IN-DEPTH: Domestic manufacturing

Mark Gracy talks about his Steubenville, Ohio, factory like a proud parent.

“We take raw steel coils on one side of our plant and ship out finished product on the other,” he said, referring to the 3-year-old, 38,000-sq.-ft. facility where his Bully Tools company makes long-handled tools, including shingle removers and shovels.

Eventually, the topic turns to domestic manufacturing in an outsourced world. “Back in the late 1980s, I saw everyone was outsourcing,” he said. “In extreme cases, companies were closing up altogether and moving.”

“I hate it when people wrap themselves in the flag, but I thought it was a mistake to have all our manufacturing go overseas,” he said.

Gracy is part of a proud minority -- a domestic manufacturer of made-in-the-U.S.A. products. Across the industry, companies like Bully Tools point to the growing advantages of domestic manufacturing. Invariably, they point to the ability of a domestic plant to respond to customers’ demand for speed and their own increasing need for control and flexibility.

Hand torch manufacturer Worthington Cylinders operates 10 plants -- six in the United States, one in Canada and three in Europe.

Worthington VP sales and marketing Dusty McClintock sums up the advantage for domestic manufacturing in one simple phrase: “low-risk supply.”

The specific drawbacks of international supply chains extend beyond “three weeks on the water,” he said. Containers can fall off barges. Strikes can disrupt major ports. Bad weather can seriously delay shipments.

“We think the retail buyer is becoming more sophisticated,” he said. “Just-in-time delivery has become key during this economic current. No one wants to hold inventory.”

On top of that, domestic manufacturers point to resurgence in what some call “pocketbook patriotism,” the willingness of consumers to seek out made-in-the-U.S.A. products as a way to help their country through economic challenges.

And also, adjustments to the Chinese government’s VAT tax has somewhat eroded the disparity in costs enjoyed by offshore manufacturers.

The topic clearly generates passion among businesses and consumers alike.

It is far less clear, however, if the perceived advantages of domestic manufacturing and a rally-around-the-flag consumer base are leading to a significant back-to-the-U.S. movement.

Arecent survey conducted by the American Hardware Manufacturers Association on domestic manufacturing showed that more AHMA members felt economic conditions are making domestic manufacturing “less attractive” than “more attractive."

The survey, conducted in early September with the participation of Home Channel News, showed three times as many companies said they were more likely to move manufacturing overseas than to move overseas manufacturing to the United States.

Beyond survey numbers, the trade imbalance with China speaks volumes, according to AHMA president and CEO Timothy Farrell. “AHMA is deeply concerned about the accelerating decline in our country’s balance of trade with China,” he said.

Back in 1985, the United States and China both exported about $3.86 billion in goods to the other country. In 2008, Chinese goods had a $268 billion imbalance.

“While we recognize the realities of the global economy and the need for some low-cost product sourcing, we are also very much aware and concerned about the negative effects of excessive dependence on foreign suppliers, not only on our industry but on the American economy in general and on our country’s ability to maintain high employment levels in the manufacturing sector,” Farrell said.

The numbers don’t tell the whole story. Some see a shift in the manufacturer’s mind-set, despite the numbers.

“I’ve been converting companies back to U.S. manufacturing for several years now because it has been the smart thing to do and the right thing to do,” said Richard Pontz, president of the Lawn & Garden Performance Group, a consultant for manufacturers.

Domestic manufacturing used to be rejected out of hand by companies looking to bring products to the U.S. market, Pontz said. “Sometimes, people look at me like I’m nuts because they’re thinking of the business model from 10 years ago,” he added. “They haven’t revisited it.”

One thing going for domestic manufacturing is psychology. People want to be responsible in the face of near-10% unemployment.

“I’m not trying to be isolationist,” said Pontz. “But to just close the door without even looking at the U.S. is not being socially responsible.”

When Grabbit Tool of Littleton, Colo., finally considered domestic manufacturing in 2008, the maker of tent stakes and tarp holders took action.

“Conventional wisdom told us we had to produce in China,” said Jim Doherty, VP sales. “Simple calls to local plastic injection houses in Denver quickly told us otherwise.”

Doherty describes the advantages of domestic manufacturing in three categories: finances, quality and psychology. “It feels so good to be making product right here in Denver,” he said.

The unarguable drawback of overseas manufacturing is the great distances products must travel to reach their markets and the time involved in the process.

“Nobody wants to carry inventories because of the high cost of carrying them,” said Sheldon Betsalel, executive VP from Saddle Brook, N.J.-based Arrow Fastener. “They want small quantities on a constant delivery basis. As a domestic manufacturer, we can control that just-in-time supply to our customers.”

As to quality, the made-in-the-U.S.A. logo has long been a symbol of quality to many consumers. And that perception appears to have a long shelf life.

Brian Kincaid, Azek’s VP marketing, said it’s not fair to paint all foreign products with the same brush, but negative headlines have an impact. Case in point: the flawed Chinese drywall of 2008.

“We as a company find that consumer peace of mind about our products comes from our ability as a management team to be located at or near our factories to keep a close eye on what is happening,” said Kincaid.

Azek Building Products operates a 1 million-sq.-ft. plant in Moosic and Scranton, Pa.—the largest cellular PVC manufacturing facility in the world, according to a spokesperson.

Aquestion from the recent AHMA poll asked member companies how American-made products compare in quality to imports. A full 71% responded “better,” compared with 27% “about the same,” and 2% “not as good” -- a ringing endorsement for made-in-the-U.S.A. products.

But according to some, such a generalization is difficult to make, given the variety of products and price points targeted by foreign products.

“I don’t think quality is as much a factor as the [domestic] manufacturers want to make it,” said Pontz. “That might have been an issue a few years ago. They’re getting much better.” The issue is shipment time, he added. With a domestic-manufacturing model, “you don’t have six weeks on the water,” Pontz said.

One company that has spent decades studying quality and branding is Stanley, described by spokesman Todd Langston as a “global” company with customers all around the world. Stanley makes about a third of its products in the United States, including the Fat-Max tapes near its headquarters in New Britain, Conn. Stanley also has factories in Poland, Mexico and China.

“Geography doesn’t equate to bad quality,” said Langston. “The manufacturer takes the responsibility for making a good product. If we manufacture in China, Poland or South America or the United States, we’re going to control the quality.”

Stanley is one of several companies stepping up its packaging to indicate “Made in the U.S.A.,” where possible.

“There’s a renewed interest in made in the U.S.A. and a renewed loyalty to products made in the U.S.A.,” he said. “And we sense that.” As a result, packaging for made-in-the-U.S.A. products or made in the USA with global components is “really going to spell it out now,” he said. What’s being promoted with the tag he added, isn’t quality, but rather “the pride of making it here.”

Channellock, the Meadville, Pa., maker of hand tools, will be stepping up its made-in-the-U.S.A. pedigree in a campaign that kicked off in August and is set for a bigger splash in November. The campaign includes the American flag and the phrase: “Fiercely made in Meadville, Pa.”

“I would definitely agree that there is a resurgence [in made in the U.S.A],” said Ryan DeArment, VP sales and marketing. “We don’t want to hide behind the flag, but we always wanted that to be a factor in the decision.”

Back in Steubenville, Ohio, Bully Tools’ Gracy said he has the feeling of being ahead of the curve on the resurgence of interest in domestic manufacturing.

The company made the jump from 22 products a year ago, to a catalog of 142 products. “We predicted that people would want to buy an American-made product,” he said. “I realized that early on.”

One of those products is a shovel with the letters USA cut into the blade. “A lot of customers use that as a display in their store,” Gracy said.