Archive for March, 2011

Innovative Strategies — The Key to Success

Tuesday, March 29th, 2011

While the United States still leads world in innovation, American manufacturers are faced with doing more with less to compete in the global economy.  They must achieve higher productivity with fewer people and lower profits.  What can manufacturers do to survive, succeed and thrive in the intense global economy?

There are hundreds of books and articles with recommendations on how manufacturers can succeed and grow in the global economy.  Innovative strategies are key to success.  Let’s focus on the following three strategies:  purpose, process, and promotion.

Purpose – a clear vision of the reason for the existence of your company, an understanding of the need you are looking to fulfill and the solution, the Distinct Competitive Advantage (DCA) of company’s products or services, the target audience you are serving, and the internal business model and guiding principles of the company.

Process – adoption of Lean Manufacturing and Six Sigma principles that seek to eliminate waste through all aspects of the organization and process and focus on the production and delivery of products directly associated with customer orders.

Promotion  – use of most cost-effective and productive marketing and sales methods and channels to market

According to Michael Treacy’s book, “The Discipline of Market Leaders,” best in class companies must choose one of the three following types in order to be able to fully optimize key company support systems:

  1. Process Excellence Company – companies like McDonalds make their processes very efficient and consistent to survive or thrive.
  2. Innovative Leader Company (product leadership) – companies like Apple create innovative products like the iPhone and iPOD at a much faster rate than their competition in order to survive or thrive
  3. Customer Intimacy Company – companies that focus on being flexible to cultivate long time relationships with customers

How well a company performs, or even survives, depends upon how that company focuses on meeting the markets to which it is trying to sell.  As a manufacturers’ sales representative for over 25 years, I know how important marketing is to the growth and success of a company.  Businesses cannot succeed if they don’t meet the needs of the market.  Manufacturers often fail because they embrace a product-driven strategy instead of a market-driven strategy.  There’s an old story that if you build a better mousetrap, the world will beat a path to your door.  This isn’t true!  You first have to let the world know you have built a better mousetrap through marketing, and you have to make the product easily available to them through the right sales channels.

Most small to medium-sized manufacturers don’t put enough emphasis on marketing because they don’t really understand what marketing is and don’t have any marketing experience.  Most small to medium-sized companies can’t afford to have a marketing or sales manager.  The owner of the company tries to do sales at the same time he/she is managing the day-to-day activities of the company.

So what is marketing?  It is everything a business does to create customers for their product/services.  Everyone in the company is part of marketing, and marketing begins in the mind of customer.  A business should never stop marketing.  What’s in it For Me (WIFM) is a universal law of marketing.   There are no marketing rules that apply to every type of company, and there are no quick fixes or “magic pill” that will work for every company.  All marketing is a gamble – you can’t accurately predict the results.  There are three basic steps to effective marketing

  • Know your market
  • Know each possible way to reach market with persuasive message
  • Use methods that provide maximum results with minimum effort

Every company needs to address these three areas in some way, but any given company will need to focus on one or more of these methods in order to survive or thrive.   As Brian Tracy’s said in his book “The Discipline of Market Leaders” “No company can succeed today by trying to be all things to all people.”

You and your sales team need to be able to describe what it is about your product or service that is unique or different.  This is called your Differential or Unique Competitive Advantage (DCA).  In other words, the reasons why customers would want to buy or use your products or service.

You need to be able to describe your “business identity” in 25 words or less (called an  “Elevator speech”).   For example, my business is ElectroFab Sales, a manufacturers’ sales rep agency, and my business identity elevator speech is:  “We help companies select the right manufacturing processes to make parts for their products from the companies we represent.”  The key is to find a market in which your product and/or service can be a leader.

An effective DCA always develops out of an under filled or unfulfilled market need.  Examples of DCA thrusts are:

  • Cutting edge technology
  • Fills wide range of needs
  • Specialized know-how
  • Wide selection
  • Exclusive selection
  • Customization
  • Convenience
  • Speed (of service or product delivery)
  • On-going customer education
  • Service follow-up

If you are having trouble determining the DCA for your business, ask your customers questions about what they like best about you company’s products and/or services.  Ask them what they look for in a vendor/supplier and how they decide which company to choose.   Compare your products or services with those of your major competitors.   It would be helpful to have a consultant or someone outside of your company do a comparative matrix of your products or services.

If you still can’t determine your company’s DCA, you would be wise to hire a marketing consultant to help you identify what is unique about your company and its products and/or services.  You may even need help restructuring your company or redesigning your products to create a competitive advantage.  If you do not have a competitive advantage your sales people can easily describe, you are dead.

