rony Kubat, Pattie Maes, and Ben Weissmann, “LuminAR Lens,” Fluid Interfaces Group, MIT Media Lab, http://fluid.media.mit.edu/sites/default/files/poster-final-small.pdf, accessed November 18, 2013.back ^
  3. Dee Depass, “Some jobs are shifting back to Minnesota in ‘Reshoring’,” StarTribune, July 30, 2012, http://www.startribune.com/business/164214466.html, accessed November 18, 2013; John Koten, “A revolution in the making,” Wall Street Journal, June 10, 2013, http://online.wsj.com/article/SB10001424127887324063304578522812684722382.html, accessed November 18, 2013.back ^
  4. Associated Press, “First US made smartphone, just as cheap to produce” CBS DFW, August 28, 2013, http://dfw.cbslocal.com/2013/08/28/first-us-made-smartphone-just-as-cheap-to-produce/, accessed November 19, 2013.back ^
  5. Becky Bereiter, “Perdue attends ceremony marking Siemens expansion in Charlotte,” News 14 Carolina, http://charlotte.news14.com/content/news/649639/perdue-attends-ceremony-marking-siemens-expansion-in-charlotte, accessed November 18, 2013.back ^
  6. Siemens, “Simulation software: The key to competitive advantage,” Pictures of the Future, spring 2013, http://www.siemens.com/innovation/apps/pof_microsite/_pof-spring-2013/_html_en/acquesitions.html, accessed November 18, 2013; Bernard Charlès and Thibault de Tersant, “Analyst meeting Q2 & H1 2013,” Dassault Systems, http://www.3ds.com/fileadmin/COMPANY/Investors/Earnings/13Q2/13Q2-Earnings-Presentation.pdf, accessed November 20, 2013.back ^
  7. National Association of Manufacturers, “Facts about manufacturing in the United States,” 2013, http://www.nam.org/Statistics-And-Data/Facts-About-Manufacturing/Landing.aspx, accessed November 18, 2013.back ^
  8. “Additive Manufacturing Handbook” (Deloitte internal document).back ^
  9. Research and Markets, “Carbon Fibers & carbon fiber reinforced plastics (CFRP)—A global market overview,” Yahoo Finance, September 30, 2013, http://finance.yahoo.com/news/carbon-fibers-carbon-fiber-reinforced-150430957.html, accessed November 18, 2013.back ^
  10. Charlès and de Tersant, “Analyst meeting Q2 & H1 2013.”back ^
  11. Linder, Kubat, Maes, and Weissmann, “LuminAR Lens.”back ^
  12. Jim Henry, “The BMW i3 electric vehicle updates the graduate: 2014—one word; fibers,” Forbes, July 31, 2013, http://www.forbes.com/sites/jimhenry/2013/07/31/the-bmw-i3-electric-vehicle-updates-the-graduate-to-2014-one-word-fibers/, accessed November 18, 2013.back ^
  13. Koten, “A revolution in the making.”back ^
  14. Wailin Wong, “Motorola Mobility betting big on Moto X production in Texas,” Chicago Tribune, September 11, 2013, http://articles.chicagotribune.com/2013-09-11/business/ct-biz-0911-motorola-manufacturing-20130911_1_dennis-woodside-motorola-mobility-moto-x, accessed November 18, 2013.back ^
  15. @RedEyeOnDemand, “How many 3D printing locations do you have globally,” Twitter, November 19, 2013, https://twitter.com/RedEyeOnDemand/status/402847398818365440, accessed November 20, 2013.back ^
  16. Julie Bird, “A big investment in Charlotte youth,” Charlotte Business Journal, June 17, 2011, http://www.bizjournals.com/charlotte/print-edition/2011/06/17/a-big-investment-in-youth.html?page=all, accessed November 18, 2013.back ^
  17. Steve Culp, “New threats to supply chains call for new approaches to risk management,” IndustryWeek, June 7, 2013, http://www.industryweek.com/supplier-relationships/new-threats-supply-chains-call-new-approaches-risk-management?page=2, accessed November 18, 2013.back ^
SOURCE: Deloitte University

