This “Made in the USA” issue of Home Channel News profiles several companies that point to the benefits of domestic manufacturing. But for many more companies, sourcing product to low-cost overseas factories makes compelling economic sense. Home Channel News interviewed an executive from one such company — a manufacturer of a well-known brand of home improvement products — who spoke openly on condition of anonymity. Call him “Manufacturer X.”
Home Channel News: Your company is looking to manufacture more of its product in China. Why?
Manufacturer X: The big issue is cost. Our retailer customers are not allowing us to increase prices. And even if they did, they wouldn’t allow us enough to substantiate the margins we would need to survive. By going overseas and taking advantage of the lower cost structure, we are able to survive and compete.
HCN: Was it a difficult decision to bring manufacturing out of the United States and into China?
Manufacturer X: We watched a major portion of our business slip away, and that volume has hurt us dramatically — both in dollars and loss of employment. We’d love to remain a domestic manufacturer for all of our products, but due to demands of the marketplace, we’ve been forced to do it.
HCN: Describe the cost savings that you see overseas.
Manufacturer X: Let me put it this way: We have a machine here in the U.S. We load it up and it runs, turning materials from one end into packaged products at the other end. We move the product into the warehouse with a forklift. It’s all automatic, and still it’s 30% more expensive than manufacturing in China, where the same product is made by people. And that includes paying the freight, duty and cost fees. That’s just an example of the tremendous cost savings available to Chinese-made products.
HCN: What about the logistical benefits of domestic manufacturing? Are they meaningful?
Manufacturer X: Yes, they are. For instance, what if you’re forecasting 10,000 pieces, and all of a sudden the market demand is 20,000? If you’re buying from China, you’re not going to be able to get that extra 10,000. In the States, I can ramp up production quickly. In Chi