Once you have an accurate understanding of your target markets and have determined your DCA, then you can choose the best marketing methods to use.  The following are some of the best low-cost marketing methods:

  • Direct Mail Marketing  – flyers, letters, brochures, catalogs, CDs/DVDs
  • Internet Marketing (website, e brochures, e newsletters, videos, webinars)
  • Distributors
  • Sales Representatives
  • Strategic Partnerships – non-competing companies promote each other for percent of the action
  • Social networking (Linkedin, Facebook, Twitter)
  • Telemarketing
  • Trade Shows

The direct mail marketing methods of flyers, letters, brochures, and catalogs don’t work as well as they once did, and people don’t often take the time to view the newer CDs and DVDs.  A two to four minute video on a website has become more effective.

An Internet presence via a website has become crucial way to establish credibility as a company.  I am surprised I still meet entrepreneurs that don’t have a website and have a gmail mail or yahoo email address instead of one connected to a company website.  It’s well worth the money to have a website, even for very small companies or professional consultants.  Electronic brochures and newsletters can become effective tools to use if they are concise, easy to read, and contain useful information.  Even though attendance at trade shows has dropped in the last few years, there is no substitute for the opportunity to meet face-to-face with a prospective customer and have them see and touch your products or even see a live demonstration of how it works.  Telemarketing is most effective when it is used to make “warm” calls to follow up on show leads or keep in regular contact with regular customers and key prospects.  If you don’t have any idea how to utilize social networking for your company, there is an abundance of training available now to fit everyone’s schedule.

Today’s manufacturers must utilize innovative strategies to succeed and grow.  The days are gone when manufacturers could have equipment and people sitting idle.  American companies who provide the level of delivery, or quality, or customer service that got them by in the past will not survive, because customers can get that from Chinese vendors for a far lower price.  American manufactures are now in a struggle for their very survival.  The strategies covered in this article are based on an excerpt of the chapter in my book, Can American Manufacturing be Saved?  Why we should and how we can, on what manufacturers can do to not only “save themselves,” but also prosper and grow in the competitive global economy.

 

Michele Nash-Hoff is President of ElectroFab Sales and can be reached at michele@savingusmanufacturing.com

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Unintended Consequences of U. S. Environmental Protection Laws

Tuesday, March 22nd, 2011

One of the most difficult problems in bringing back manufacturing from offshore to “Reshoring” in the United States is the increasingly stringent environmental regulations being imposed at Federal and State level that adversely affect various sectors of the manufacturing industry.   The following describes some of the more stringent environmental regulations.

Clean Water:  As authorized by the Clean Water Act in 1972, the federal Environmental Protection Agency (EPA) oversees the National Pollutant Discharge Elimination System (NPDES) Regulations for Storm Water Discharges.  In most cases, the NPDES program is administered by authorized states.  Many states, such as California, have set up multiple water quality control regional boards that develop and administer specific regulations for their region.  The San Diego regional board issued 62 pages of new regulations in August 2002, for which compliance has been very onerous and expensive for manufacturers.  For example, rain water falling on a manufacturer’s parking lot must be monitored so that toxic pollutants, oil grease, waxes, chemicals, and visible floating materials are prevented from entering the storm drains on the property connecting to the municipal sewer system.

Hazardous Air Pollutants:  In 2005, the Federal Occupational Safety and Health Administration (OSHA) proposed standards to go in effect January 1st 2006, but Congress didn’t approve the new standards as stringently written.  The proposed standards would have reduced the allowed emissions for hexavalent chromium (a chemical compound used in the chrome plating process) to less than 1/50th of the allowable level (52 mg. of chromium per meter of air down to 1mg.)  The emission standard of 52 mg. that went into effect in 1998 was already a 97 percent reduction in hexavalent chromium emissions.  In May 2006, Congress finally approved slightly less stringent regulation of 5 mg. per cubic meter of air, which went in effect January 2007.

Metal plating, including chrome plating, is important to the electronics, machine equipment, defense, and automotive after-market sectors of manufacturing because every metal part that could corrode is nickel or chrome plated to keep it from corroding.  These new standards required existing chrome plating facilities to purchase new environmental control equipment in order to maintain compliance status.  Many large plating facilities converted to the more expensive, but less toxic trivalent chromium, which is suitable for some applications and certain thicknesses of plating.  The trivalent chromium process requires more careful control than the hexavalent chromium process and is more difficult to do in some applications such as barrel plating.

On June 12, 2008, the EPA issued final national air toxics standard for smaller-emitting sources in the plating and polishing industry applicable to cadmium, nickel, lead, manganese, and chromium.  The final rule affected an estimated 2,900 existing planting and polishing facilities.  These standards seriously affected the chrome plating industry nationwide and have accelerated the offshore outsourcing of products requiring chrome plating.

In San Diego County, six metal processors went out of business between 2007 and 2008, and one company closed down its chrome plating line prior to the stricter regulations going into effect.  Two companies moved their chrome plating across the border to Tijuana, Mexico so that there are now only two metal processors that do chrome plating, which has stretched lead times for locally fabricated metal parts that require chrome plating.  Of course, there is no border control for the flow of air so emissions in Tijuana affect the air quality in San Diego County.

