21 April 2015
A recent article in the Wall Street Journal featured two American companies that were struggling to survive after making the choice to re-shore manufacturing operations. I have a few observations on the question of consumer patriotism.
In the first case, Stanley Furniture – a maker of baby cribs – banked on customers’ desire to buy American and pay the price for it. Their cribs sold at a price point that challenged US customers’ sensibilities, with a cost nearly double that of the non-US made product. Compound that issue with a computer system glitch that delayed delivery of cribs to customers, and you’ve got a recipe for disaster. The North Carolina manufacturing operation is shutting down and seeking a buyer for the facility.
The second case highlights the challenges faced by Chesapeake Bay Candle Company. The company opened a manufacturing site in Maryland, bringing a portion of its operations back to the US from China and Viet Nam. The company founders cited challenges with regulatory agencies and labor issues as major obstacles to the successful re-shoring of manufacturing. It’s too soon to say whether the gamble has paid off, but the owners are hopeful.
Three particular observations struck me when reading the article.
1. Supply chain
Stanley Furniture struggled with supply chain issues in a way that Chesapeake Candle did not. It’s one thing to bring manufacturing operations back to US soil, but if your supply chain doesn’t come with it, you’re fighting a losing battle. Stanley Furniture wood suppliers were selling more to overseas markets, and Stanley ended up paying a premium for raw materials, bumping their price to consumers even higher. Chesapeake Bay Candle did not face this problem, as raw materials for candle products were readily available in the US.
2. Market Analysis
No details are given in the article, but it is evident Stanley Furniture erred in its analysis of the market and demand for US-made baby cribs. Many American consumers are price shoppers rather than value shoppers, and Stanley learned the hard way that there is a limit to consumer patriotism. We’ve seen the “buy American” credo pop up in various industries, especially the auto industry, but it appears to me that American consumers are fickle on this point. I have yet to see loyalty for American-made products trump the desire for low-priced products.
3. Labor Issues
Chesapeake Bay Candle explicitly names labor issues as a struggle to their re-shoring effort. They found American workers to have weak skills and a poor work ethic. This is a bit of an unspoken taboo subject, so I’m surprised it appeared in the article. It is part of our national ethos that American labor is the best in the world, but we quietly know this is not always the case. Interestingly, Chesapeake Bay’s challenge with professional talent – chemists and engineers – was not in finding high caliber individuals, but in finding those individuals willing to take lower paying positions at Chesapeake Bay, compared to the high-paying positions offered by big pharma.
If we are serious about bringing more manufacturing back to US soil, then these two case studies reveal at least three factors that have to be taken into account. Supply chains need to be accessible and affordable to small to mid-size companies. An accurate market analysis is required to show what consumers are willing to pay for the value of the “American made” label. Finally, US manufacturers must be prepared to address employee training, engagement, and productivity issues and integrate these matters into their daily operations.
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What do you think is critical to bring manufacturing back the US? Is consumer patriotism a good bet?