Factories Rethinking Outsourcing Strategies To Bring Manufacturing Back Home
May 29, 2010
With so many jobs being outsourced overseas, there is a rethinking in the U.S. that more jobs should go to American factories. In the last six years, about 6 million jobs have been shipped abroad with most of it going to China and India, as the cost of labor is cheap there.
One of these plants that is having a change of heart is Peerless Industries, where die-casting is used to make TV wall mounts. Converting molten metal into parts like this is not common in the U.S. A plant in Northern Illinois capitalizes in making these TV mounts. This type of work used to be outsourced to China, but the company has brought it back and created 100 more jobs for new workers. One of them is 53-year old Joe Dolack, who thought he was finished with the die casting business a couple of years ago. But now he’s back and working.
Dolack, who is a supervisor at Peerless Industries, told pbs.org, “When we shut down the last plant I didn’t think there was a chance of finding another job, at least in the Chicago land area.”
The company now says that what it saved in labor in sending jobs to China, it had to shell out it in inventory. Some of the other concerns facing the firm when doing business in China are intellectual property rights and quality. Over the last couple of years, there were a spate of products that did not meet health standards from bacteria-laden food to lead paint in toys.
In addition, most customers come to Peerless to get their products made fast and this is always a problem when parts arrive late from China. This meant that the firm had to go with more products in its inventories and this would get expensive.
“Going to China steered us into a direction of us not being a manufacturer as much as we were. And we wanted to control, you know, our destiny and our quality and our products and our designs. So we made the strategic decision to bring it back to the U.S.,” said Michael Campagna, President of Peerless.
Subsequently, Peerless has moved all of its production to the U.S. The firm was able to get its parts on the cheap. Additionally, with layoffs prevalent in the automobile industry, it was also easy to find employees.
A market analyst with Morning Star said idling manufacturing activity in the U.S. along with increasing labor costs in the mainland and transportation expenses are making American factories rethink their options. Moreover, Chinese currency, the yuan, is also a cause of alarm as some say it is deflated.
Larsen was quoted as saying, “With the peg to the dollar, companies really don’t have to worry too much about currency fluctuations. That’s not necessarily a risk. But looking forward, if we do lose that peg that is something companies are definitely going to have to pay attention to. It is a potential risk factor.”