Clean Air:  In September 2006, the federal EPA approved new national air quality standards that reduced the previous daily particulate matter standard by nearly 50 percent.  Particulate matter is fine particles such as soot, dust, and liquid droplets that are too small to see.  A new Maximum Achievable Control Technology (MACT) for hazardous waste combustors (boilers and incinerators) followed in 2008.  EPA will soon announce new draft rules aimed at slashing toxic air pollution emitted by power plants.

Electric utilities and manufacturers have objected to these new air quality regulations, saying that the new rules cost billions of dollars to implement.  William O’Keefe, CEO, George Marshall Institute, wrote “…the utility MACT will impose costs on utilities that far exceed air quality benefits…Forcing the utility industry to install the most expensive emissions reduction technologies will simply drive up the cost of electric power when it can least be afforded…That is not what we need as our economy struggles to recover from the worst recession in decades.”

A report released in 2007 by the National Association of Manufacturers  (NAM) stated “the domestic environment for manufacturers is dominated by concerns about rising external costs that make manufacturing from a U. S. base difficult.  These costs for corporate taxes, health care and pensions, regulation, natural gas, and tort litigation add more than 30 percent to manufacturers’ costs.”

In addition, the NAM report stated that the annual cost of complying with federal regulations is more than $10,000 per employee for manufacturers, while the cost is half that for non-manufacturers.  When companies are spending more money on regulatory compliance, materials, fuel and energy, they have less money for R & D, new product development, and purchase of capital equipment and systems.  This puts U. S. manufacturers at a substantial disadvantage compared to manufacturers in countries that aren’t subject to this degree of regulation.

On October 14, 2010, Joe Barton, Ranking Member of the Committee on Energy and Commerce and Michael Burgess, Ranking Member of the Subcommittee on Oversight and Investigations, wrote a letter to Lisa Jackson, Administrator of the U. S. Environment Protection Agency, expressing their concern over the cumulative impacts of new regulations being proposed by the EPA under the Clean Air Act (CAA).  The letter included a chart (51 pages), which identified approximately 40 proposed or final CAA regulations, including greenhouse gas regulations, revised air quality standards, and other regulator proposals under the CAA, as well as many regulations in the pre-proposal stages.   The letter stated, “At least eight of the proposed or final rules included have compliance costs estimated by EPA to exceed $1 billion each.  It appears that collectively the Administration’s new or proposed CAA regulations could impose billions of dollars of additional new costs annually on U. S. business as the new rules are implemented by your agency.”  A response was requested with regard to the accuracy of the compliance costs estimated included in the chart and if there were any other pending or proposed CAA regulations not included in the chart.

One of the unintended consequences of strict environmental protection laws and regulations in the United States that drives manufacturing offshore is the increased environmental pollution in other countries, such as China and India.  India and China have been getting more polluted in the last 30 years, as more and more U.S. manufacturing companies have outsourced to these countries.  Four cities in India and six cities in China are listed in the “Dirty 30” list of the worst polluted sites in the world, according to a 2007 report by the New York-based Blacksmith Institute.  The Institute’s “Top 10” list now includes four cities in China and two in India.  The Institute’s list is based on scoring criteria devised by an international panel that includes researchers from Johns Hopkins University, Harvard University, and Mt. Sinai Hospital in assessments of more than 400 polluted sites.  “Children are sick and dying in these polluted places, and it’s not rocket science to fix them,” said Richard Fuller, Blacksmith Institute’s founder and director.  The Institute highlights the health threats to children from industrial pollution, such as the stunting effect of lead poisoning on intellectual development.  Some 12 million people are affected in the top ten sites, according to the report.

One of the worst examples is Wanshan, China, termed the “Mercury Capital” of China, because more than the 60 percent of the country’s mercury deposits were discovered there.  Mercury contamination extends through the city’s air, surface water systems, and soils.  Concentrations in the soil range from 16 to 232 times the maximum national standard for mercury contamination. To put this into perspective, the mercury from one fluorescent bulb can pollute 6,000 gallons of water beyond safe levels for drinking, and it only takes one teaspoon of mercury to contaminate a 20-acre lake – forever.  The health hazards of mercury exposure include kidney and gastrointestinal damage, neurological damage, and birth defects.  Chronic exposure is fatal.

On June 19, 2007, the Netherlands Environment Assessment Agency announced that China’s carbon dioxide (CO2) emissions were seven percent higher by volume than the United States in 2006.  Many experts were skeptical, but on June 13, 2008, the same agency announced that a new study found that China’s emissions were 14 percent higher than those of the United States in 2007.  “The Chinese increase accounted for two-thirds of the growth in the year’s global greenhouse gas emissions, the study found.”  In addition, China is now the largest source of SO2 emissions in the world (SO2 causes acid rain), and.  Japan and South Korea suffer from acid rain produced by China’s coal-fired power plants and yellow dust storms that originate in the Gobi desert.

