Reshoring in the Real World
Made in the USA” is a win-win-win proposition for American assemblers. Besides increasing their number, the movement honors assemblers’ hard work and recognizes their importance to the U.S. economy.
Workers at many large manufacturers, most notably the Detroit 3, have supported “Made in the USA” for decades. Big retailers, in contrast, often looked the other way. That all changed in January 2013, when Wal-Mart, the world’s largest publicly traded employer, announced its “Investing in American Jobs” program. By promising to purchase an additional $50 billion in U.S.-made products over the next decade, the company estimates that the initiative will create nearly 1 million new U.S. jobs: 250,000 in manufacturing and 750,000 in the supplier and service sectors.
More than likely, the driving forces behind Wal-Mart’s jobs program are the growing reshoring and foreign direct investment (FDI) movements. According to data compiled by the Reshoring Initiative, both movements combined have added at least 10,000 U.S. manufacturing jobs annually since 2010. What’s most impressive—and indicative of the future—is that they brought more than 60,000 such jobs to the United States in 2014.
Reshoring impacts manufacturers of all sizes on a daily basis. In the following pages, several manufacturers discuss how bringing assembly back home better equips their companies to serve current and future customers.
It’s Much Finer in Carolina
Perception doesn’t always match reality. Carol Gregg has learned that lesson twice as founder and president of red egg, a manufacturer of accent chairs, tables and bookcases.
The company began as an importer of Ming-dynasty replica antiques in 1997, before expanding into manufacturing of antique replica furniture two years later by contracting with two shops in China. As business increased, red egg also contracted with shops in Vietnam and the Philippines.
In 2004, however, Gregg learned an important business lesson. Her manufacturing sources in China began putting red egg’s needs behind those of larger companies. The shops also wanted to make various styles of furniture rather than just one type. In addition, Gregg saw significant increases in Chinese workers’ wages and the cost of shipping furniture to her facility in San Francisco.
All of these factors convinced her that it was time to move her business. So in 2005, Gregg relocated to High Point, NC—a town long considered the furniture manufacturing hub of America before globalization caused many companies to go out of business. Unfortunately, Gregg learned another painful lesson after only a couple months.
“I assumed that I’d be able to find many workers who could make the exact prototypes and furniture I wanted,” says Gregg. “But, it turned out I needed craftspeople more than simply assemblers. And they were not easy to find.”
Gregg located an industry consultant who operated his own small workshop and introduced her to several other local workshops. Within a few months, Gregg contracted with several of them to start making her furniture.
For the last decade, she has had to contract with several other workshops. This is because some shops fail to meet design specs over time, while others close or get tired of making just one type of furniture.
“Flexibility in my manufacturing model got me through the Great Recession and also helps me today,” notes Gregg. “I can more easily tweak pieces of furniture for customers. Plus, we’re in a position to begin manufacturing a different type of furniture for another market segment.”
The Heart of Success
In 1991, electrical engineer Clive Smith founded Thinklabs, a design and product development company. While doing research some years later, Smith learned that the basic design and function of the stethoscope had not changed in more than 200 years.
Always interested in medical electronics, he took on the challenge of developing a very different type of stethoscope. After eight years of R&D, Smith introduced the ds32 stethoscope in 2003. It featured an electromagnetic diaphragm that uses a high-intensity electric field to better amplify heart and lung sounds.
Smith decided to outsource manufacturing to China, given its vast manufacturing infrastructure. Finished product would be distributed from company headquarters in Centennial, CO.
“China is the default choice if you have a completed product design ready for production,” says Smith. “My contacts there offered me a turnkey solution that was simple and comprehensive.”
From 2004 to 2013, the ds32 was made in China. Back home, however, Smith was designing his next-generation stethoscope, Thinklabs One. He made components for the new prototype using 3D printing. By fall 2013, Smith was convinced that, with careful design, he could mass-produce stethoscope parts using 3D printing. This would make the entire design process software-driven and significantly increase design and production flexibility.
