Bringing jobs back to US is no easy task

Costly regulations, higher costs and employees who can't do basic math are roadblocks for companies trying to make it in America.

By MSN Money Partner Jun 26, 2014 1:30PM
Credit: © John McDonnell/The Washington Post via Getty Images
Caption: A craftsman prepares wooden bed posts in a furniture factory.By Timothy Aeppel, The Wall Street Journal

Some small and midsize companies that brought manufacturing back to the U.S. in recent years have found it a bumpy road.


Shortages of skilled workers are a common problem, as are difficulties navigating complex regulatory systems that govern modern American manufacturing.


But there are other challenges as well.


Crib maker Stanley Furniture (STLY) misjudged the willingness of Americans to pay more for domestically produced goods when cheaper imports are available, for example. 


Meanwhile, the husband-and-wife entrepreneurs who founded 20-year-old Chesapeake Bay Candle have struggled to find workers who can do basic math.


More than 80 percent of companies bringing work back to the U.S. have $200 million or less in sales, according to the Reshoring Initiative, a nonprofit that encourages companies to return production to the U.S. Many supply parts to bigger companies or, if they sell directly to consumers, are seeking to cut out lengthy supply chains from Asia.


But big companies have the resources and experience to hopscotch around the globe. It's harder and riskier for small firms to do the same.


Here's a closer look at the challenges faced by Stanley and Chesapeake Bay, two companies whose reshoring efforts the Journal has profiled in the past:


U.S.A.-made cribs flop

Stanley Furniture shifted production of cribs and other baby and youth furniture from factories in China to Robbinsville, N.C., its last remaining U.S. production site.


The move, four years ago, was a gamble that Americans would pay a hefty premium for U.S.-made baby gear. Its $800 to $900 cribs, marketed under the patriotic sounding Young America brand, were up against similar-looking imports selling for about half as much.


The effort hit a snag last year when a new computer system delayed many orders -- a dire problem in a business that involves parents shopping for soon-to-arrive babies. The delays "created opportunities for other vendors," says Walter Joshi, vice president of Home & Kidz Furniture, a retailer in Paramus, N.J. 


The company also hit unexpected problems with its U.S.-based wood and veneer suppliers, who have shifted most of their attention to exporting American-grown hardwoods like cherry wood to furniture factories in the Far East. "We were such a small part of their business that we were seeing price increases the Asians weren't," says Glenn Prillaman, Stanley's CEO.


Stanley also misgauged its marketing, overestimating the ability of retailers to persuade customers to pay the big prices. "At the end of the day, it turned out to be a failure because of one reason -- price," says Nathan Friedman, president of Living Quarters, a New York City area furniture store with two outlets that carried the Young America line.


Stanley didn't scrimp on the effort. Micah Goldstein, chief operating officer and CFO at the 90-year-old High Point, N.C.-based firm, estimates the company spent $20 million --between the financial losses and $10 million for advanced machinery for the U.S. plant. One set of new machinery allowed the plant to do work once done by 42 workers with just nine employees.


Young America never made money, and losses at the Robbinsville factory swamped profits Stanley made on the other lines of imported furniture it also sold. For the first quarter, the company reported a net loss of $4.4 million on sales of $21.9 million.


Stanley's Robbinsville factory is now in the process of shutting down and shedding its last 300 employees. Stanley is trying to sell the operation. If it doesn't find a buyer, it will liquidate the plant.


Stanley isn't the only furniture maker to misjudge demand for Made-in-America furniture.

Bruce Cochrane, founder of Lincolnton Furniture Co., attended the 2012 State of the Union address as an example of a manufacturer bringing back jobs from overseas. His company in 2011 reopened a long-dormant North Carolina factory to make dining sets and other types of wooden furniture, and became a poster child of the reshoring trend. But Lincolnton shut down last January, citing a lack of orders.


Twist for candle-maker

Chesapeake Bay Candle co-founder Mei Xu says opening a U.S. factory in 2011 has been "a roller-coaster ride" that continues to bring unexpected turns.