An article titled “Scientists Track Asian Pollution” in the September 4, 2008 issue of The News Tribune of Tacoma, Washington reported that the Journal of Geophysical Research that stated “East Asia pollution aerosols could impose far-reaching environmental impacts at continental, hemispheric and global scales because of long-range transport,” and “a warm conveyer belt lifts the pollutants into the upper troposphere over Asia, where winds can wing it to the United States in a week or less.”

Dan Jaffe, a professor of environment science at the University of Washington and a member of the National Academies of Science panel studying the issue, said,  “This pollution is distributed on average equally from Northern California to British Columbia.”  He added that “up to 30 percent of the mercury deposited in the United States from airborne sources comes from Asia, with the highest concentrations in Alaska and the Western states.”

What good does it do to control the quality of our air and water in the United States so strictly that we drive our manufacturing industry south of the border to Mexico or offshore to Asia where environmental regulations are either lax or nonexistent?  If people want strong environmental protection while retaining American jobs, we are going to have to analyze the cost of the environmental impact on American manufacturers and accept a reasonable compromise that doesn’t go overboard on environmental regulations that drive more and more manufacturing offshore.  Another option would be to assess an environmental impact fee on products imported based on the level of pollution in the country of origin as compared to that of the U. S.  The natural disasters of the past year, such as the Icelandic volcano, and the recent earthquake/tsunami in Japan have shown us that what happens to the environment in one part of the world affects the environment of other parts of the world.  While government takes the time to come to grips with this problem, you can prevent yourself from contributing to the world’s pollution by buying products made in America.  Remember, every product you buy made in China or India contributes to the world’s pollution.

Posted in General, Outsourcing, Taxes/Regulations | 2 Comments »

Is First to File Patent Reform Bill Right for America?

Tuesday, March 15th, 2011

The America Invents Act (S. 23), originally titled the Patent Reform Act of 2011, passed the Senate by a vote of 95 to five.  The bill’s author was Judiciary Committee Chairman Patrick Leahy (D-Vt.), and Chuck Grassley (Iowa) the Ranking Republican on the Judiciary Committee, and Orrin Hatch (R-Utah) were original co-sponsors of the bill.  An amendment to strip S. 23 of its troubling grace-period provision by striking the section of the bill containing the conversion of America’s first to invent patent priority system to a first to file patent system introduced by Sen. Diane Feinstein (D-Calif.) was defeated 87-13.

The first to file (FTF) provision eliminates the current first to invent filing system that goes back to the earliest beginnings of our nation.  The FTF transition would eliminate the current one-year grace period that allows inventors to prove they were first to invent within one year from the date of their invention. Retaining the current grace period and filing system received little attention as small inventors were largely left out of the previous Congressional hearings on patent reform in 2009 and 2010, and no hearings were held by the Judiciary Committee of the new Congress prior to vote on the Senate floor.

According to Patent and Trademark Office Director, David Kappos, the U. S. is already operating as a “first to file” patent system because in 2007, the total number of interference cases for all applications was seven, and only one interference claim involving a small or medium sized entity was decided based on priority alone – out of 441,637 patent granting decisions.  Interference cases are where two inventors file their patents nearly simultaneously and rely on the first to invent criteria during interference proceedings.

“Reforming the nation’s antiquated patent system will promote American innovation, create American jobs.  It will grow our economy,” Leahy said on the Senate floor.  President Obama praised the Senate action, saying “This long-overdue reform is vital to our ongoing efforts to modernize America’s patent laws and reduce the backlog of 700,000 patent applications – which won’t just increase transparency and certainty for inventors, entrepreneurs and businesses, but help grow our economy and create good jobs.”

The bill allows the Patent and Trademark Office (PTO) to determine fees and stops the practice of Congress diverting patent fees to the general Treasury to ensure that the office has the resources to hire more qualified examiners and modernize its computer systems.  Like a thief in the night, Congress raided the PTO fund and diverted $53 million of fees to other Congressional programs.  The new Congress hasn’t made any attempt to refund that amount to the PTO.  PTO funding is completely dependent on user fees paid to the PTO for patent and trademark applications, examinations, and maintenance.  Zero taxpayer dollars are used to fund the PTO, which means Congress is using resources paid by inventors and innovators on programs not related to the patent or trademark applications those inventors and innovators filed.  In addition to the $53 million stolen last year, over $750 million was stolen by Congress over the last 15 years.  (CONNECT Policy eNews 1.31.11)

When Director Kappos was in San Diego in May 2010, he told the San Diego Inventors Forum that they were hiring 300 more patent examiners in 2010 and planned to hire 1,000 more in the next two years to help reduce the backlog of 750,000 patent applications.  He said they were also providing training to the current 7,000 patent examiners to accelerate the processing of patent applications.

