Made in the USA: Regulations Keeping Jobs Overseas?
GLEN BURNIE, Md. - Across the country hundreds of companies are helping reverse a long trend of sending American manufacturing jobs overseas.
They're doing what's known as reshoring, which is bringing production back home to the United States instead of chasing cheap labor and other incentives in developing nations.
Bringing Jobs Home
During the last four years about a 100,000 jobs have returned to the United States, according to the Reshoring Initiative, a non-profit group based in Chicago.
Many factors contribute to the United States regaining a competitive edge over countries like India, Japan, and China.
"Chinese wages have been rising, expressed in U.S. dollars, at 15 to 18 percent per year, for the last 18 years," Harry Moser, founder of the Reshoring Initiative, said. "Whereas in the U.S., it's stayed stationary."
Other reasons include delivery time, quality, and innovation.
"Turns out you can't innovate the product very well if you don't manufacture the product," Moser said. "So when you can bring together the engineering manager, the engineer and the factory worker, get them together as a team, improve the product, improve the process by which the product is made, it works a lot better."
Unplugging from China?
Chesapeake Bay Candle Company opened its first domestic manufacturing facility in 2011.
"We've created 80 jobs in the last three years," Mei Xu, the company's owner and CEO, said.
Xu started the company in 1994 in her Maryland basement.
"We were so impatient waiting for molds to fill our candles with. We saw a lot of soup cans laying around the kitchen and we said, 'Wow, these are great molds,'" she said. "So we used them. The first set of samples were made with those molds."
Despite its U.S. origins, Xu opened her first factory overseas because of the cheaper labor cost.
"If you have a mold, you first finish it by pouring wax in it and then you have to manipulate the texture so that it achieves the desired result," explained Xu. "So each candle would be priced at $40 to $50 and its not going to be a market that can accept that."
The company grew quickly for about 10 years, until the 2005 recession blew in.
"Consumers stopped purchasing as they used to in 2005 or before that," Xu said. "So our retail partners demanded price reduction."
That change caused Xu to re-evaluate her decision to do business from China. In the end, it made sense to bring a big part of the company's manufacturing back home.
Reshoring, however, can be risky and many attempts are unsuccessful. Some experts blame those results on the U.S. government.
"On the one hand there's the reshoring initiative, which is this push to bring high paying manufacturing jobs and activities back to the U.S.," Greg Husisian, an expert on international trade issues, said.
"At the same time the U.S. government has, since probably about 2008, gotten really serious about enforcing U.S. regulations governing exports and international conduct," he explained. "People are being encouraged to bring their manufacturing back here, but they don't realize that the cost of complying to these regulations and managing the risks of them can be quite substantial. So they work at cross purposes."
The opening of the Chesapeake Bay Candle, Glen Burnie facility, was delayed for six months because of the process of getting a permit.
"They looked at us as if we're crazy and said, 'Um, we haven't given a license in two decades, but we think if you look at hospital code, school code, and restaurant code, you're safe,'" Xu said.
During the entire delay, they still had to pay for the facility and key staff members although the doors remained closed. Eventually the permits came through, and the Chesapeake Bay Candle Company became one of the success stories.
"If we hadn't moved manufacturing back, we wouldn't be growing like we're growing," Xu said.
Home Grown Business
About 50 percent of the company's business currently comes from the Glen Burnie factory. But after adding a new production line, they have the ability to triple that number in the future.
"Word has been out that we have moved back, and we have people knocking on our doors saying, 'Can you produce for us?'" Xu said. "There are so many companies that we wouldn't dream of giving us an order, easily, because they require made in the U.S.A."
Xu also has a message to the government as they encourage more companies to come home.
"Do not become a business prevention if you are trying to be a business creation center," she said.