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Sunday, July 22, 2012

Small U.S. Manufacturers Give Up on 'Made in China'

When Sonja Zozula and Jerry Anderson founded LightSaver Technologies in 2009, everyone told them they should make their emergency lights for homeowners in China. After two years of outsourcing to factories there, last winter they shifted production to Carlsbad, Calif., about 30 miles from their home in San Clemente. “It’s probably 30 percent cheaper to manufacture in China,” Anderson says. “But factor in shipping and all the other B.S. that you have to endure. It’s a question of, ‘How do I value my time at three in the morning when I have to talk to China?’ ”

As costs in China rise and owners look closely at the hassles of using factories 12,000 miles and 12 time zones away, many small companies have decided manufacturing overseas isn’t worth the trouble. American production is “increasingly competitive,” says Harry Moser, founder of the Reshoring Initiative, a group of companies and trade associations trying to bring factory jobs back to the U.S. “In the last two years there’s been a dramatic increase” in the amount of work returning.
LightSaver executives no longer spend hours on the phone with ChinaPhotograph by Michael Schmelling for Bloomberg BusinessweekLightSaver executives no longer spend hours on the phone with China
An April poll of 259 U.S. contract manufacturers—which make goods for other companies—showed 40 percent of respondents benefited this year from work previously done abroad. And nearly 80 percent were optimistic about 2012 sales and profits, according to the survey by, a website that helps companies find manufacturers. “A decade ago you just went to China. You didn’t even look locally,” says Ted Fogliani, chief executive officer of Outsource Manufacturing, the San Diego company working with LightSaver. “Now people are trying to come back. Everyone knows they’re miserable.”
For LightSaver, the decision was simple. Neither of the founders has ever been to China, which made communicating with manufacturers difficult. Components that were shipped from the U.S. sometimes got stuck in customs for weeks. And Anderson had to spend hours on the phone to explain tweaks in the product. “If we have an issue in manufacturing, in America we can walk down to the plant floor,” Anderson says. “We can’t do that in China.” Anderson says manufacturing in the U.S. is probably 2 percent to 5 percent cheaper once he takes into account the time and trouble of outsourcing production overseas.
Dana Olson makes a living convincing small manufacturers that it pays to produce domestically. About 10 percent of the roughly 60 companies that his Minneapolis firm, Ecodev, has worked with have moved manufacturing to the U.S. or decided not to send it overseas, and another half-dozen are considering similar moves. “There’s a growing sense, with the economy doing what it’s doing, of U.S. companies wanting to produce in the United States,” says Olson. “It’s very important to them to have ‘Made in the U.S.A.’ on their label again.”
Since 2008, Ultra Green Packaging, one of Olson’s clients, has used manufacturers in China to make compostable plates and containers from wheat straw and other organic materials. By yearend, Ultra Green expects to start producing the bulk of its wares at a plant in North Dakota to cut freight costs and protect its intellectual property. “They’re infamous over there for knocking [products] off,” says Phil Levin, chairman of the 10-employee company. “All anybody needs to do is find a different factory and make a mold.”
For Unilife (UNIS), moving production to the U.S. helped it win regulatory approval for an important product: prefilled syringes with retractable needles that make it almost impossible for medical personnel to accidentally stick themselves. Although the company used Chinese manufacturers for earlier offerings, syringes preloaded with medications are subject to stringent U.S. Food and Drug Administration rules. So in March 2011, Unilife began making its syringes at a $32 million, 165,000-square-foot plant it built in York, Pa. “The very thing in the U.S.A. that oftentimes we complain about—the complexity of the rules and the regulations—works for us,” says CEO Alan Shortall. “FDA compliance is the main reason we’re here.”
Even with strong Mandarin skills, Brian Bethke grew frustrated with manufacturing in China. The co-founder of Pigtronix, which makes pedals that create electric guitar sound effects, discovered that he couldn’t adequately monitor quality at Chinese factories. The original idea for the company was to develop products in the U.S. and make them in China, where Bethke was living. But after several years of finding technical glitches in as many as 30 percent of pedals, the company decided to move production to Port Jefferson, N.Y. At its small factory in a Long Island office park, the company can run multiple tests on its products and even has a guitarist play each of the 500 to 1,000 pedals it sells monthly before they’re packed and shipped.
U.S. production lets Pigtronix more extensively test its guitar pedalsPhotograph by William Mebane for Bloomberg BusinessweekU.S. production lets Pigtronix more extensively test its guitar pedals
Pigtronix’s move back, completed three years ago, has helped improve cash flow. While manufacturing pedals in the U.S. can cost anywhere from three to six times as much as it does in China, Bethke says Pigtronix benefits from not having capital tied up in products that spend weeks in transit and then pile up in inventory. “In China, you have high minimum quantities you have to order, so you’re building a couple thousand of every guitar pedal,” Bethke says. “Your carrying costs start to get huge.” Today the company only makes those pedals it’s confident it can sell quickly.
While goods for U.S. consumers are less likely to be made in China these days, overseas production may still make sense for companies that plan to target foreign markets. “What we’re seeing is regionalization, buying stuff from manufacturers in the region where you’re going to sell it,” says Michael Degen, CEO of Nortech Systems (NSYS), a contract manufacturer based in Wayzata, Minn., that has eight factories in the U.S. and one in Mexico. “It’s very noticeable. … We’ve seen movement in terms of manufacturing in country for country.”
The bottom line: Although manufacturing in China can cost a third what it does in American factories, small companies are bringing production back to the U.S.