The bill creates a new micro-entity category that would allow fees to be reduced by 75 percent for inventors with five or fewer employees and fewer than five prior patent applications.  The PTO currently offers a 50 percent discount for small entities (under 500 employees) in virtually every fee category, which is further reduced by another 50 percent for small entities and independent inventors who use the electronic filing system.

Under the bill, the PTO could set up an expedited review program under which, for a higher fee, it would guarantee a final decision on an application within a year.  It now takes about three years, on average, for a patent application to be approved, and the office has such a backlog that it takes two years for examiners to begin work on a new application.

The legislation garnered a broad spectrum of support from pharmaceutical companies, large corporations such as IBM and Motorola, academic groups such as the Association of American Universities, and labor groups, including the AFL-CIO.  The Coalition for 21st Century Patent Reform, a group whose 50 members includes Caterpillar, General Electric, Eli Lilly, and Procter & Gamble, said “this legislation will make our national more competitive in the global marketplace.”

Independent inventors (individuals who are not part of corporations) had been anxiously watching the outcome of the proposed Patent Reform Acts of 2009 and 2010, in which the new process would be a first to file system in contrast to the current first to invent system.  The concern of independent inventors was that this bill would favor large companies who can afford to file applications for patents before vetting the new technology because it would alter patent law to effectively kill the grace period by conditioning it on early disclosure.  In other words, an inventor would have to publicly disclose the invention in order to trigger a grace period.  Startups and small business inventors do not publicly disclose the details of their inventions right after they are conceived because it would tip off competitors to essential details of their new technology.   The ability to secure a patent is critical for an inventor or startup company to be able to obtain licensing agreements or early stage investment funding by angel investors or venture capitalists.

Several groups representing inventors and small business have long campaigned against any provision that would weaken the legal mechanisms available to their members to assert their patents.   In December 2009, a group of organizations announced that they banded together to form the Small Business Coalition on Patent Legislation.  The Coalition is a national consortium of non-profit organizations representing and assisting early-stage startup companies, small businesses, individual and academic inventors, researchers, and new innovative market entrants who depend on patent protection.  The Coalition included San Diego’s CONNECT organization, the National Small Business Association (NSBA), IP Advocate, the American Innovators for Patent Reform (APIR), the National Association of Patent Practitioners (NAPP), the Professional Inventors Alliance USA (PIAUSA), and the United Inventors Association (UIA)

Ed Black, president and CEO of the Computer and Communications Industry Association, a trade group whose members include Google, Microsoft and Oracle, warned that excluding the post-grant review provisions could make “the current situation even worse for the tech industry.”  Sen. Mark Udall (D-Col.) one of the co-sponsors of the amendment said he would seek to include it in the final version of the bill negotiated by the reconciliation committee with the House bill that passes.

The Coalition for Patent Fairness, which represents high-tech companies, such as Apple, Google, Intel, Cisco, and Oracle had been a leading voice of dissent on the legislation and announced they would continue to work with Congress to address the concerns of America’s top innovators.

When the bill was first introduced by the new Congress in January, Timothy Tardibono, CONNECT’S Washington D.C. Office Director said, “The bill makes it harder for inventors to perfect their invention before filing while ignoring a major Supreme Court case that will further exacerbate the patent application backlog and pendency time.  There is no need to rush this bill through until it fully protects innovation instead of hurting innovation and killing job creation.”  This legislation he mentioned is Microsoft v. i4i patent infringement case, in which Microsoft is petitioning the U. S. Supreme Court to lower the standard needed to prove a patent invalid from the current standard of clean and convincing to preponderance of the evidence.

In a February 2, 2011opinion article in The Hill’s Congress Blog, U. S. business & Industry Council President, Kevin Kearns, and Research Fellow, Alan Tonelson, wrote, “The principal advocates of the Leahy bill are the governments of Europe and Japan – along with boosters in China and India.  They want the United States to ‘harmonize down’ to their inferior systems.  They and the bill have it backwards.  Advocates also include a handful of Big Tech transnational corporations that want to make easier and less costly the infringement of other’s patent rights.  Their business model has a unique name, ‘efficient infringement.’”

They also pointed out that the reforms of the Clinton era “doubled from 18 to 36 months the time required to process a patent, required the Patent Office to publish full patent applications on the Internet 18 months after filing – encouraging theft of American IP worldwide, and created a new post-grant challenge process to patent validity that can consume three or more years in bureaucratic proceedings inside the Patent Office.  As a result, individual inventors who received 15 percent or more of all U. S. patents before the Clinton reforms got barely 5 percent last year.”

The action now moves to the House, where Judiciary Committee Chairman Lamar Smith (R-Texas) has indicated that he plans to introduce a companion bill in the near future..

