The trend hasn’t been as crushing in the Washington region as in Rust Belt cities such as Detroit and Youngstown, Ohio, because manufacturing is one of the smaller slices of this area’s economy. Still, the trajectory for manufacturing jobs here hasn’t been much different from national trends: The industry shed 20,000 jobs in this region between 2003 and 2013, a 27 percent decrease.
But despite the losses, there are still nearly 50,000 people employed locally in manufacturing jobs, a sign that some companies in this sector are still finding reasons to make their products stateside.
For these businesses, making things in America — in the Washington area, specifically — is still a viable model, even if it brings with it some tough challenges. Here’s a look at three firms that are keeping their manufacturing jobs here and why they’re finding that to be good business.
Sundog Productions
Fairfax-based manufacturer of T-shirts and other garments. Cas Shiver started his T-shirt business in 1986 in his parents’ garage.
Thanks in part to a big boost from a 1991 contract with Ralph Lauren to produce 80,000 T-shirts and other apparel, Sundog Productions grew from a small tie-dye shop to a bustling garment-making operation that includes cutting, sewing, dyeing, embroidering and printing.
As Sundog expanded, Shiver worked to keep in Virginia the kinds of jobs that many other manufacturers had outsourced. Unsurprisingly, he repeatedly missed out on business opportunities by sticking to that principle.
“I fell on my sword all throughout the ’90s with ‘made in America,’ and nobody cared,” Shiver said.
Prospective customers would tell him, “We want what you do, but it’s too expensive.” And so Shiver kept his operation in Fairfax, but in 2004 he opened a second facility in Amatitlan, Guatemala. Wages were lower there — his workers made the equivalent of $12 a day — and so he was able to slash prices on products made in that location. By contrast, his hourly workers in Virginia are paid anywhere from $7.50 to $18 per hour, and most employees in the dyeing area make between $15 to $25 an hour.
“In going down to Guatemala, we were able to accept orders from the big boys,” Shiver said, including major global retailers such as Kohl’s, Kmart and Wal-Mart.
He maintained the dual operations for several years, but eventually nature forced a reassessment of that strategy. A punishing tropical storm flooded the Guatemala factory in 2010, and Shiver opted not to rebuild it. He found it difficult to keep an eye on two facilities, and he said the business model for the Guatemala plant was thorny.
“The reality was it was feast or famine. You get an order from Kohl’s, it’ll keep you busy for a month,” Shiver said. But then there might be lulls in between massive orders, a problem he didn’t have stateside where he has smaller orders.
And business challenges aside, the Guatemala venture never quite jibed with Shiver’s belief in the importance of “made in America” products.
Now, Shiver focuses on Sundog’s Fairfax operations. The company relocated in June to a renovated 40,000 square-foot facility on Jermantown Road that is larger than its previous outpost and capable of greater output.
The factory ships 1.2 million units a year to customers such as Disney, Universal Studios, Crayola and Joe’s Crab Shack. Sundog can no longer give mega-retailers the low prices they demand, though, so it doesn’t contract with those companies.
Shiver said it can be difficult to find the workers he needs in this region.
“The middle classes are grooming their children to be somebody bigger and better … Nobody was groomed to say, ‘I want to be a sewer on my production floor. And that’s what I want to do.’ But I need people to be able to do that,” Shiver said.
Still, he sees advantages in his current set-up. Shiver said Fairfax city officials helped move his renovation along at a speedy pace. The project took about 14 months; he estimates in another jurisdiction, it might have taken several years. Virginia also gave Sundog a $53,000 grant for a solar heating system for its water, which has been helping the company conserve resources.
Shiver said he believes his business’s unique capabilities give him a leg up on competition: Because Sundog does so many steps of the garment-making process under one roof, the company can offer its customers a way to reduce their shipping costs and carbon footprint.
In its vast new space, Sundog has room to grow.
“The factory you see here actually can come close to tripling in production,” Shiver said. “The big issue is demand.”
Patton Electronics
Gaithersburg-based manufacturer of wireless routers, ethernet extenders and other electronic products.
More than 70 percent of Patton Electronics’ products are shipped to customers outside the United States. And yet the maker of wireless routers, ethernet extenders and voice-over-IP technology has not moved any of its manufacturing positions away from its headquarters in Gaithersburg.
Robert Patton, the firm’s president and chief executive, said part of his strategy is the simple belief that it’s the patriotic thing to do.
“We want to keep the jobs here because we believe it’s the best thing for our country,” Patton said.
But he has other reasons, too, for staying in Gaithersburg. For one, he doesn’t think that the set-up of many overseas factories is a good fit for his business. That’s because Patton products are often highly customized: Some go out under different brand names, and thus Patton needs to be able to easily change the product labeling and packaging. Patton said that level of customization is not something he believes can be easily managed at an overseas facility.
Patton also said he’s found that many international manufacturing outposts want to be paid up front and prefer to receive orders for a large quantity of items.
“That inventory carrying cost can really be a killer on your balance sheet,” Patton said.
These challenges have led Patton to conclude it makes more sense to keep production in Maryland. Plus, Gaithersburg has the advantage of being near the federal government, one of the company’s key customers.
Patrick M. Dewar is taking on his newest challenge: growing the company’s international business as U.S. government spending shrinks.
Still, Patton said there are some drawbacks to staying here. One is the lack of business partners that have exper
tis
e in the needs of the manufacturing industry.
“There are just not many accountants that understand manufacturing, there aren’t many banks that understand manufacturing and exporting,” Patton said. “All of the professional services that go along with a business like ours, they’re just not as well entrenched in the space.”
Micron
Manassas-based manufacturer of semiconductors.
Micron’s sprawling semiconductor factory in Manassas is just one of the company’s dozens of high-tech facilities across the globe. The plant produces the memory that is crucial to the functionality of many of our gadgets, from USB drives and smartphones to televisions and automobiles.