Smith began manufacturing the One stethoscope in the United States in January 2014. PCB assembly and some subassembly work are done by contract manufacturers around the country. At company headquarters in Colorado, several workers 3D print internal components, and perform final assembly and electronic testing prior to packaging. Assembly work includes bonding components and manually tightening a base plate to the stethoscope’s cylinder body using 3D printed threads.
The One has volume control that produces sound 100 times louder than traditional stethoscopes. It also features five audio pitch filters that help doctors discern what they’re hearing.
“Contract manufacturers seek consistency, but they consider innovation a distraction,” says Smith. “I wanted the flexibility to design new products and develop them rapidly. This ability to innovate on-the-fly enables us to expand our customer base to meet other specialized health care needs.”
From Virtual to Vibrant Manufacturing
Whenever Joseph A. Turek thinks of the year 2000, two things come to mind. One is the dot.com bubble. Another is his company’s decision to stop manufacturing PCBs after nearly 30 years.
Now known as M-Wave International LLC, the company began as West-Tronics Inc. in 1972. Founded by Turek’s dad Clare and his partner Larry West, it specialized in fabricating microwave circuit boards. By the early 1980s, Turek had become president, changed the company name to Poly Circuits and was operating a full-scale assembly plant in Bensenville, IL. More importantly, he shifted the company’s focus to producing high-performance PCBs for the power side of the emerging wireless telecom industry.
“In the 1990s, as M-Wave Inc., we began importing some boards from Southeast Asia that met or exceeded our capabilities in quality and cost,” explains Turek. “Within a few years, the dot.com bubble burst and we could no longer support manufacturing. We sold the plant and became a virtual manufacturer that imported all of our products.”
M-Wave partnered with several contract manufacturers in China, Hong Kong, Korea, Malaysia, Singapore and Taiwan to make PCBs and PCB assemblies (PCBAs). In 2005, the company expanded its product line to include fabricated metal parts, injection-molded and blow-molded plastic parts; cable harnesses; and other custom and semifinished products. By 2010, however, Turek had become frustrated with certain aspects of offshoring.
“The 12-hour time difference meant that there was very little real-time interaction,” says Turek. “Then there was the language barrier, especially when translating technical terms, and having inventory costs tied up on the water for five or six weeks.”
Toward the end of 2012, he began to look for a local facility where he could reshore the manufacturing of PCBAs, wire harnesses and industrial control products, such as circuitry, signals and sound alerts. Turek purchased a former injection molding facility in Glendale Heights, IL, in 2013 and spent one year overhauling it for manufacturing and to serve as corporate headquarters. Last year, M-Wave began production there after selling off its Itasca, IL, headquarters and remaining PCB importing operation.
“We have a great command of logistics and are more responsive to our customers needs,” says Turek. “Over the next three to five years, we see the potential to quintuple in size and do much more manufacturing here.”
Proud to (Again) Produce Presses
Most owners of a Mercedes-Benz automobile take great care to never damage the car’s upholstery. Some even go so far as to install expensive seat covers made of a comfortable and durable material like leather. Freeman Schwabe Machinery (FSM) manufactures the hydraulic and pneumatic die cutting presses that cut the leather used in many of these seat covers.
Based in Cincinnati, FSM is the result of the Freeman Co. buying Herman Schwabe Inc. in 2002. Freeman has made thermoform tooling, cutting dies and folding equipment for the food service and packaging industries since 1892. Herman Schwabe made die cutting presses for the automotive, medical, flooring and consumer products industries from 1935 until being purchased.
Schwabe stopped production after Freeman decided to offshore all design, engineering and assembly work to a partner manufacturer in Taiwan. The presses built there were smaller and more standardized than the ones Schwabe was known for at that time.
“Offshoring did ensure a fixed cost on each press, but its major drawback was loss of control of our quality, delivery schedule and intellectual property,” explains Greg DeFisher, president and CEO of FSM. “Another negative was requiring our customers to send their materials and tooling to Taiwan, and travel there for the factory acceptance test.”