As a member of the steering committee of the San Diego Inventors Forum, I stand on the side of the individual inventor and small business owner and oppose the conversion to the first to file system.  Each month, our meeting is packed with 60 to 80 inventors and entrepreneurs with innovative ideas for new products and technologies.   These inventors need the protection of the first to invent system to be able to fully vet their technology before publicly disclosing it after filing for a patent.

Now is the time to express your opinion.  Contact your Congressional representative and let them know how you stand on the America Invents Act, especially whether you support or oppose the conversion from a first to invent to a first to file system.

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ABCs ‘Made in America’ Series

Tuesday, March 8th, 2011

On Monday, February 28th, ABC began a series on the World News with Diane Sawyer called “Made in America.” John and Ana Ursy of Dallas, Texas agreed to accept the challenge of working with the ABC team of David Muir and Sharyn Alfonsi to furnish three rooms of their home exclusively with products that are made in America.  When the team examined everything that existed in these three rooms and removed all foreign-made products, the result was a virtually empty house – no beds, no tables, no chairs, no couches, no lamps.  Only the kitchen sink, a vase, a candle, and some pottery remained.

The questions posed by the team were:  Is buying American-made more expensive?  What staples are no longer manufactured in the U.S.?  And what difference would it make if everyone promised to buy more American-made products?

The results were somewhat surprising.  The kitchen was the most difficult because there are only a couple of companies still making major appliances in America:  Viking Products provided the stove, and Sub-Zero and Wolf provided the refrigerator, microwave, and oven.  They couldn’t find any coffee makers made in the U.S.; Bun-a-Matic assembled a coffee maker out of parts made offshore.  There are no TVs made in America and no light bulbs.  General Electric closed the last plant making incandescent light bulbs in the U. S. in July 2010.  The team was able to furnish the bedroom with all American-made furniture, lamps, and bedding for less money:  $1,699 compared to $1,758.   All in all, the team found more than 100 manufacturers still making various consumer goods in America, and viewers submitted names of many more.  You can view the companies on an interactive map of the USA.

When one of the ABC reporters, Sharyn Alfonsi, examined the toy box of her own child, she didn’t find any American-made toys in it, so the interactive website provides the names of some U. S. toy makers, such as Green Toys in San Francisco that makes toys from recycled milk bottles. There are six other California companies shown on the interactive map:  Pure-Rest Organics, making organic bedding in San Diego, Harveys Handbags in Santa Ana, Maglite Flashlights in Ontario, Danmer Custom Shutters in Los Angeles, Glass Darma, making handmade drinking straws in Ft. Bragg, and Sergio Lub Jewelry in Martinez.

Why does it matter if we buy American-made products?   First, our addiction to imports has helped create our high trade deficit, especially with China, where most of the consumer goods we import are manufactured.  In 1960, imported foreign goods made up just 8 percent of Americans’ purchases.  Today, nearly 60 percent of everything we buy is made overseas.  In 2010, our overall trade deficit was $97.8 billion, up from $374.9 billion in 2009 but nearly 30 percent below our highest deficit in 2008 of $698.8 billion.  Our trade deficit with China has grown from $ $83.8 billion in 2000 when China was granted Most Favored Nation status to a record high of $273 billion in 2010.

Second, American-made products create American jobs.  Each time you choose to buy an American-made product, you help save or create an American job.  There is a ripple effect in that every manufacturing job creates three to four other jobs while service jobs create only one to two other jobs.  We’ve lost 5.5 million manufacturing jobs since the year 2000, and the number of manufacturing jobs dropped below 12 million in 2010, down from a high of nearly 20 million in 1979.

You may be thinking, would what I do make a difference? American activist and author, Sonia Johnson said, “We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.”   Eleanor Roosevelt echoed this sentiment saying, “Never doubt that a small group of thoughtful, committed citizens can change world; indeed, it’s the only thing that ever has.”  Remember that our country was founded by a small group of people that did indeed change the world by forming the United States of America.

Here are suggestions of what each one of us can do:  First, look at the country of origin labels of goods when you go shopping.  Most imported goods are required to have these labels.  Many manufacturers have tried to get the Federal Trade Commission (FTC) to relax the rules determining what’s “Made in USA.”  After two years of public hearings, studies, and reports, in December 1997, the FTC reaffirmed:  A product will be considered Made in U.S.A. if “all or virtually all made in the Unites States” only where “all significant parts and processing that go into the product are of U. S. origin.”

Buy the “Made in U.S.A.” even if it costs more than the imported product.  It is a small sacrifice to make to insure the well being of your fellow Americans.  The price difference you pay for “Made in USA” products keeps other Americans working.  If the product you are looking for is no longer made in America, then avoid countries such as China that has the goal of becoming the world’s “super power” in the 21st Century by winning either an economic war or a military war with the U. S.  When you take our trade deficits with China into consideration, it would not be an exaggeration to say that American consumers have paid for the bulk of China’s military buildup.  American service men and women could one day face weapons mostly paid for by American consumers. Instead, patronize impoverished countries such as Bangladesh or Nicaragua, which have no military ambitions.