Micron has worked in the past decade to automate much of the activity in its clean room. Instead of having workers carry a product from one step to another of the assembly process, a robotic system now makes those transfers.
This transformation helped improve productivity by about 60 percent, and yet it has not led to a reduction in Micron’s Manassas-based workforce. In fact, the plant has added employees.
“We actually ended up requiring different skill sets,” said Raj Narasimhan, the site director.
Narasimhan said the changes have meant the company’s entry-level workers need to have a higher level of analytical reasoning and deduction. In order to get employees up to speed, the company partnered with Northern Virginia Community College to offer classes that were scheduled around Micron’s shifts. Some 350 workers went through the training.
Because many of Micron’s jobs now demand strong technical skills, Narasimhan said their nearness to NVCC and other universities has provided a valuable pipeline of talented workers.
“In Virginia, it’s pretty impressive the amount of talent that we have, engineering and technicians talent,” Narasimhan said.
That Micron is the only semiconductor factory in the region has both upsides and downsides: It doesn’t face direct competition for attracting and recruiting employees.
But, “when it comes to vendors that we buy equipment from, given that we’re the only one, essentially, in an eight-hour drive up north that does this kind of work, the support from them is hard to get,” Narasimhan said.
Micron also said it has remained in this region because of its relationship with the city of Manassas. Micron uses more than 50 percent of all the electricity in the city, an expenditure that costs the company close to $25 million per year. By simply keeping those rates competitive, Narasimhan said Manassas has been an important supporter of the business.
“Even if the rate is down by a cent, it makes a big difference,” Narasimhan said.
Made in the USA: Bringing manufacturing back to America
in Uncategorized/by MAM TeamBy CONGRESSMAN MIKE FITZPATRICK
As our nation’s economy begins to recover, it is imperative that the United States bring manufacturing jobs back to America. This goal has been at the top of my agenda, And so I was pleased to read the series published in the Courier Times and Intelligencer: “Made in the USA.”
The series highlighted local, small businesses and the importance of domestic manufacturing and its impact on manufacturers’ bottom line, their employees, customers, and communities.
The personal stories and information conveyed in the series lines up with much of what I heard during visits to 100 local businesses and manufacturers in 100 days, some reported in your newspapers. I had a unique opportunity to meet with business owners and their employees and learned how they are dealing, in this economy, with the challenge of growth and jobs and how important it is that we work together to address their issues. As a result of that experience and information gathered over the past few years, I developed a plan, similar in name to your series, to help revitalize the American manufacturing sector, which we all agree is key to our economic recovery. (Manufacturing has the highest multiplier effect of any sector in our economy.)
According to my revitalization plan, “Made in America,” stands for quality, value, and ingenuity — all important to industry, and ones clearly conveyed through the newspaper’s “Made in the USA” series. Without a doubt, the role of government is important. To bring manufacturing back to America, we must promote a variety of federal and national initiatives: lowering taxes and promoting certainty to encourage businesses to remain in the United States, reining in overreaching ineffective and onerous federal regulation to help businesses grow, engaging in “Buy American” and other pro-growth initiatives, and encouraging workforce development.
In Congress I’ve supported countless bills that empower small businesses and manufacturers, some of which resulted from my meetings with business owners, manufacturers and workers in Bucks and Montgomery counties.
Equally important to building an economy in which manufacturing thrives, is providing them with a skilled workforce. You may have heard there are “jobs,” but not enough workers trained to fill them. This is more important since manufacturing supports an estimated 17.2 million jobs in the United States — about one in six private sector jobs. And nearly 12 million Americans — or 9 percent of the workforce — are employed directly in manufacturing.
Your series also highlighted the importance of connecting high school students, young adults, returning military veterans and those pursuing a second career, to new educational and training resources. Ultimately, it is the skilled and trained individuals who will claim the family sustaining jobs in a broadened manufacturing base.
Today, there are not enough institutions training young people to participate in the high-skill manufacturing sector, even though the National Association of Colleges and Employers reports that the higher paying entry level jobs go to those with industrial and manufacturing degrees. Therefore, we must direct our attention to making sure manufacturers have access to a skilled workforce by encouraging and supporting technical and scientific education.
Long ago, American ingenuity, innovation and an acknowledged productive workforce established the United States as the No. 1 manufacturing country. Now, I would like to see us, once again, be a world leader and the best place in the world to manufacture.
While the history of the 8th District describes the Bucks-Montgomery region as business friendly, we can continue to build on that reputation as we focus on the elements that will bring about a manufacturing resurgence in the region and the nation. Again, much of what we need to accomplish requires cooperation between the public and private sectors, workforce development and public education — and thank you for your attention to the latter. I commend the newspaper on the series and trust you will continue to provide your readers with important public service stories, such as “Made in America.”
Congressman Mike Fitzpatrick is serving his third term in the U.S. House of Representatives. He represents Pennsylvania’s 8th District, which includes Bucks County and a portion of Montgomery County.
Things are ‘Made in the USA’ Again
in Uncategorized/by MAM TeamActually, the same things that have always been made in the USA. Things like Tervis tumblers, Unionwear apparel and Fiestaware. Better yet, a whole new crop of newer businesses are growing based on the fact that every product they sell is manufactured right here in the United States, CNBC reports. Most of the newer businesses are for boutique products made and marketed locally, such as a beard care line based in Nashville and a dog biscuit brand out of San Luis Obispo, but old standards like Unionwear are still going strong. In fact, Unionwear owner Mitch Cahn told NBC news that he has had a whole host of new customers calling him.
The fact that more consumers are seeking out American-made products in greater numbers is a good thing for business owners like you. It shows that consumers are willing to pay a little bit more for the knowledge that their products were made here in the USA. That means that they will be willing to pay a little bit more for your products and services – as long as you capitalize on the fact that your products were made here.
Read more at http://www.business2community.com/branding/things-are-made-in-the-usa-again-0556996#R3RjXQgzseHLgqEb.99
Entrepreneur Clears Hurdles to a "Made in USA” Label
in Uncategorized/by MAM TeamThe labels on every kind of fabric-based product in your home offer evidence that running a textile business in the U.S. in 2013 is not common. Lotuff says market forces ultimately pushed manufacturing for his first company offshore (he sold Berkshire in 2006), and it wasn’t easy to establish a new business offering an American-made product.
But he was determined to offer consumers a way “to buy American again” when it comes to baby blankets, bedding, and throws. So he invested his own capital and found a few workarounds.
Read more by Adrienne Burke at:
http://smallbusiness.yahoo.com/advisor/blogs/profit-minded/entrepreneur-clears-hurdles-made-usa-label-215106786.html
Made Where? Cattle Producers Want To Get Rid of New Meat Labels
in Uncategorized/by MAM TeamWASHINGTON — After surviving years of drought and watching the size of the U.S. cattle herd fall to its lowest level in more than 60 years, Texas cattleman Bob McCan would just as soon steer clear of the U.S. government’s latest meat-labeling rules.
But with his herd of roughly 4,000 including cattle from Mexico, McCan said there’s no good reason to segregate the animals when he sells them. All it would do, he said, is create hundreds of millions of dollars of extra handling costs that would get passed on, driving up the price at grocery stores.
“We don’t want beef to become a luxury item,” said McCan, a fifth-generation rancher from Victoria, Texas.
McCan, now the president-elect of the National Cattlemen’s Beef Association, is among a group of cattle producers and meat companies that has sued the U.S. Department of Agriculture for moving ahead in late May with new country-of-origin labeling rules.
In a lawsuit filed July 8 in U.S. District Court in Washington, the groups claim the labels will hurt beef exports and are unconstitutional as “compelled speech” that doesn’t advance a government interest.
Backers of the new rules, who say labeling can be done at a minimal cost, are braced for another battle with cattle producers.
“They’re totally wrong – consumers have the right to know where products are from,” said Joel Joseph, chairman of the Los Angeles-based Made in the USA Foundation, a group that promotes labeling and products manufactured in the United States. “It’s not forced speech. It’s just consumer information, the same kind of information that’s on a label of a new car that says where an engine’s from.”
He offered some advice for McCan: “If he doesn’t want to segregate his cattle, then he shouldn’t get cattle from Mexico.”
McCan said labeling is a marketing issue that should be left to the private sector.
“We’re not anti-labeling at all,” he said. “We just kind of feel like the government doesn’t really need to be in our marketing system. It doesn’t have to be dictated to us.”
Cattle producers aren’t the only unhappy ones.
The new labeling rules also could ignite a trade war with Canada, which is threatening to retaliate. Last month, the Canadian government called the new rules a “protectionist policy” that discriminated against foreign competition. Ottawa said it might respond by imposing tariffs on a long list of products, including pork, fruits and vegetables, pasta, chocolate, cheese, office furniture and many more. The Canadian government fears that its beef exports to the United States would decline under the new rules, with U.S. retailers more likely to reject foreign meat.
Canadian officials immediately complained to the World Trade Organization, but they say it could take more than a year to resolve the case.
As a result, John Masswohl, director of government and international relations for the Canadian Cattlemen’s Association, called the new rules a tactic by the U.S. Agriculture Department “to buy themselves another year of discrimination.”
And he predicted that the threat of tariffs will quickly affect U.S. businesses.
“If the market thinks tariffs are coming, businesses make plans to adjust,” Masswohl said. “So my feeling is that if you are a producer of one of the products on that list, your banker might have some issues with your line of credit.”
The issue has become tortuous for the Agriculture Department, which last year got sued by labeling proponents who accused the government of dragging its feet on adopting new rules.
And for consumer groups, labeling has become the issue that never goes away, even though it wins strong backing in polls.
“I thought we were done with it, and all of a sudden it’s still going on,” said Chris Waldrop, director of the Food Policy Institute at the Consumer Federation of America.
But he said industry groups have opposed country-of-origin labeling since it first appeared in Congress’ farm bill more than a decade ago.
“They’ve been trying to delay it ever since,” Waldrop said. “This is just another effort to do that, but the public is not on their side on this. . . . Consumers want more and more information about where their food comes from and how it’s grown, and not less.”
He cited a poll released by the Consumer Federation in May, which found that 90 percent of Americans back mandatory labeling of meat products.
McCan is not convinced.
“They might say they care, but most of them really don’t care what country it comes from. Beef is beef,” he said.
Masswohl said polls are misleading, adding that if consumers are asked only whether they’d like to know the origin of their food, “you’d be hard-pressed to find one who would say ‘no.’” But he said consumers put a higher value on price when they understand that labeling could result in a higher grocery bill. He estimated that the new U.S. rules would cost Canadian cattle producers from $90 to $100 per animal.
Canada and Mexico filed complaints against the U.S. with the World Trade Organization after an expanded labeling law took effect in 2009, alleging that it constituted a barrier to trade. After reviewing the case, the WTO upheld the right of the United States to require labels but said their cost exceeded the benefit and that they were confusing to consumers.
That prompted the USDA to issue its new rules this spring, satisfying a deadline set by the WTO.
Under the new rules, the labels will provide more information, detailing what countries the animals were born in and where they were raised and slaughtered. Officials at the Agriculture Department and the Office of the U.S. Trade Representative said the federal government is satisfied that the new rules are legal and comply with the WTO’s concerns.
But critics say the new rules did nothing to end the discrimination, which they say will continue the forced segregation of animals.
