Domestic manufacturing doesn’t have to be impractical. It can be profitable if you do it right.
1. Invest in efficiency
To beat overseas rivals with lower overhead, you need to find a way to offset high labor and raw-materials costs. That’s why Kimray, a profitable family-run, Oklahoma City-based maker of oil and gas industry equipment, spends more than 50% of its annual capital budget on new machines that let it do more, faster, with less waste. “This makes us more competitive,” says Thomas Hill, vice president of manufacturing and grandson of the company’s founder.
2. Train your own talent
Like many U.S. companies, Kimray has to contend with a shortage of skilled machinists. Instead of offshoring, the company, which has $230 million in revenue, offers an extensive in-house training program emphasizing math and technology to get new hires up to speed, plus continuing education. It also helps fund college tuition for interested full-timers. “I’m willing to invest in them if they will invest in themselves,” says Hill.
3. Outsource locally
Many companies assume they have to look overseas to get competitive sourcing. But 800razors.com, with headquarters in Boca Raton, Fla., found a venerable old factory in the U.S. that, according to CEO Steven Krane, makes “an amazing, high-quality blade.” Result: His startup, which expected nearly $1 million in revenue for 2013, can accurately tout that its products are made in the U.S. — something its chief rivals can’t. Better yet, manufacturing here keeps shipping and logistics costs down.
4. Turn the tables
Many U.S. companies spend so much time defending their local turf that they neglect opportunities to expand into the backyards of rivals who have been exporting here. If you sell consumer products, now is an ideal time to break into developing economies with a growing middle class, thanks to the high status American products have there. Foreign businesses are also welcoming American-style quality, innovation, and customer service. Ask Kimray. Its biggest foreign market is China.
5. Play the patriot card
Jobs are still the No. 1 concern of many Americans, so if you’re keeping your manufacturing here, look for creative ways to showcase that. 800razors.com does this through its Burn-Free Guarantee, featured prominently on its website: “No skin burn, wallet burn, or American job-loss burn.” Thanks to the slow recovery from the last recession, that kind of message is going to resonate with many U.S. consumers for a long time.
Verne Harnish is the CEO of Gazelles Inc., an executive education firm. Read more of his advice: