 While moving jobs overseas has not necessarily fallen to the wayside, some U.S. manufacturers have begun to move their off-shore operations back to America.
Take Peerless Industries Inc., Melrose Park, Ill., for example. Peerless manufactures and distributes audio visual (AV) flat panel mounts, projector mounts, ceiling mounts, AV carts and stands, environmental enclosures, AV furniture and AV accessories, including screen cleaners, cables, etc. The company makes more than 3,600 types of mounts that currently are used in 28 niche vertical markets. For more than 45 years, Peerless has set the industry standard and created firstin- category solutions that support and enhance the functionality and enjoyment of AV technology. The company’s commitment to safety is unmatched, having driven the establishment of U.S. safety standards for AV mounts more than a decade ago with Underwriters Laboratories (UL). Today, Peerless runs one of only two dedicated in-house UL testing facilities in the United States.
Peerless started in the 1940s manufacturing “rabbit ears” antennas for early television sets. The company has not strayed from its roots and has been building its name to the point that it is now the recognized world leader in engineered solutions to mounting any type of audio visual equipment, according to Brian Eble, vice president of marketing at Peerless. “We have seen explosive growth with the new flat screen television market and we continue to look forward to engineering, building, coating, assembling and marketing the best television mounts in the world,” says Eble. Peerless mounts are used by in both commercial and residential installations worldwide, including installations in schools, universities, offices, healthcare facilities, hotels, sports arenas, training facilities, retail environments and in homes. According to Eble, outsourcing really took off for the company in 2003 and 2004, but Peerless had itsown facility in Mexico since 1994. Eble says Peerless had a partnership with a manufacturing facility in China, but unlike the “lick-and-stick” business (where they just lick a label of your logo and stick it on their product), this facility only manufactured Peerless products. “Engineering was done in the United States, but Peerless oversaw the quality and manufacturing in China,” says Eble. “We still do outsource some of our non-branded products through China. But today all manufacturing was brought back in house in the United States.”
Peerless decided to bring manufacturing back to America, according to Eble, because it had a large 11-acre facility in Melrose Park that was underutilized. “Management studied the cost of manufacturing here vs. manufacturing in Asia or local outsourcing and felt we could be just as
cost effective manufacturing here,” he says. “The simple math of spreading the fixed costs of our current facility over a larger number of units made lowers the unit cost. The rising cost of transportation and the long lead times associated with shipping product from overseas were alsomajor factors in this decision.”
Peerless’ decision to move its manufacturing back to the UnitedStates falls in line with a study released earlier this year by Archstone Consulting, a management strategy and operations consultancy in Stamford, Conn. The study says that companies were contemplating the re-establishment of manufacturing domestically, amid rising costs and other strategic challenges within the off-shoring model. It also reveals that as companies reassess their manufacturing and supply chain strategies for today’s global economic environment, the trend may create significant job opportunities in the United States.
“For years, the concept of offshoring, or moving production and/or sourcing operations to a foreign country, has been the mantra of any supply chain manager looking to cut costs,” says John Ferreira, principal and global manufacturing industry practice leader, at Archstone. “Now, amid volatile oil prices and an uncertain global economic future, this analysis no longer is a certainty. Furthermore, companies that will commit to domestic manufacturing can spur much-needed improvements in customer service, innovation and job creation—especially when servicing the large domestic market.”
The Archstone study revealed that in the last three years manufacturers have seen a significant increase in costs related to off-shoring manufacturing for export purposes rather than in country demand, which include:
*Ocean freight costs have increased 135 percent, highlighting risks and cost volatility.
*The global commodity price index has risen by 27 percent.
*The Chinese Yuan has gained 18 percent in value compared to the U.S. dollar.
*Chinese manufacturing wages have risen by 44 percent. In addition to the rising costs of conducting business on a global basis, the study found several soft cost issues, which affect the true cost of off-shoring, including:
*Slower cycle/delivery time (59 percent of respondents).
*Reduced supply chain flexibility and responsiveness (56 percent of respondents).
*Lost visibility, coordination and control over the supply chain, including quality (50 percent of respondents).
*Bottlenecks in logistics networks(e.g., ports, transportation) (50 percent of respondents).
“The perceived 25 to 40 percent cost savings associated with off-shoring has previously been made possible by low labor costs, cheap commodities and favorable exchange rates—factors that no longer exist in today’s marketplace,” continues Ferreira.
The study found that almost 90 percent of the companies surveyed are considering changing—or have begun changing just like Peerless has—their manufacturing and supply strategy and are being more and more selective in making off-shoring decisions. U.S. manufacturers have become increasingly aware of the need for a more sophisticated total cost model that considers factors such as supplier price and terms, delivery costs, operations and quality costs, customer-centric supply capabilities and other situational costs that arise.
“Manufacturers who approach sourcing decisions with a holistic perspective—evaluating market and customer demands and competitive strategy against a comprehensive knowledge of total cost—will likely increase revenue and lower costs, giving U.S. companies a powerful competitive advantage,” says Ferreira.
Bringing It Back
To bring its manufacturing back into the United States, Peerless has or will be purchasing additional metal fabrication, powder coating and assembly equipment to facilitate the work coming back to the United States, says Eble. “We are systematically moving product after product from Asia and bringing it back to the United States. We have processes in place to validate that each product made will be equal to or better than our product from Asia,” he says. Eble also reveals that Peerless will continue to manufacture in Mexico for the domestic Mexican market, but that the company has already shifted many products back to the United States that are sold in markets other than Mexico.
Peerless hired Steve Jayhan as the director of manufacturing. The immediate task was to upgrade the capabilities of the powder line and manage the insourcing project.
Peerless’ current powder coating line is a little more than 1,400 ft in length using a 3" I-beam conveyor. The three-stage washer is 112 ft long to accommodate the line speed of 20 fpm. The company’s three application booths are housed in an environmental room that doubles as the powder storage room. Jayhan says that Peerless has just purchased a small spray-to-waste booth to accommodate small and sample runs. Their oven is a gasfired convection oven and is 242 ft long to allow over 20 minutes in the oven if they are at the top speed. He also says that the company has numerous racking systems and are building more every month.
Peerless uses Nordson Equipment for the application in all three of its current booths. Two of the three booths are reclaim booths that have been retrofitted with Nordson guns. When it came time to build the new line about 8 years ago, Eble says that Peerless wanted to increase the line speed to 20 fpm, and Nordson provided the best engineered solution at that time and therefore was awarded the third booth as well as the retrofit of the original two reclaim booths.
When asked if Peerless does any custom coating, we were told that they do not at the present time. They have the one powder coating line that has a threestage washer and are in the process of adding a second line with a fivestage washer with Coral Chemicals as its source for washer chemicals. Eble says that Peerless locally outsources for e-coat, anodizing, black oxide or zinc plating. Peerless’ product line has four major colors: high and low gloss black, gloss white and silver, which are provided by DuPont Coating Solutions.
When it comes to masking, Jayhan says that they do mask all threaded holes and some other parts that have critical dimensions. “Typically we will be able to keep up with this on line but at times, there are parts that need to be ‘prepped’ so as to not slow the line down on other jobs on the line,” Jayhan says. He says they use more silicone plugs than anything else but are starting to design fixtures to mask product to alleviate adding personnel simply to mask product. Peerless in the process of designing a hook that will mask three holes on one part and help keep the part stable in the process, allowing them to increase the density without changing the limiting factor on this job. “We therefore will be able to increase throughput by about 30 percent with this new rack. We have already done this with several other products in 2009,” Jayhan reveals.
Eble concludes, “This most recent initiative to bring jobs back to the U.S.A. is indicative of the ownership and management of our company commitment to our employees and our country. We can make it in the United States, provide new jobs and remain competitive—even cutting costs on many of our products. It can be done, and Peerless is committed to making it happen.”
Sharon Spielman is editor of Powder Coated Tough magazine. She can be reached at 847-302-2648 or via email at sspielman@powdercoating.org.
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