“It’s absurd what they did, for them to suggest that they complied,” said Masswohl, whose group is one of eight that filed the lawsuit against the USDA.
Cattle producers say the new rules will be particularly onerous for ranchers and meat companies in border states such as Texas, the nation’s top beef-exporting state.
With his ranch just three hours from the Mexican border, McCan said he has long included cattle from Mexico in his business.
“They’ve been tested and treated for everything under the sun before they come across the river, so they’re clean animals and their health is good,” he said. “And usually they’re just ready to go when we get them. . . . There’s no safety concerns with those cattle coming in from Mexico. If anything, they’re even safer.”
But Joseph, whose Made in the USA Foundation urged the USDA to pass the new rules, said labeling is both a health and safety issue for American consumers, who put more faith in U.S. products.
“You’re getting a better product when you ge
t A
merican goods of any type,” he said. “And concerning food products, you’re getting a safer, cleaner product. Sanitation is better in the United States than it is in Mexico.”
McCan worries that a prolonged labeling spat could sour trade relations with Canada and Mexico. And they’re the top two destinations for U.S. beef exports, which declined by 12 percent worldwide in 2012, compared with the year before, according to the U.S. Meat Export Federation.
“The last thing we really need to be doing is creating some problems with them,” McCan said. “It’s gotten very political, unfortunately.”
By Rob Hotakainen — McClatchy Washington Bureau
Email: rhotakainen@mcclatchydc.com
Twitter: @HotakainenRob
Man of (Overpriced) Steel
in Uncategorized/by MAM TeamCash tolls at the Verrazano Bridge hit a whopping $15 last March. Apparently, that’s not high enough for Chuck Schumer.
Schumer may have nothing against motorists or taxpayers and would likely deny he wants to raise their expenses. But that would be the undeniable consequence if he succeeds in his shilling for steel unions.
In a letter sent last week to MTA chief Tom Prendergast, Schumer says China’s state subsidies, looser regulations and cheap currency give its steel companies “a significant competitive advantage.” For that reason, the MTA should “do everything in its power to avoid purchasing from these companies.”
China does indeed subsidize some of its industries, including steel, with its policies. But it’s not the MTA’s mission to create employment for American workers. The MTA’s job is to keep New York’s transportation system in good repair at good value for the people who pay for it: the taxpayers. And if China’s lighter regulatory hand gives its companies a competitive edge in this global economy, maybe Schumer should be looking to lower our regulatory burden.
The math is telling. According to the authority, going with US steel firms instead of the lower-priced Chinese would see the $34 million price tag expand fourfold — to $134 million. That’s a lot to ask of already beleaguered motorists and taxpayers.
Even worse, because US companies aren’t prepared to start work immediately, the MTA says, the bridge project would have to be delayed.
Clearly, the agency wants to promote US jobs if it can; it’s been working with industry officials to that end. That’s great: the more suppliers, the better. And if Americans can do the job as well as the Chinese, and for the same price or less, better still.
Meanwhile, it would be nice to see Schumer looking out for all his constituents in New York instead of limiting his advocacy to the special-interest labor big shots — who have no qualms about, uh, steeling taxpayer dollars.
Detroit Bankruptcy Could Hit Millions of Retirees
in Uncategorized/by MAM TeamDespite the uncertainties surrounding what’s expected to be a hard-fought legal battle, the outcome promises to inflict more pain on Detroit’s already-beleaguered residents, businesses, creditors, investors and city workers, whose pension plans may now be invalidated.
The case will also set a legal precedent that will be watched closely by other major cities across the country, which are struggling under the weight of years of accumulated debt and underfunded pensions covering millions of public-sector retirees.
Detroit is the largest U.S. city to file for bankruptcy and that puts the city on an uncertain course that could lead to laying off employees and selling assets, reports CNBC’s Brian Sullivan.
The bankruptcy filing follows a decades-long decline of a city that prospered through much of the last century as the capital of U.S. manufacturing. But as that industrial base has declined, so to have the city’s fortunes.
Detroit has endured booms and busts in the past. Even as the auto industry has roared back to life since the Great Recession, the economic recovery has left the Motor City in its rear-view mirror.
Though unemployment has fallen from a peak of nearly 28 percent in 2009, some 16.3 percent of Detroit workers are still without a paycheck. As a result, income tax revenues have fallen 30 percent in the last decade. Meanwhile, the national recovery in home prices has yet to spread to Detroit. Property taxes are 20 percent lower than 2008 levels.
“There’s no way Detroit can afford to service 140 square miles anymore,” said Scorsone. “So for parts of the city, if your streetlight’s out they’re not going to fix it. If your road has massive potholes, it’s going to turn it to gravel. It’s that stark.”
Many residents have responded by simply moving away. Once American’s fourth-largest city, Detroit’s population has fallen by a quarter since 2000. A shrinking population further erodes the tax base, intensifying the budget squeeze.
Union officials, who have vowed to fight any effort to reduce benefits to retirees and vested workers, claim the city has undermined the pension fund by outsourcing city services to workers who don’t pay into the system.
“As older people leave the workforce, the city has been privatizing those jobs instead of bringing people back in to pay into the fund,” said Ed McNeil, special assistant to the president of Michigan AFSCME Council 25, which represents city workers.
Chairman of the Detroit Blight Authority, Bill Pulte is looking to get rid of the dangerous homes in the depressed city of Detroit. He is working to stabilize the city and help fix the suffering public safety issues by decreasing the number of abandon buildings.
“If they went after that money, they could pay their debts,” said McNeil.
Investors holding Detroit’s bonds have already taken a hit as the steady erosion of the city’s finances has slashed the city’s credit rating to junk status. Last month, Kevyn Orr, a bankruptcy lawyer named to restructure Detroit’s debts, declared a “moratorium” on some interest payments.