In 2006, the Freeman board of directors sold the Schwabe division to DeFisher (Freeman’s CEO at the time), who then renamed the company Freeman Schwabe Machinery. After the company’s building lease expired in 2008, DeFisher moved the company from Erlanger, KY, to Cincinnati and told employees about his bold plan: reshoring at the start of the Great Recession.
“Some employees told me I was out of my mind,” says DeFisher. “My response was ‘I didn’t buy a 30,000-square-foot factory to just be a distributor or agent. We’re going to be a manufacturer. That’s the Schwabe heritage.’ ”
FSM presses continued to be made in Taiwan from 2008 to 2010. During this transition period, FSM workers rebuilt and remanufactured older Schwabe presses to improve their skills and capabilities. DeFisher also hired estimators, assemblers and engineers; bought software and hardware; and updated the facility’s infrastructure.
“The last five years we’ve sold more presses than ever,” notes DeFisher. “We now control our destiny from order to shipment and build products with a quality level that Schwabe customers have been used to for 80 years.”
Charm School Specialists
Dave Schowalter has always had a strong interest in the Internet. By the mid-2000s, when the Internet had become a part of daily life and business, he tried to use it to create an e-commerce income stream for Miner’s Den Jewelers, his family’s fine-jewelry business. It was founded by his father, a former Alaskan gold miner, in 1974, and Schowalter had worked there ever since.
Eventually, he realized the jewelry business wasn’t a good fit for e-commerce. To make things worse, in 2008 Schowalter was diagnosed with a brain tumor that required surgery.
While recovering, he came across a company e-mail from a woman detailing her fruitless search for a sorority bead to add to her Pandora charm bracelet. Schowalter searched the Internet and found no such product, so he handmade the oval-shaped, sterling silver bead for her. Soon afterward, he founded the Collegiate Bead Co. (CBCo) to specialize in making beads and charms that fit the Pandora- and Chamilia-style bracelets.
“We applied for and got our first two licenses in 2009 from Michigan State University and the University of Michigan,” recalls Schowalter. “Each school must grant us a license to make products showing their name or logo. The school must also approve each product design.”
By the end of the year, CBCo had licenses from 50 schools to make three different bead designs. Keeping up with demand became a real challenge for the small company. A bigger problem, however, was that each bead design requires a separate metal mold, and the domestic suppliers he was using wanted $2,000 to $4,000 per mold.
For purely economic reasons, Schowalter decided to offshore bead manufacturing to China early in 2010. But, by that summer, he began to have a change of heart.
“Besides the ongoing communication gap, we received some pretty poor product,” admits Schowalter. “It took several months before we received product that was good enough to sell. We learned that our production costs include much more than the price of the mold.”
After hiring a public relations company to tell CBCo’s story, Schowalter heard from Terryberry, a local company that makes recognition products like charms, lapel pins and award rings. Schowalter liked how the two companies complemented each other. In 2011, Terryberry began supplying CBCo with product made from metal molds Terryberry created, as well as enameled charms.
CBCo’s current product line also includes earrings, necklaces, bracelets, watches and cuff links. Of its 22 employees, six assemble products using soldering irons and laser cutters, markers and welders. Prototypes and certain components are 3D printed.
“Modern technology has leveled the playing field when it comes to reshoring,” says Schowalter. “As a result, lots of jewelry manufacturing is coming back to the United States.”
Terryberry has always manufactured its recognition jewelry products in the USA. Managing partner Mike Byam says there are two reasons for this.
“Offshoring has never been seriously considered because we only make custom products in small batches from one to a few thousand,” says Byam. “We also have a very experienced and skilled workforce that hand assemble each item. Some of them have been here 40 years.”
Byam’s great grandfather Herbert R. Terryberry started the company back in 1918. It excelled in the Midwest market for school rings from the 1920s to the 1970s, before switching to lapel pins (noting years of service) and award rings. Today, however, the company’s most popular products include nursing pins, charms, championship rings and employee recognition software.
“We were very excited when the Grand Rapids Griffins from the American Hockey League asked us to produce their championship rings after they won the Calder Cup in 2013,” says Byam. “Each player and person in the organization received a ring, and each ring featured 73 stones set by hand.”