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Is 'Made In America' Primed For A Comeback?
More companies could manufacture in the U.S. by investing in automation, says InterVac Design founder
PALM CITY, Fla. —The loss of American manufacturers and the rise of products made in China have frustrated American workers, and provided political commentators fodder for years. But more recently, signs have emerged that a reversal of fortunes is in the making.
Rising labor costs in China have prompted many manufacturers to look elsewhere to produce their goods. Some upped their production in other Asian countries, such as Vietnam, but the stage also was set for many businesses producing overseas to return to the U.S.A. Of course, some never left these shores to begin with.
“In many cases, companies can manufacture in the United States if they are willing to invest in automation,” said Susan Schlapkohl of InterVac Design (www.intervacdesign.com), which makes built-in vacuum cleaner systems for boats, RVs, and small homes. “A lot of businesses were drawn overseas because they felt the cost-savings associated with foreign production made sense. Now that studies show the cost gap between the United States and China is shrinking, they are starting to see the advantages of coming back home.”
Schlapkohl understood those advantages all along. She and her husband, Peter, an engineer who emigrated from Germany in 1964, were determined to keep InterVac’s production in the United States when they founded their company in 1998. Schlapkohl previously had 30 years of banking experience, and also was president of JJFN Services Inc.
“We were certain that with our automation and design background, we would be able to make our vacuum cleaners in America using American workers,” Schlapkohl said. “We were right.”
Schlapkohl isn’t the only one who is high on America’s odds of rebounding on the manufacturing front.
The Boston Consulting Group, a global management-consulting firm, said in 2011 that China’s manufacturing-cost advantage over the U.S. was shrinking rapidly. The BCG's latest survey said manufacturing companies are reshoring their plants to the U.S., and more will follow.
The firm predicted then that within five years, rising Chinese wages, higher U.S. productivity, and other factors would “virtually close the cost gap between the U.S. and China for many goods consumed in North America.” “We are starting to see that happening,” Schlapkohl said. In her view, “Made in America” is more than just a slogan. It makes good business sense. She offers a few reasons why, including quality control and financial considerations.
It’s much easier to maintain quality when you are overseeing the process yourself, rather than farming out the job to someone in a foreign country, Schlapkohl said. “In our case, we wanted to make sure we were shipping vacuum cleaners that meet our standards, as well as the standards of Underwriters Laboratories,” she said. “So we invested in automation, because that is the only way to deliver a consistent product at a competitive price.”
The rise in Chinese labor costs that made the wage gap less significant is just one factor that is making domestic production more enticing. Shipping costs also have jumped. Meanwhile, a reduction in domestic natural gas prices has helped keep electricity costs from soaring. “Also, when you are importing, you fight the battle of what product mix to bring in,” Schlapkohl said. “If you guess wrong, you end up with higher inventory levels and that reduces profit because of slow inventory turnover.”
“For anyone who said manufacturing companies can’t compete if they don’t go overseas, my response is simple,” Schlapkohl said. “At InterVac, we’ve been making our products in the United States for 17 years. So don’t tell me it’s not possible.”
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