In the days leading
up to
Thursday’s bankruptcy filing, Orr had been working with individual creditors to renegotiate those debts at dimes on the dollar.
That could help close the gaping financial hole in the short run. But inflicting too much pain on bondholders could have dire long-term consequences, according to Kim Rueben, a senior fellow at the Urban Institute who specializes in municipal finance
Detroit is asking a federal judge for permission to go into Chapter 9 bankruptcy protection, reports CNBC’s Scott Cohn.
Orr must now persuade a bankruptcy judge to invalidate the city’s pension contracts, freeing him to reduce payments to retirees. The unions’ lawyers will argue that pension and health benefits are protected by Michigan’s constitution, one of seven states that specifically ban cuts in retiree pension and benefit payments.
That’s why the case will be closely watched by states such as Illinois and California, which also have badly underfunded their pensions. If Detroit is allowed to cut payments to its retirees, city and state workers in those states and others could see their future benefits pared back.
Future public sector workers can all but count on lower retirement benefits, as many state and local governments scale back the kind of financial promises that sank Detroit. With retirees living longer, those promises have become too costly to make.
Medium-sized industrial cities across China could suffer the same fate as Detroit, which suffered a sharp economic decline as industry left the city, Sanjeev Sanyal, Global Strategist, Deutsche Bank told CNBC.
Automakers said they plan to standby the city.
“We believe a strong Detroit is critical for a strong Michigan and our industry. The city has a difficult job ahead, and we are optimistic that governmental leaders will be successful in strengthening the community,” said Jay Cooney, a Ford spokesman.
Chrysler said it “believes in the City of Detroit and its people. We not only continue to invest in the city and its residents by adding to our presence in Detroit, we also are committed to playing a positive role in its revitalization.”
The crisis is also being watched closely in the White House.
—By CNBC’s John W. Schoen. Follow him on Twitter @johnwschoen.
Is the U.S. the Next Low-Cost Manufacturing Country?
in Uncategorized/by MAM TeamNot only are American companies pulling back on their overseas production, but foreign businesses view the United States as an attractive alternative to producing at home. It could be that America is becoming a low-cost manufacturing destination.
Last year, Manufacturing Trends and News concluded that “changes in the economic environment are making homeshoring more and more attractive, with a number of manufacturers actively moving their offshore operations back to the home turf.”
But it’s not U.S. firms anymore. The U.S. is becoming an increasingly attractive location for foreign businesses to operate, largely due to the boom in shale gas production that is making energy costs lower.
“Shale gas has become a game-changer for the U.S. manufacturing renaissance,” Sath Rao, vice president of industrial automation and process control at market research firm and business consultant Frost & Sullivan, told IMT. “Abundant quantities and subdued prices are helping U.S. manufacturing fortunes.”
One thing that’s causing domestic companies, at least, to rethink their production locations is the “total cost of ownership,” or TCO. When taking into account the cost of quality, delivery, transportation, energy consumption, labor monitoring, carrying stock, freight, packaging, and all other aspects of production, instead of focusing only on labor costs, it might make more financial sense to keep production at home.
Energy costs are particularly important in the TCO equation. As Rao noted, “Energy-intensive industries, all the way from mini-steel plants to downstream chemicals, are witnessing interest [in reshoring] like never before…high-tech industries are also selectively looking at reshoring to the U.S.”
Caterpillar recently decided to build a new 600,000-square-foot hydraulic excavator manufacturing facility in Victoria, Texas, citing the location’s proximity to the company’s supply base, access to ports and other transportation, and the positive business climate in the state.
Iconic American companies like Apple and GE are homeshoring production as well. Forbes explains that the U.S. is currently “more attractive than China, Korea, India, and other low-cost regions where global manufacturers once rushed to move production.”
In fact, GE’s decision to shift some production from China to Kentucky resulted in a 20 percent lower sticker price for final products, higher quality, and reduced lead times from factory to warehouse.
Forbes identifies three major factors in this shift: Rising wages in China, which have increased 500 percent since 2000 and are expected to grow 18 percent annually for the foreseeable future; higher energy, transportation, and manufacturing costs; and increased labor productivity in the U.S., due to plant enhancements and a shift to higher-level manufacturing.
But it’s not just American companies who find advantages in bringing production back home. European companies tired of paying exorbitant energy costs are finding that it makes sense for them to shift production to the U.S.
Earlier this month, German chemicals manufacturer BASF announced plans for a wide-ranging expansion in the U.S., primarily because U.S. natural gas prices have fallen to a quarter of those in Europe.
The Washington Post noted that since 2009, “BASF has channeled more than $5.7 billion into new investments in North America, including a formic acid plant under construction in Louisiana.”
In 2007, natural gas in the U.S. cost 80 percent of what it did in Europe, but today that ratio stands at 25 percent. That’s significant enough for energy-intensive industries to make the move to America. Combined with American production staying at home instead of going overseas, it’s fueling a manufacturing boom in the U.S. In the chemicals manufacturing industry alone, companies are building plants worth an estimated $95 billion.
But, as Rao cautioned, “The question then is, will the U.S. manufacturing industry be lulled into using the same-old energy efficiency practices and technologies as they build for the future? We sure hope not.”
Bangladesh Pollution, Told in Colors and Smells
in Uncategorized/by MAM TeamSAVAR, Bangladesh — On the worst days, the toxic stench wafting through the Genda Government Primary School is almost suffocating. Teachers struggle to concentrate, as if they were choking on air. Students often become lightheaded and dizzy. A few boys fainted in late April. Another retched in class.
“Sometimes it is red,” said Tamanna Afrous, the school’s English teacher. “Or gray. Sometimes it is blue. It depends on the colors they are using in the factories.”