In addition, you would be reducing your “carbon footprint” by buying a product made in America instead of a product that is made offshore that will use a great deal of fossil fuel just to ship it to the United States.

If you have a “Made in USA” appliance that needs repair and all the new ones are imported, try to get it repaired.  If it can’t be fixed, and it is a small appliance that you can live without, then don’t buy a new one.  We Americans buy many things that we really don’t need just because they are so cheap.  If a product that you are considering purchasing is an import, ask yourself, “Do I really need this?”  If you don’t need it, then don’t buy it.

If you are willing to step out of your comfort zone, ask to speak to the department or store manager of your favorite store.  Tell the person that you have been a regular customer for x amount of time, but if they want to keep you as a customer, they need to start carrying some (or more) “Made in USA.” products.  If you buy products on line or from catalogs, you could contact these companies via email with a similar message.   Your contacting a company does have an effect because there is a rule of thumb in sales and marketing that one reported customer complaint equals 100 unreported complaints.

Buying American has been made even easier by a new guide to buying American – “How Americans Can Buy American:  The Power of Consumer Patriotism” first released in March 2008 and updated in 2010.  Author Roger Simmermaker says, “Supporting American companies leads to a more independent America.  Ownership equals control, and control equals independence.  We cannot claim to be an independent country or control our own destiny if our manufacturing base is under foreign ownership or foreign control.  A nation that cannot supply its own needs is not an independent nation.  If we are to claim independence from the rest of the world and truly be a sovereign nation, we must begin supplying our own needs once again.”

According to Simmermaker, “buying American” is not just about buying “Made in USA.”  “Buying American, in the purest sense of the term, means we would buy an American-made product, made by an American-owned company, with as high a domestic parts content within that product as possible…’American-made’ is good. ‘Buying American’ is much better!”

One of our greatest statesmen, Thomas Jefferson, stated, “I have come to a resolution myself, as I hope every good citizen will, never again to purchase any article of foreign manufacture which can be had of American make, be the difference of price what it may” (pg. 9 of Simmermaker’s book).

Simmermaker has made it easy by listing companies and their nation of ownership and view his list of American owned companies at his website: www.howtobuyamerican.com.    In addition here are some other websites.

www.buyamericanmart.com

www.madeinusa.org

www.americansworking.com

www.shopunionmade.org

www.MadeInUSAForever.com

As American consumers, you now have more American choices so you can live safely and have more peace of mind.  It’s high time to stop sending China our American dollars while they send us all of their tainted, hazardous, and disposable products.  If 200 million Americans refused to buy just $20 each of Chinese goods, that’s would be a four billion dollar trade imbalance resolved in our favor – fast!  In the ABC World News program, Diane Sawyer said, “if every American spent an extra $3.33 on U. S. -made goods, it would create almost 10,000 new jobs in this country.”   The ABC World News series “Made in America” continues with a look at the garment industry the week of March 7th.

Manufacturing jobs are the foundation of our middle class, and we are losing our middle class in state after state.  From December 2000 to December 2010, 22 states have lost a third or more of their manufacturing jobs.  Massachusetts, New York, and Ohio have lost 38 percent of their manufacturing jobs, New Jersey 39 percent, North Carolina 42 percent, Rhode Island 44 percent, and Michigan 48 percent.

We cannot afford to export our wealth by buying imports from China and finance our more than 10 years of deficits by borrowing an average of $1.553 billion every day.  We cannot lose our manufacturing base and be able to remain the world’s “superpower.”  In fact, we may not be able to maintain our freedom as a country because it takes considerable wealth to protect our freedom.

Remember, the company you save or the job you save by your actions may be your own.  More importantly, you can play a role as an individual in saving our country’s sovereignty by following the suggestions in this article.

Posted in Outsourcing, Reshoring, Trade Policy | 3 Comments »

Bringing Back Jobs from Offshore to Revive American Manufacturing

Tuesday, March 1st, 2011

There have been many recommendations of how to revive American manufacturing and create the jobs Americans need, but most job creation programs proposed by commentators, politicians and economists involve either increased government spending or reductions in employment or income taxes at a time of soaring budget deficits and decreased government revenue.  Other recommendations would require legislation to change policies on taxation, regulation, or trade that would be difficult to accomplish.  Many of these solutions involve borrowing money now, largely from China, or taking money from one group of citizens or a future generation to give to another.  Other programs call for Chinese currency revaluation or tariffs, which would help the manufacturing industry, but would increase consumer prices.

In contrast, the move to bring back manufacturing production to the United States, called Reshoring, has grown increasingly popular over the last few years.  Reshoring brings jobs directly back from offshore, often from the LLCCs (Low Labor Cost Countries) that have grown so rapidly over the last decades at the expense of American workers, American manufacturing companies, and the overall U.S. economy.  Higher transportation and fuel costs, escalating wage rates in developing countries like China, and serious, sometimes life threatening, quality problems with products made in China are providing added impetus to this trend.

