An article titled "Bettin On Sunnier Days At Matouk & Co." by Mark Patinkin ran in The Providence Journal the other day (Hat tip: Bill Waddell). It provides clear lessons about how US manufacturers and MFG.com suppliers - or manufacturers in any mature industrial nations - can beat outsourcing, thrive and profit.
Matouk & Co. was founded in 1929 by George Matouk's grandfather. The company made fine linens in the garment district in New York. In the 90's, it had set up production in Massachusetts. That's when textile manufacturers in the US began rushing overseas for low-wage labor.
George took over about that time, and he had to make an important decision - move production overseas or defy conventional wisdom and stay put:
"Many U.S. firms were shifting manufacturing to low-wage countries, reducing stateside operations into design and marketing only. It had been going on for years, but with advances in shipping and communications, globalization was easier than ever. Matouk resisted. He resolved to keep making textiles in America. Graduate school friends told him he was crazy."
George's reasoning was part altruism ...
"Outsourcing, (George) said, was indeed the rallying cry of American manufacturing 10 years ago. It was a quick way to boost shareholder value. But Matouk felt other values were being neglected. 'There wasn't any attention paid to the larger role an enterprise could or should play within society,' he (says). He did'’t like watching America's manufacturing base decimated and key skills outsourced to nations that could one day be our adversaries."
... part pragmatism ...
"He knew many jobs were destined to go abroad. 'That's a natural part of the capitalist system,' Matouk said. 'But I think a lot of jobs could and should have stayed here had companies approached their investments with a broader point of view.'"
... and part rational (re: LEAN) strategy:
"Matouk, however, felt he had a niche that could be competitive here. Had his firm made shirts or jackets, it would be different –– those, he said, are small pieces of fabric that take a lot of labor per item. But if he invested in modern equipment, and aimed to make luxury bedding and towels carried by stores like Neiman Marcus, Matouk felt a U.S. workforce could compete with overseas rivals.
Another local advantage was the market for customized items. Firms with foreign factories take months to deliver on those. By keeping production here, with ready stock, Matouk would be nimble enough to turn around personal orders in days.
I asked why he didn't at least consider going to a Southern state with lower costs. In part, said Matouk, it was because his New Bedford workforce had a culture of loyalty and hard work."
And did the strategy pay off?
"But it began to work. In time, the company outgrew its New Bedford space. In 2005, Matouk bought a more modern building in the Fall River Industrial Park, and today, his workforce has doubled to 70 people. In 1995, he had $3 million in sales. Today, it's $12 million.
Even (a) new solar energy system, he said, is part of leveraging U.S. opportunities to be competitive. It cost $700,000, said Matouk, but $500,000 was subsidized by state and federal grants, much of it stimulus money. Seeking creative partnerships with government, he said, is part of a successful U.S. strategy. Another example: many of his employees have been schooled in "lean manufacturing" and English-as-a-second-language as part of the Massachusetts Workforce Training Fund. Both skills have improved efficiencies."
So the solutions are recognize value, consider Total Cost of Ownership, define a niche, invest in technology, form & maintain strong relationships with customers and partners, and value and train your employees - all based squarely upon principles of Lean and sound business acumen.
These are strong, important lessons for all small- and medium-sized manufacturers competing against low-wage threats and crowded markets. You can compete, and thrive against any competition - regardless of where it is.
And if you think Matouk is an exception, look at American Apparel - US-based production, thriving while many have pursued low-cost countries. If they can do it, why can't you?