Nearly three months ago, the Rana Plaza factory building collapsed, killing more than 1,100 people, in a disaster that exposed the risks in the low-cost formula that has made Bangladesh the world’s second-leading clothing exporter, after China, and a favorite of companies like Walmart, J. C. Penney and H & M. That formula depends on paying the lowest wages in the world and, at some factories, spending a minimum on work conditions and safety.
But it also often means ignoring costly environmental regulations. Bangladesh’s garment and textile industries have contributed heavily to what experts describe as a water pollution disaster, especially in the large industrial areas of Dhaka, the capital. Many rice paddies are now inundated with toxic wastewater. Fish stocks are dying. And many smaller waterways are being filled with sand and garbage, as developers sell off plots for factories or housing.
Environmental damage usually trails rapid industrialization in developing countries. But Bangladesh is already one of the world’s most environmentally fragile places, densely populated yet braided by river systems, with a labyrinth of low-lying wetlands leading to the Bay of Bengal. Even as pollution threatens agriculture and public health, Bangladesh is acutely vulnerable to climate change, as rising sea levels and changing weather patterns could displace millions of people and sharply reduce crop yields.
Here in Savar, an industrial suburb of Dhaka and the site of the collapsed Rana Plaza building, some factories treat their wastewater, but many do not have treatment plants or chose not to operate them to save on utility costs. Many of Savar’s canals or wetlands are now effectively retention ponds of untreated industrial waste.
“Look, it’s not only in Savar,” said Mohammed Abdul Kader, who has been Savar’s mayor since his predecessor was suspended in the wake of the Rana Plaza disaster. “The whole country is suffering from pollution. In Savar, we have lots of coconut trees, but they don’t produce coconuts anymore. Industrial pollution is damaging our fish stocks, our fruit produce, our vegetables.”
Bangladesh has laws to protect the environment, a national environment ministry and new special courts for environmental cases. Yet pollution is rising, not falling, experts say, largely because of the political and economic power of industry.
Tanneries and pharmaceutical plants are part of the problem, but textile and garment factories, a mainstay of the economy and a crucial source of employment, have the most clout. When the environment ministry appointed a tough-minded official who levied fines against textile and dyeing factories, complaining owners eventually forced his transfer.
“Nobody in the country, at least at the government level, is thinking about sustainable development,” said Rizwana Hasan, a prominent environmental lawyer. “All of the natural resources have been severely degraded and depleted.”
Less than two miles from the site of Rana Plaza, the Genda primary school has a student body made up mostly of the children of garment workers. Golam Rabbi, 11, who is the top-ranked student in the third grade there, lives with his mother and two younger brothers in a single room. The boys use price tags collected from factory floors as makeshift playing cards.
“The school always smells,” Golam said. “Sometimes we can’t even eat there. It is making some kids sick. Sometimes my head spins. It is hard to concentrate.”
His family is still struggling to recover from the Rana Plaza collapse. His father, a security guard, was killed in the disaster, and his mother is trying to support her sons and keep the two oldest in school. The father had left school for work — as had the mother — and both parents believed education could provide their sons a better life.
“His main goal was to get his children educated,” Golam’s mother, Hasina Begum, said of her husband.
But the pollution has made it hard. Golam has fainted from the smell. “He has told me several times that he doesn’t want to study at the school,” his mother said. “When it is very hot, and the breeze brings in the bad smell, he can’t breathe properly. I tried to reassure him, saying that people are holding rallies. I don’t know why the pollution is still continuing, why they can’t stop it.”
Factories surround the school: within 300 yards are two garment factories, two dyeing operations, a textile mill, a brick factory and a pharmaceutical plant. At least 10 dyeing plants can be found in a slightly larger radius. An underground drainage channel dumps wastewater through a pipe into the canal behind the school.
Mohammed Abdul Ali, the school’s headmaster, said he had approached local factory owners, as well as Savar officials, trying to get the drainage pipe moved. Mothers of children at the school, including Golam’s mother, have held awareness workshops and rallies. Local environmentalists have also campaigned.
“We’ve never seen the owners take our appeals seriously,” Mr. Ali said. “Everything is going on as usual. They have a good relationship with the politicians. That is why they don’t care.”
On a recent rainy afternoon, the smell was overpowering as the school’s fifth graders gathered in a classroom. Asked how many had parents working in garment factories, 23 of the 34 students in the room raised their hands.
“Sometimes my head is spinning,” one student said of the smell. “Sometimes we feel like we need to vomit,” another said.
Barely 100 yards away, behind a battered metal gate, the Surma Garments factory was dyeing fabric in a shade of dark purple. Mahadi Hasan, a manager, offered a tour of the Effluent Treatment Plant, where wastewater is treated with chemicals in a series of concrete tubs. He called for a worker to bring beakers with “before” and “after” samples — only to be handed an “after” sample in which the water was light purple.
Asked about pollution at the nearby school, Mr. Hasan said his wastewater flowed in the opposite direction, though that would mean it flowed uphill. “There are some other factories around here,” he said. “The water might be from them.”
In February, environmental regulators fined Surma Garments and four other factories for illegally dumping pollution. Two years earlier, another factory near the school, Anlima Yarn Dyeing, was fined for dumping untreated waste, even though it had a functioning effluent treatment plant. Local news accounts said that Anlima Yarn had been operating withou
t a
n environmental clearance certificate for 23 years.
The inspections were part of a highly publicized antipollution enforcement campaign led by Munir Chowdhury, a senior official in the environment ministry. Mr. Chowdhury raided factories, often at night, finding that many were saving money by dumping waste without treating it. He imposed repeated fines until he was transferred this year to run the state dairy operation.
Mr. Kader, the acting mayor of Savar, said there was only so much a single official could do. “You should understand the reality in Bangladesh,” he said. “These people who are setting up industries and factories here are much more powerful than me. When a government minister calls me and tells me to give permission to someone to set up a factory in Savar, I can’t refuse.”