The company, known for scented and textured candles that sell at Kohl's (KSS) and Target (TGT), had previously produced everything in China and Vietnam. The name Chesapeake Bay was originally picked because it evoked a classic American image and represented a place close to where Ms. Xu, a Chinese immigrant, had set up a trading company with her husband, David Wang, in Rockville, Md. She thought it would be relatively easy to open a plant in nearby Glen Burnie.


It wasn't. Regulators demanded costly upgrades to the factory design that pushed her months behind schedule and added to setup costs.


Some industries have struggled to bring factories back to the U.S. because they can't find suppliers of component parts and services needed to run plants. That's not a problem with candles, says Ms. Xu, noting there are plenty of domestic suppliers of items like glass containers, wicks and packaging.


Chesapeake Bay's other big miscalculation only became clear once the plant opened, says Ms. Xu. "Our biggest problem is the employment issue," she says. Chesapeake struggled with high turnover in the early days and has continued to have difficulty finding workers with the skills needed to run machinery.


"We have people struggling with math," she says. "Not middle-school math, elementary-school math. And this includes the supervisors -- not just the line workers."


Finding employees with a good work ethic is also a problem. There have been instances, she says, where the plant announced drug tests would be held the following day and up to 20 percent of workers didn't show up. The company screens workers for drugs when they are hired.


Hiring professionals, like engineers and chemists, pose yet another challenge. Chesapeake Bay, as a small manufacturer, doesn't offer the level of pay and benefits that the large pharmaceutical and technology companies in the area can offer. "We just can't offer the stock options and bigger paychecks," she says.


Yet she doesn't regret her decision. The Maryland factory now employs just under 90 workers and is on track to supply half the candles the privately-held company sells this year. "There are definitely frustrations and times when I question my decision to build this factory," she says. "But when you see more and more U.S.-made candles in our assortment, I feel like it was a wise choice."


Most recently, she adds, having the U.S. factory has helped her reassure customers who were hearing about riots in Vietnam in which workers were attacking Chinese factories. "They're very happy when we tell them that, if anything happens, we can move even more of our production to the U.S.," she says.


More from The Wall Street Journal


Tags: KSSTGT
236Comments
Jun 26, 2014 3:08PM
avatar
It’s time for Lady Liberty to retire. We do not need any more of the world’s tired or poor; huddled masses, wretched refuse or homeless, we have enough of our own. If you have not yet grasped the concept of freedom and liberty in your own country, that’s your problem. We have more than enough of those who have stolen and cheated their way into this country. We do not have enough jobs for our own true citizens. Put the word out… The U.S.A is full; we don’t want you or need you, stay home.
Jun 26, 2014 2:33PM
avatar

""Costly regulations, higher costs and employees who can't do basic math are roadblocks for companies trying to make it in America.""

 

That is the sub headline people.  Regulations come from the govt.  Employees who can't do basic math?  That is a failure of our govt run education system as well as the parents.

 

YET THE LIBERALS CLAIM THESE PEOPLE WHO CAN'T DO SIMPLE MATH DESERVE $15/hr?????

 

 

Jun 26, 2014 2:22PM
avatar

WE IMPOSED on ourselves over the years worker's comp, 40 hour work week, vacation, sick days, OSHA, child labor laws, Air Quality Management Districts, maternity laws, etc. 

 

THEN our leaders open the boarders with no thought that these conditions would make us non-competitive on a world scale against near cheap slave labor. 

 

it never occurred to the "leaders" to use our laws as a standard and impose tariffs against countries far departed from our laws.  zero tariffs for instance to England, austrailia, new Zealand, etc.  such an approach would tend to lift these other countries up from 3rd world status. 

 

MEANWHILE our schools pass kids along in school if they are qualified or not.  no one FLUNKS anymore!  so someone with a high school diploma has to get a screening test from a simple manufacturer to see if they know basic math or English reading or writing?  !?!?!?!?

 

the companies I know who have tried china manufacturing and stopped were/are fed up with poor china quality of manufacture.  shipping issues are only part of the story

Jun 26, 2014 3:53PM
avatar
The Supreme Court ruling in 1982 extending the equal protection clause of the 14th Amendment to include guaranteeing free public education to the children of illegal immigrants is just one of the instances that has increased the desire of illegal immigrants to bring the children to the US.  Arizona, Texas and other states need to challenge that ruling and demand that the US Congress pass laws denying illegal immigrants and their children any benefits of citizenship beyond basic necessities of shelter while awaiting deportation.
Jun 26, 2014 4:59PM
avatar
I say put them illegals all on busses and drive them to Washington DC. Let them out at the Whitehouse.
Jun 27, 2014 1:29AM
avatar
You've got to hand it to this Marxist Community Organizer.
Barack said he was going to transform this country and, By George, he did it in less than 5 years.
Many were surprised to learn that "change" meant destroy.  Many, but not all.

Jun 26, 2014 3:40PM
avatar
The problem is Americans are raised to be very short sighted.  I once had a conversation with a person who bought a new vehicle made abroad.  He gloated about the "price"  I asked him about the long term price?  He was puzzled, not knowing what I meant.  I went on to explain to him about how he just sent money overseas and this money would never return into our system.  How in the long term the cost will be high to both him and other Americans.  Job prospects, tax monies, supporting those Americans that can't find jobs, Less money for investments into America/Americans.  Buy, Demand American made goods and services.  WE ALL ARE CONNECTED in this economy.  No one is immune.  Even the rich will loose if there is no middle class to purchase...
Jun 26, 2014 3:03PM
avatar
How much more proof do we need that the problem in this country is the government, unions and unskilled Americans.
Jun 26, 2014 4:23PM
avatar

This is a problem the government has to fix.

Make foreign produced goods cost the same as american produced goods, and make it easy for businesses to function here.

Right now, imported goods are cheaper, and its very difficult and expensive to abide by all of the laws to run a business in America.

It's that simple.

Jun 26, 2014 2:39PM
avatar

We cannot bring back jobs while the Tax code is the way it is.   We encourage companies to move overseas, practically forcing them to do so.   And while we have the Obama war on business, and the democrats heaping more and more costs, taxes, and regulations upon business you would be stupid to remain in the USA or expand here. 


25 years ago, Apple made everything in the US, today they make NOTHING here.  If a company with the highest margins and very smart people, thinks it needs to move operations overseas, what makes you think the rest won't do the same?


Obamacare is the last straw.  Look at the companies all trying to re-locate overseas to avoid paying for the parasitic democrats. 


Want the US to recover?  This November un-elect every democrat on the ballot.  Fire all of them at every level.  Otherwise get used to the new norm, part time minimum wage jobs. 

avatar
Costly regulations, higher costs and employees who can't do basic math are roadblocks for companies trying to make it in America.


Thanks Democrats!

Jun 27, 2014 8:28AM
avatar
If the Democrats cared as much as they say, they would be doing everything in their power to help these business return to America,  Training, less regulation, less taxes.  Obama and the Democrats are just full of doublespeak, they are driven by power, corruption and out and out lies.  Too bad America, we are now a dumping ground for illegal's so the Democrats can continue their socialist path towards total government control of your lives.
Jun 26, 2014 2:37PM
avatar
Someone simply wanted to make candles in this article and had a hard time because of the tolerant and accepting liberally run state of MD.
Jun 26, 2014 3:21PM
avatar
The Keyword here is Wages. Qualified folks are not going to work for anyone for basically Peanuts. There are far too many ways to make MORE money on the Books and or OFF the Books. If you can't find folks that can perform basic Math Skills, then you as an Employer have already failed the First basic Principle of Business, Location, Location, Location.

If you don't or can't understand what type of Workforce are in your Locale, you darn sure likely aren't going to understand much of anything else. If you cannot even train folks to do basic things, then that's a YOU Problem. They say you get what you pay for, why do folks think it's any different when hiring workers.
Jun 26, 2014 4:12PM
avatar

Want to bring jobs back to America?

1. Final consumption sale tax - the only tax - no person or item exempt- and give the American people the direct wright to decide what they will buy though government (bypass congress). Take taxes off business and business and jobs will move back to America. When the consumer spends $1 on final consumption and $1.5 on taxes for that consumption they will cut government costs and quick.

2. Get rid of energy regulations. Energy needs to be plentiful and cheap.

3. The federal reserve must use an honest and accurate CPI and use the CPI to keep inflation between a deflationary 2% and 0% inflation. This will move money to America.