By and on June 21, 2012

5 Fast Fixes for Business Knowledge Optimization

5 Fast Fixes for Business Knowledge Optimization
Project planning can be incredibly time-consuming and tedious, but it's worth it to keep a project running smoothly. A critical piece of the plan is creating your team. This task becomes easier when you know exactly who is available -- with the skill sets you need -- and what their schedules will be for the duration of the project.

Can you tell me exactly where your employees are and what they are doing? Do you know what the top 10 most profitable projects were for your company last year? Can you make a bid on a project that has little or no margin of error? If you can't answer these questions, then you should know that someone else can and the business advantage lies with them.
Fortunately, gaining this type of insight is not particularly difficult if you know how to use the right tools to do it. Following are five ways to make sure you have the detailed, easily accessible insights necessary to remain competitive in an increasingly fast-paced business climate.
1. Track Projects Individually
Tracking employee time spent on projects is great, but you will reap maximum benefit when you track each project separately. This allows you to view each project as a unique element in company profitability.
This insight is incredibly valuable when allocating resources because you will know the parameters for each project relative to the current availability of the company. While too many metrics can paralyze decision-making, differentiated metrics allow you to execute projects with surgical precision.

2. Monitor Employee Tasks and Changes in Productivity

In any organization, the immediate benefits of knowing what your employees are doing at any given point should be quite obvious: You want them working on tasks that are actually beneficial to the company.
However, if you mistakenly believe that any forward progress is beneficial, roles become static and repetitive. Companies that have the same employee doing the exact same job for an extended period of time are quite frankly failing themselves and their employees.
While roles might not be dynamic, humans are. Employees might become better at certain tasks over time and excel in areas outside their traditional roles.
If you are not paying attention, you could lose out on productivity. Your employees will get bored and dissatisfied quickly. Implementing a system that allows employees to track time against specific tasks will allow you to see where they are most effective. Odds are that's what they enjoy doing best.
Now, don't go changing employee job roles every day, but do consider a change when the evidence suggests that they've honed skills in a new area.

3. Build a Database of Prior Projects

In the long run, having a backlog of your projects will be incredibly valuable, though it takes some time to build. It will allow you to make estimates with pinpoint accuracy. With this information, you can determine how many people it normally takes to finish a project; improve accuracy of your budgets based on scope; and perfect timelines based on overall project parameters.
Even the least-efficient projects become valuable because you can glean just as much information from them. You will know what did not work, what factors caused you to go over budget, and learn from the mistakes. Maintain the backlog well, and make sure it is easily accessible, because it can reduce the margin of error on your most-important business tasks, and save time and money.

4. Always Know Your Available Resources

Project planning can be incredibly time-consuming and tedious, but it's worth it to keep a project running smoothly. A critical piece of the plan is creating your team. This task becomes easier when you know exactly who is available -- with the skill sets you need -- and what their schedules will be for the duration of the project.
It would create unnecessary stress if you, say, found out after making an assignment that the employee in question had already scheduled a two-week trip to Acapulco right in the middle of the project.
If you have an automated project management system, employee schedules are readily apparent and any requests for leave will be noted.
You will also know the tasks that other employees are working on so you can avoid stretching resources too thin or allocating individuals to tasks for which they aren't well suited.

Constantly Monitor Resource Use Relative to Budget and Schedule

This is probably the most useful feature of tracking time to individual projects, as it ensures you do not waste time or money -- as in, ever. If you compare time and resources spent on a project versus percentage complete, you can see which projects are absorbing too many resources to remain profitable.
This allows you to redistribute assets to projects as necessary or even kill projects that are too far gone to benefit your company. It is always better to determine issues early on, and a dynamic tracking system provides that insight. Sometimes it's best to cut your losses and move on; costs can quickly spiral out of control, causing your situation to worsen.
These tactics do not cost 5 Ways to Reduce eCommerce Costs. Click to download white paper. much, if anything, to implement and are not particularly difficult to monitor -- yet they can drastically improve business operations. Efficiency is the key to success, and failure to maintain a razor-thin margin of error can result in lost profits and clients. Implement these fixes early in the lifecycle of your business and enjoy the benefits for years to come.