Connected Products Changing Manufacturing Business Model

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There’s been a flurry of activity over the past few years indicating a greater reliance by manufacturers on product lifecycle technologies ranging from increased use of CAD/CAM/CAE software to full-blown product lifecycle management software suites. Just a few weeks ago I wrote about how expectations are growing for a PLM surge in manufacturing; shortly thereafter, GE and PTC announced that they have expanded their collaboration to include a reseller agreement and joint product development as well as sales and marketing. Clearly, there’s quite a bit of activity in the manufacturing PLM space, and where there’s smoke, there’s usually fire.
Throwing more fuel on that fire is a recent article by Jim Heppelmann, CEO of PTC, which was published in Frost & Sullivan’s Manufacturing Leadership Journal. The article, titled “Transforming the Relationship Between Products and Services”, looks at how more manufacturers are looking past single sales transactions and into “creating multiple opportunities for an exchange of value, and simultaneously transforming the relationship between manufacturer and customer.” This new business model is blurring the lines between products and services for many manufacturers and is leading to a “rethinking of nearly everything, from how products are conceived, designed, and sourced to how they are produced, sold, and serviced. We’re at the early stages of a fundamental transformation, marking what could be one of the most significant business model disruptions since the Industrial Revolution.”

Heppelmann’s conclusions are, in part, based on data from a survey of 300 global manufacturing executives commissioned by PTC and performed by Oxford Economics, a global forecasting and quantitative analysis firm. Nearly 70 percent of responding executives said they expect their companies to undergo significant business process transformations over the next three years. The executives hold these expectations because they believe “they’re nearing a point of diminishing returns with their focus on improving manufacturing operations, with more than half saying they believe they’ve already wrung out almost all the potential savings from efficiencies in their production processes,” Heppelmann states in his article.

While this is undoubtedly true for many manufacturers, I have to wonder how true this statement holds for the majority of manufacturers. After all, less than a year ago I attended a presentation by Laurie Harbour, president of Harbour Results, at the Manufacturing in America Symposium. According to her analyses of current manufacturing data, manufacturers as a whole haven’t become more efficient over the past several years. “The extra revenues being brought in now [due to the upturn in U.S. manufacturing] are just hiding the inefficiencies,” she said. The data she produced showed that revenue per full time employee in 2011 was $160,000, but was only $149,000 in 2012. In 2012 revenue increased 16 percent over 2011 but throughput went down 7 percent, she said, which represents about an $11,000 loss per full time employee.

SOURCE:  OfWeek

Texas' Surging Manufacturing Sector Gets Boost from Apple

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Texas’ resurgent manufacturing industry takes a giant step forward as the Texas made Apple Mac Pro begins taking orders today for it’s first fully Made in the USA computer, 1200 WOAI’s Michael Board reports.
“We have begun manufacturing the Mac Pro in Austin,” Apple CEO Tim cook said on Twitter.  “Orders start Thursday.”

The Mac Pro is being assembled at the Flextronics America factory in northwest Austin.  The plant employs about 2500 people and jobs at the plant could increase as production of the Mac Pro ramps up.

Apple has been secretive about its plans for USA production, with Flextronics America revealing in October that it was hiring workers to build “the next generation desktop computer.”  Apple confirms that all of the parts made in the Mac Pro are also made in the USA, work which had previously been done at Apple’s massive Foxconn factory in China.

Texas economist Ray Perryman says this will be a wonderful opportunity for Texas to tout its manufacturing assets.

“With quality issue and with looking for competitive edges, I think more people will be looking at the United States for manufacturing key components,” Perryman said.

The return of manufacturing has been one of the truly untold stories of the economic recovery.  Powered largely by cheap natural gas being recovered from the Eagle Ford shale, manufacturing is returning from offshore locations where it was moved in the seventies and eighties, and much of it is locating in Texas.

Perryman says being known as the place where Apple manufacturers its computers will be just as valuable a promotional tool as San Antonio being known as the place where Toyota manufactures its pickup trucks.

“I think we are going to see a general trend of more components and more computers being produced in the United States,” Perryman said.

But Perryman says despite the advantages of Texas and USA production, offshore manufacturing is still attractive for companies looking to cut costs.

“They compute so intensely, so there is going to be a lot of pressure on them to remain in lower wage countries,” Perryman said.

The Texas built Mac Pro won’t be cheap.  It is priced at Apple stores and other retailers at $2,999.

SOURCE:  1200 News Radio

Apple Kicks Off ‘Made in USA’ Push With Mac Pro

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Apple Inc. is taking orders today for the new Mac Pro personal computer, which is being built in Texas with components made domestically as part of Chief Executive Officer Tim Cook’s $100 million Made-in-the-USA push.
“We have begun manufacturing the Mac Pro in Austin,” Cook wrote in a posting yesterday on Twitter. “It’s the most powerful Mac ever.”

The cylindrical machine, which runs on Intel Corp.’s latest Xeon chip, will be available to order today at a starting price of $2,999, Apple said. While companies such as Google Inc. and Lenovo Group Ltd. are doing some final assembly in the U.S. of parts made overseas, Cook said in an interview in October that Apple is manufacturing — not just putting together — the Mac Pro’s metal parts in the U.S.

“The difference with us is that we’re taking a bottoms-up approach,” Cook said at the time. “We don’t want to just assemble the Mac Pro here, we want to make the whole thing here. This is a big deal.” Apple’s partners are using industrial molds and production processes that were developed in the U.S., he said.
Cook’s pledge to domesticate some production followed years of criticism from labor advocates about conditions at contractors’ facilities in China, where most of Apple’s products are built. Though Apple, the world’s largest technology company, hasn’t announced plans to make other products in the U.S., recent investments suggest it may head in that direction, including a new plant in Mesa, Arizona.

High End

The newest version of the Mac Pro, a top-of-the-line computer used by graphic designers and filmmakers who require the fastest performance, is going on sale at the height of the holiday shopping season in customizable configurations starting at $2,999 and $3,999 depending on the chip’s power and amount of memory.

The sleek, rounded black machine, which looks like a space-age trash can or a small jet engine, is 9.9 inches tall and is an eighth the size of the current Mac Pro, the company said. Intel’s Xeon processors will let it handle some calculations at twice the speed of the existing model, Apple has said, and will use 70 percent less power because of its smaller size. The computer comes with 256 gigabytes of flash-based storage, expandable to one terabyte — the equivalent of 1,000 gigabytes.

Twenty States

Apple executive Phil Schiller said in October that more than 2,000 people in 20 states were working on the Mac Pro. The Cupertino, California-based company released a video of the highly automated processes used to build the machine, showing a puck-shaped plug of aluminum being stamped into the shape of the cylindrical shell, and then passed through a series of robots for polishing, anodizing and painting. Other machines insert electronic components onto circuit boards.

The last frames of the video show the words “Designed in Cupertino, Assembled in the USA” being etched on the bottom of the machine by laser. Under U.S. Federal Trade Commission regulations, companies can’t include the term “Assembled in USA” if that process only includes final piecing together of imported parts “in a simple ‘screwdriver’ operation in the U.S.”

So far, the company’s push isn’t poised to have a big impact. Of Apple’s $170.9 billion in annual revenue, more than 70 percent of that comes from the iPhone and iPad tablet, which are built in China. The new Mac Pro will probably contribute less than 1 percent of Apple’s sales in 2014, said Gene Munster, an analyst at Piper Jaffray Cos. He predicts the company will sell 1.1 million Mac Pros in 2014, compared with 300 million iPhones and iPads.

Google, Lenovo

Other large technology companies have also been doing more work in the U.S., yet few have begun manufacturing components in the country. Google, which makes the rival Android mobile operating system and Motorola smartphones, has been assembling its Moto X device at a Flextronics International Ltd. factory near Fort Worth, Texas, hiring more than 2,000 people. In June, Lenovo said it was adding 115 people to work on final assembly of PCs in Whitsett, North Carolina.

“We are designing, engineering and assembling Moto X in the USA,” Gabe Madway, a spokesman for Motorola, said in an e-mail. “Our parts come from all over but are assembled and in some cases made in the U.S.”

While Beijing-based Lenovo, the world’s largest PC maker, isn’t doing fabrication in the U.S., the automation equipment used at its Whitsett plant was made in the country and the company uses packing materials from local vendors, said Milanka Muecke, a spokeswoman.