For global brands that buy clothing from Bangladeshi factories, pollution rarely gets the same attention as workplace conditions or fire safety. H &M has sponsored some environmental programs, but Bangladeshi environmentalists say global buyers have done far too little.
“The buyers totally understand the conditions of Bangladesh and they take advantage of it,” said Ms. Hasan, the environmental lawyer.
Why ‘Made in the U.S.A.’ is still a viable model for some local manufacturers
in Uncategorized/by MAM TeamIt’s been one of the most consequential changes to the U.S. labor market over the last several decades: Manufacturing jobs have disappeared as assembly lines have become increasingly automated and as companies find it is cheaper to make their goods overseas.
In 2003, nearly 15 million Americans were employed in manufacturing jobs, but that number had dipped below 12 million by 2013.
But despite the losses, there are still nearly 50,000 people employed locally in manufacturing jobs, a sign that some companies in this sector are still finding reasons to make their products stateside.
For these businesses, making things in America — in the Washington area, specifically — is still a viable model, even if it brings with it some tough challenges. Here’s a look at three firms that are keeping their manufacturing jobs here and why they’re finding that to be good business.
Sundog Productions
Fairfax-based manufacturer of T-shirts and other garments. Cas Shiver started his T-shirt business in 1986 in his parents’ garage.
Thanks in part to a big boost from a 1991 contract with Ralph Lauren to produce 80,000 T-shirts and other apparel, Sundog Productions grew from a small tie-dye shop to a bustling garment-making operation that includes cutting, sewing, dyeing, embroidering and printing.
As Sundog expanded, Shiver worked to keep in Virginia the kinds of jobs that many other manufacturers had outsourced. Unsurprisingly, he repeatedly missed out on business opportunities by sticking to that principle.
“I fell on my sword all throughout the ’90s with ‘made in America,’ and nobody cared,” Shiver said.
Prospective customers would tell him, “We want what you do, but it’s too expensive.” And so Shiver kept his operation in Fairfax, but in 2004 he opened a second facility in Amatitlan, Guatemala. Wages were lower there — his workers made the equivalent of $12 a day — and so he was able to slash prices on products made in that location. By contrast, his hourly workers in Virginia are paid anywhere from $7.50 to $18 per hour, and most employees in the dyeing area make between $15 to $25 an hour.
“In going down to Guatemala, we were able to accept orders from the big boys,” Shiver said, including major global retailers such as Kohl’s, Kmart and Wal-Mart.
He maintained the dual operations for several years, but eventually nature forced a reassessment of that strategy. A punishing tropical storm flooded the Guatemala factory in 2010, and Shiver opted not to rebuild it. He found it difficult to keep an eye on two facilities, and he said the business model for the Guatemala plant was thorny.
“The reality was it was feast or famine. You get an order from Kohl’s, it’ll keep you busy for a month,” Shiver said. But then there might be lulls in between massive orders, a problem he didn’t have stateside where he has smaller orders.
And business challenges aside, the Guatemala venture never quite jibed with Shiver’s belief in the importance of “made in America” products.
Now, Shiver focuses on Sundog’s Fairfax operations. The company relocated in June to a renovated 40,000 square-foot facility on Jermantown Road that is larger than its previous outpost and capable of greater output.
The factory ships 1.2 million units a year to customers such as Disney, Universal Studios, Crayola and Joe’s Crab Shack. Sundog can no longer give mega-retailers the low prices they demand, though, so it doesn’t contract with those companies.
Shiver said it can be difficult to find the workers he needs in this region.
“The middle classes are grooming their children to be somebody bigger and better … Nobody was groomed to say, ‘I want to be a sewer on my production floor. And that’s what I want to do.’ But I need people to be able to do that,” Shiver said.
Still, he sees advantages in his current set-up. Shiver said Fairfax city officials helped move his renovation along at a speedy pace. The project took about 14 months; he estimates in another jurisdiction, it might have taken several years. Virginia also gave Sundog a $53,000 grant for a solar heating system for its water, which has been helping the company conserve resources.
Shiver said he believes his business’s unique capabilities give him a leg up on competition: Because Sundog does so many steps of the garment-making process under one roof, the company can offer its customers a way to reduce their shipping costs and carbon footprint.
In its vast new space, Sundog has room to grow.
“The factory you see here actually can come close to tripling in production,” Shiver said. “The big issue is demand.”
Patton Electronics
Gaithersburg-based manufacturer of wireless routers, ethernet extenders and other electronic products.
More than 70 percent of Patton Electronics’ products are shipped to customers outside the United States. And yet the maker of wireless routers, ethernet extenders and voice-over-IP technology has not moved any of its manufacturing positions away from its headquarters in Gaithersburg.
Robert Patton, the firm’s president and chief executive, said part of his strategy is the simple belief that it’s the patriotic thing to do.
“We want to keep the jobs here because we believe it’s the best thing for our country,” Patton said.
But he has other reasons, too, for staying in Gaithersburg. For one, he doesn’t think that the set-up of many overseas factories is a good fit for his business. That’s because Patton products are often highly customized: Some go out under different brand names, and thus Patton needs to be able to easily change the product labeling and packaging. Patton said that level of customization is not something he believes can be easily managed at an overseas facility.
Patton also said he’s found that many international manufacturing outposts want to be paid up front and prefer to receive orders for a large quantity of items.
“That inventory carrying cost can really be a killer on your balance sheet,” Patton said.
These challenges have led Patton to conclude it makes more sense to keep production in Maryland. Plus, Gaithersburg has the advantage of being near the federal government, one of the company’s key customers.
Patrick M. Dewar is taking on his newest challenge: growing the company’s international business as U.S. government spending shrinks.