4. Setup a free trade board to measure restrictions on American exports and be able to apply restrictions on imports as needed. This will help keep other countries from devaluing their currency at America expense.

Here are things we can do economically that would increase growth in our economy to 5% to 7% and dramatically increase employment in America. We have the economic Tec, why the hell we're not doing it is unbelievable.

We have a president that is nut case, a congress that is worthless and a federal reserve that is there of the top 1%. Government economists are a joke!!!!

Jun 27, 2014 9:03AM
avatar

Taxes on wages (in any form – flat or progressive) are the greatest evil of our American Republic. When government is free to steal from you, there are no limits to waste and abuse in government. If a person chooses to work extra hours or two jobs in order to better provide for themselves or their family, they should not be penalized, but that is what happens. The more you make by working harder and longer, the more money is stolen from you, and given to those who spend their lives living off the hard work of others.

The revenue the government needs to provide legitimate constitutional services should be obtained primarily from a national sales tax instead of a tax on wages. All would pay based on consumption, the more you spend the more you pay. The more luxury you surround yourself with, the more you pay. Your choice! A national sales tax system would capture money spent by criminals and by illegal aliens who currently pay near zero in taxes. There would need to be some exemptions: Cars (already have a federal excise tax) Primary Residence/Rental Properties (vacation homes would be subject to tax/rental profit would be taxed) Fresh Food (Preprocessed foods and prepared meals would be taxed – only fresh/fresh frozen/canned goods would be exempt) Insurance Premiums, Health Care & Certified Education.

Adding another layer of tax to a business would not be fair. Businesses would need to be compensated by keeping a portion of the tax to cover the expense of collection and reporting. A percentage of .20 to .05 would be fair.    
Jun 26, 2014 10:08PM
avatar
Government regulations, high corporate taxes, the federal reserve, very poor management in Washington, D.C. for decades, union greed, illegal immigration, poor education system, the E.P. A., printing dollars 24/7, non-stop government spending, and left-wing liberal policies have all put us in the horrible position that we now find ourselves in...
Jun 26, 2014 3:04PM
avatar

To those of you who say jobs have moved oversees because of corporate greed, here are some questions for you.

How far out of your way are you willing to go to buy American?

How much more are you willing to pay to buy American?

How many of you have asked stores to carry American Made items in stock?

Is it really just corporate greed or is it also union and worker greed that caused jobs to move out of this country?

How many benefits are you willing to give up to have some of these jobs back?

How many of you have agreed with government over-regulation of business?

How many of you have stood side-by-side with your employer to fight over- regulation?

Jun 26, 2014 4:49PM
avatar
TRY THIS FOR STUPIDITY        Lets kill the jobs we already have   

 A California appeals court sided with environmentalists over growers on Thursday and upheld federal guidelines that limit water diversions to protect Delta smelt, in a battle over how the state will cope with its worst drought in a century.

The 9th U.S. Circuit Court of Appeals ruled that a lower court should not have overturned recommendations that the state reduce exports of water from north to south California. The plan leaves more water in the Sacramento Delta for the finger-sized fish and have been blamed for exacerbating the effects of drought for humans.

Reaction from both sides was swift in the national political issue. In a blog post, Damien Schiff, an attorney for growers, said the ruling "bodes ill for farmers, farm laborers and millions of other Californians dependent on a reliable water supply."

Efforts to save the Delta smelt, which lives only in the wetlands stretching north of San Francisco, have been described as a humans versus fish battle.


Jun 26, 2014 3:11PM
avatar
The KEYWORD used here is  REGULATION

E P A , F D A, or whatever entity is a hindrance  on  the manufacturing sector

If you let the REGULATORS run wild  they will regulate this country out of competition
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
282
282 rated 2
455
455 rated 3
624
624 rated 4
642
642 rated 5
665
665 rated 6
610
610 rated 7
460
460 rated 8
287
287 rated 9
167
167 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
KOGKODIAK OIL & GAS Corp10
TWXTIME WARNER Inc10
BBBYBED BATH & BEYOND INC10
FOXATWENTY-FIRST CENTURY FOX Inc CLASS A10
COPCONOCOPHILLIPS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.