Labor Conditions

Apple has faced stepped-up scrutiny of its overseas labor in recent years. Allegations of use of underage workers, forced overtime and other infractions have led the company to investigate conditions at China-based manufacturing partners Hon Hai Precision Industry Co. and Pegatron Corp. Apple has joined the Fair Labor Association, and publishes regular results of hundreds of factory audits in a Supplier Responsibility Report.

In December 2012, Cook told Bloomberg Businessweek that the company would spend $100 million to build a new version of one of its Mac models in the U.S. In testimony before the U.S. Senate in May, Cook said the Mac Pro would be assembled in Texas using parts made in Illinois and Florida and equipment made in Kentucky and Michigan. And last month, the company said a new Arizona plant will employ 2,000 people to produce a glass alternative made of synthetic sapphires that are increasingly being used in smartphones to cover camera lenses and home buttons.

Rebuilding Expertise

Cook declined to say how many total jobs Apple might create in the U.S. The biggest challenges have been getting more suppliers to set up shop, and re-establishing production-related expertise that has been disappearing since big technology companies started turning to foreign companies for manufacturing in the 1990s and 2000s, he said.

“We’re responsible for 2,000 jobs so far, and we’ll see how high that goes,” Cook said in the October interview. “The important thing is to re-develop the skills.”

Some of Apple’s suppliers are already taking steps to boost their operations in the U.S. Last month, Hon Hai said it would spend $30 million to build a factory in Harrisburg, Pennsylvania. Hon Hai CEO Terry Gou said the focus at that plant would be on developing automation technologies, not creating job-intensive production lines.

Given the lower labor costs and smooth supply chain Apple has built in Asia, the co
mpany
may never bring high-volume manufacturing of devices such as the iPhone back to the U.S., said Mike Fawkes, who oversaw Hewlett-Packard Co.’s supply-chain operations until 2008. While labor costs in China have been rising in recent years, they are still 60 percent lower than those in the U.S., according to Boston Consulting Group.

“It’s a positive sign to see Hon Hai further establish its U.S. presence,” said Fawkes. “That said, a $30 million factory is a drop in the bucket for manufacturing of any consequence.”

SOURCE:  Bloomberg

Connecticut First State To Require Labeling of GMO's

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Connecticut has become a pioneer in food labeling as it is the first state to pass legislation to make companies say if their products contain genetically modified organisms or GMOs.
GMOs are used to help plants be resistant to herbicides and pesticides, but it’s done by taking DNA from a bacteria or a virus, which is inserted into the seed. GMOs are commonly found in corn, soy, canola and sugar.

Gov. Dannel Malloy held a ceremonial bill signing in Fairfield on Wednesday to commemorate a bill that requires certain foods intended for humans to be clearly marked that it is entirely or partially genetically engineered.

“People need to demand GMO labeling,” Malloy said. “Some companies are doing this and we need to move in that direction.”
Picture

Gov. Dannel P. Malloy signs GMo bill in Fairfield on Wednesday. (Picture courtesy from governor’s Twitter account)
According to the statement, Connecticut’s law goes into effect after four other states enacted similar legislation.

“I am proud that leaders from each of the legislative caucuses can come together to make our state the first in the nation to require the labeling of (Genetically Modified Organisms),” Malloy said in a statement. “The end result is a law that shows our commitment to consumers’ right to know while catalyzing other states to take similar action.”

In addition, a combination of northeastern states with a combined population of at least 20 million, including Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, New York, Pennsylvania and New Jersey, must adopt similar laws.

Officials said the bill also includes language that will protect local farmers to ensure regional adoption of the new labeling system before it will require local farms to analyze and label genetically engineered products.

Buying foods that are organic has become popular and in health food stores, it’s not common to find products that are already labeled GMO-free.

Lisa Storch, who owns the Catch A Healthy Habit in Fairfield, said more and more people want to know what’s in the foods they eat.

“It’s little steps at a time,” Storch said. “(We are) trying different avenues as far as healthy eating and what works for you.”