Still, Patton said there are some drawbacks to staying here. One is the lack of business partners that have exper
tis
e in the needs of the manufacturing industry.
“There are just not many accountants that understand manufacturing, there aren’t many banks that understand manufacturing and exporting,” Patton said. “All of the professional services that go along with a business like ours, they’re just not as well entrenched in the space.”
Micron
Manassas-based manufacturer of semiconductors.
Micron’s sprawling semiconductor factory in Manassas is just one of the company’s dozens of high-tech facilities across the globe. The plant produces the memory that is crucial to the functionality of many of our gadgets, from USB drives and smartphones to televisions and automobiles.
Micron has worked in the past decade to automate much of the activity in its clean room. Instead of having workers carry a product from one step to another of the assembly process, a robotic system now makes those transfers.
This transformation helped improve productivity by about 60 percent, and yet it has not led to a reduction in Micron’s Manassas-based workforce. In fact, the plant has added employees.
“We actually ended up requiring different skill sets,” said Raj Narasimhan, the site director.
Narasimhan said the changes have meant the company’s entry-level workers need to have a higher level of analytical reasoning and deduction. In order to get employees up to speed, the company partnered with Northern Virginia Community College to offer classes that were scheduled around Micron’s shifts. Some 350 workers went through the training.
Because many of Micron’s jobs now demand strong technical skills, Narasimhan said their nearness to NVCC and other universities has provided a valuable pipeline of talented workers.
“In Virginia, it’s pretty impressive the amount of talent that we have, engineering and technicians talent,” Narasimhan said.
That Micron is the only semiconductor factory in the region has both upsides and downsides: It doesn’t face direct competition for attracting and recruiting employees.
But, “when it comes to vendors that we buy equipment from, given that we’re the only one, essentially, in an eight-hour drive up north that does this kind of work, the support from them is hard to get,” Narasimhan said.
Micron also said it has remained in this region because of its relationship with the city of Manassas. Micron uses more than 50 percent of all the electricity in the city, an expenditure that costs the company close to $25 million per year. By simply keeping those rates competitive, Narasimhan said Manassas has been an important supporter of the business.
“Even if the rate is down by a cent, it makes a big difference,” Narasimhan said.
Why Manufacturing In The U.S. Is Personal
in Uncategorized/by MAM TeamWe addressed a variety of topics from the need to focus on high-growth industries in advanced manufacturing to re-shoring initiatives and the evolving manufacturing workforce. We also explored approaches to supporting entrepreneurs and small and medium-sized manufacturers, and promoting regional partnerships to build local ecosystems that create opportunities and enhance competitiveness.
I was delighted to have the opportunity to facilitate the discussion for several reasons. Chief among them is my very personal relationship with manufacturing.
I was born in Alliance, a Northeast Ohio town of about 22,000 with a rich industrial history. Both my grandfather and great-grandfather had worked at B.F. Goodrich in Akron fixing machines on the line. My father followed in their footsteps until he was 28, when he decided to become the first in the family to go to college. After he earned his engineering degree at The Ohio State University, we moved to Harrisburg, Pa., where my father worked for AMP. I vividly remember going to the plant as a kid and being fascinated by the machinery and production lines.
Now that I am back in Northeast Ohio, I see my two uncles, who own a pallet business and employ many of my family members, both thrive and struggle. They deal with issues many small to medium-sized companies face: handling workforce issues, understanding the regulatory environment, deciding on new markets, and occasionally facing big adversity. Last month a fire took out a large chunk of their capacity. They are back up and running but are having to make due as they rebuild. Like most manufacturers in the Midwest, they are a resilient bunch.
I know many of us that work in manufacturing, whether on a line, as a service provider or a policymaker have similar roots and stories to tell. We have a deep connection to the manufacturing economy and improving American competitiveness in this sector is personal for us. We love passing the industrial production sites as we enter into the heart of our cities.
Another example of this personal passion for making things here in America is quasar energy group, one of NorTech’s cluster companies that recycles energy in North America from organic wastes. Through all of its developments, quasar has made an effort to employ the local labor force and use U.S.-sourced technology and components. When quasar built its first digester, all of the components were sourced from Europe. Over the past six years, quasar has worked with Ohio’s existing manufacturing base to redesign and fabricate these components in Ohio, which has brought costs down significantly. Now 98 percent of the components quasar uses to build its facilities are sourced in the U.S. with more than 75 percent from Ohio.
quasar’s president, Mel Kurtz, describes it this way: “A decision to manufacture components necessary to succeed is not only exciting but liberating. The ability to change design based on experience is a big deal and doing it immediately often eliminates the traditional time gobbling associated with engineering related banter. In fact even our engineers will tell you “sometimes you need to just build it”! Making changes that improve performance can happen fast when you manage manufacturing and saving time is often more valuable than making money.”
I am proud that in my role at NorTech and through collaboration with our economic development partner MAGNET (Manufacturing Advocacy & Growth Network), we are able to not only impact the regulatory and market environment for manufacturers in Northeast Ohio, but work directly on specific projects. We do that through various programs and activities. Among them is the Partnership for Regional Innovation Services to Manufacturers (PRISM).
Manufacturing continues to be a critical part of the U.S. economic base, accounting for 11 percent of our national GDP and over 75 percent of export growth in recent years. We decided there needs to be an aggressive effort to increase the contributions of small and medium-sized manufacturers. In order to do this, the country needs to understand you can effectively manufacture in the U.S. and increase exports.
The discussions at the Clinton Global Initiative in Chicago confirmed that it takes this multilevel approach with all hands on deck to have a transformational impact. Many members of the Manufacturing Working Group called for streamlining a system of services to manufacturers and tailor these services for each customer. Effective services are particularly important as manufacturers explore new markets from both an international and industry perspective.