Reshoring breaks out of the waiting-for-policy-decisions problem, the economic zero-sum-game and the increases in consumer prices and assures that the pie grows to the advantage of all Americans.  Reshoring also focuses on the manufacturing sector that has suffered so many job losses for decades and the Small-to-Medium Enterprises (SMEs) that offer the best potential for job growth.

To help accelerate this trend, there is a new initiative with a plan to efficiently reduce our imports, increase our “net exports” and regain manufacturing jobs in a non-protectionist manner.  The Reshoring Initiative was founded by Harry Moser, retired president of Agie Chamille LLC, a leading machine tool supplier in Lincolnshire, Illinois.  The Initiative shows how outsourcing within the United States can reduce a company’s Total Cost of Ownership (TCO) of purchased parts and tooling and offer a host of other benefits while bringing U.S. manufacturing jobs home.

The Initiative documents the benefits of sourcing in the United States for large manufacturers and helps suppliers convince their U.S. customers to source local.  Archstone Consulting’s 2009 survey showed that 60% of manufacturers use “rudimentary total cost models” and ignore 20% of the cost of offshoring.   If a manufacturer is not accounting for 20% of their costs to offshore, offshoring may not be the most economical decision.  In tough economic times and stiff global competition, no company can afford this.  To help companies make better sourcing decisions the Reshoring Initiative provides:

  • A free Total Cost of Ownership (TCO) software that helps manufacturers calculate the real offshoring impact on their P&L
  • Publicity to drive the reshoring trend
  • An online Library of 98 articles about successful Reshorings
  • Access to NTMA/PMA Contract Manufacturing Purchasing Fairs to help manufacturers find competitive U.S. sources.

Manufacturing companies can reshore to:

  • Reduce pipeline and surge inventory impacts on Just-in-time operations
  • Improve the quality and consistency of products
  • Cluster manufacturing near R&D facilities, enhancing innovation
  • Reduce Intellectual Property and regulatory compliance risk
  • Reduce total Cost of Ownership (TCO)

The Initiative has received increasing visibility and influence: recognition by Industry Week magazine via its 2010 Manufacturing Hall of Fame, inclusion of the TCO concept in Cong. Wolf’s (R VA) “Bring Jobs Back to America Act” (H.R.516); numerous webinars; dozens of industry articles; presentations in major industry and government policy conferences in Chicago and Washington, DC; and coverage by CBS, CNBC, WSJ, USATODAY and the Lean Nation radio show.

The Initiative is succeeding in changing OEMs’ behavior. Companies have committed to reshore after reading Initiative articles.  Fifty-seven representatives from large manufacturers and 113 custom U.S. manufacturers attended the May 12, 2010 NTMA/PMA Contract Manufacturing Purchasing Fair, where OEMs found competitive domestic suppliers to manufacture parts and tooling.  Sixty-four percent of the OEMs brought back to the U. S. at least some work that was currently offshored.

On the February 4, 2011, the Illinois Reshoring Initiative announced its program to apply the principles of the national Reshoring Initiative to revitalize Illinois manufacturing by reshoring to bring back many of the most desirable jobs that have been lost to decades of offshoring.  This industry-led initiative will utilize an integrated, measurable, five-step program to help large manufacturers and their local suppliers recognize the total P & L impact of offshoring and the benefits that both will obtain from reshoring.   The program features keynote speakers, Peter M. Perez, Deputy Assistant Secretary for Manufacturing, U. S. Department of Commerce’s International Trade Administration, and Harry Moser, founder of the national Reshoring Initiative.

Mr. Moser commented, “In the past manufacturing conferences have presented good ideas but offered few tools and no follow-up.  The Illinois Reshoring Initiative’s year-long program provides the TCO Estimator free to attendees and has 5 integrated steps that will assure that the good ideas are implemented and the results measured.”  The Illinois Reshoring Initiative Conference will be held 7:45 AM to 11 AM, March 16, 2011 at Wojcik Center, Harper College, Palatine, IL 60067.  To register for the conference go to http://illinoisreshore.eventbrite.com/.

The Reshoring Initiative www.reshorenow.org is supported by: the Association for Manufacturing Technology (AMT) www.amtonline.org; Sescoi, , www.sescoi.com/ ; GF AgieCharmilles, www.gfac.com/us; the Association for Manufacturing Excellence (AME)  www.AME.org,; the National Tooling and Machining Association (NTMA) www.ntma.org and by the Swiss Machine Tool Society (SMTS) www.smts.org . Additional information on the NTMA/PMA Purchasing Fairs can be found at www.purchasingfair.com.

 

Posted in Reshoring | 1 Comment »