SOURCE:  Eyewitness News

'Made in USA' Now Trendy in China

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“Made in America” has become a trendy label that conscientious U.S. consumers often look for. But it’s not just Americans who are searching for that label. American-made goods have more international clout than one might think, especially with Chinese consumers.
A recent Industry Week study found that 85 percent of Americans and 82 percent of Chinese consumers believe that products made in America are high-quality.

Incidentally, the U.S. has been ranked first for brand reputation four years in a row by the Anholt-GfK Roper Nation Brands Index.

China was the third largest importer of U.S. goods last year, purchasing nearly $109 billion worth of everything from electronics to apparel to industrial equipment.

Driving this growth is a booming Chinese middle class (estimated to reach 600 million by the end of this decade) with a hunger for quality, higher priced Western products. A report from the Boston Consulting Group (BCG) found that 61 percent of China’s consumers would pay more for a product made in the U.S.

While a growing Chinese middle class is demanding better products, China is simultaneously losing its footing as a cheap place to manufacture. According to the same BCG report, China’s once-overwhelming low-cost advantage over the U.S. is eroding fast. Within five years, rising Chinese wages, higher U.S. productivity, a weaker dollar, and other factors will virtually close the cost gap between the U.S. and China.

The longstanding yet often turbulent business relationship between the U.S. and China is clearly shifting. China has lost its cost advantage, and American manufacturers can now compete aggressively on quality, service and technology in a way that China cannot. And this is exponentially good for American manufacturers.

It’s estimated that higher U.S. exports, combined with re-shored production from China, could create 2.5 million to 5 million new U.S. jobs in manufacturing and related services by the end of the decade.

If you are interested in finding out more about American-made products, you can check out this list of Made in the USA brand members.

SOURCE:  Forbes

US Fundraising Mittens Made in China

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The outside of the mittens say “Go USA.” The insides say “Made in China.”
Less than two years after being criticized for having the U.S. Olympic team’s uniforms made in China, the U.S. Olympic Committee has another wardrobe malfunction on its hands.

The red-white-and-blue mittens it’s selling to raise funds for winter athletes were produced in China.

It says so right on the tag on the inside.

The USOC is charging $14 a pair for the blue hand-warmers that have the word “Go” embroidered in red on the left mitten and “USA” on the right. Also part of that left mitten is the tag, which says the gloves are “100% acrylic,” ”One Size Fits Most” and “Made in China.”

USOC spokesman Patrick Sandusky said the “official” mittens being worn by the athletes at the opening ceremony are made in the USA. They’re also available to the public for $98 a pair on the Ralph Lauren website, which proudly proclaims its products are “Made in America” almost everywhere you look on the page for its official Team USA collection.

But the federation, which receives no government funding and is always trying to find new ways to raise money for its athletes, was going for a lower price point for its fundraiser. With the games more than a month away, it has raised $500,000 from the mitten sales.

“We wanted to create a fundraising opportunity where almost anyone could support Team USA,” Sandusky said.

The foreign-made mittens are available at the USOC’s official online shop of the U.S. Olympic Team.

The mittens are an American spin on an idea that started in Canada at the last Winter Games. The host country produced “Go Canada” mittens that turned out to be the hot item of the Olympics, raising more than $14 million for the Canadian team. Those mittens, which sold for $10 a pair, were made in China, too.

The USOC, meanwhile, has tried to be extra careful about where its goods are manufactured since running into trouble when news broke that its 2012 team uniforms were produced in China.

Congressmen from both parties piled onto the PR gaffe, with Senate Majority Leader Harry Reid, D-Nev., saying, “I think they should take all the uniforms, put them in a big pile and burn them and start all over again.”

Shortly after that, the USOC said all future team uniforms would be made in the United States and, true to its word, the 2014 versions are.

Fans can buy almost all components of the uniforms — among them, pullover sweaters, the same boots the athletes will wear at the opening ceremony and, of course, the $98 “Go for gold TEAM USA” mittens that also say “Go USA.” Some of the proceeds from those sales go to the U.S. team, per terms of licensing agreements with Ralph Lauren.

“We want to provide a variety of things for people to purchase,” Sandusky said. “A good number of those items are made in the USA and some items are made from around the globe, like most sporting goods. But we wanted to make an effort to make sure people have a chance to buy the official team mittens, which are made in the USA.”

SOURCE:  Associated Press

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