Production issues prompt U.S. firms to ‘reshore' jobs

(MINNEAPOLIS) STAR TRIBUNE

Awilda Isaac, left, works on a printer being assembled at Datacard Co. in Minnetonka, Minnesota. The company, which recently moved a production line from a plant in Malaysia to Minnetonka, is among several in the state that have moved manufacturing operations back to the States.

MINNEAPOLIS — Two years ago, Calibur11 in Duluth did what many other strapped manufacturers looking to prune costs would do: Turn to China.

But the maker of game console cases is happily shifting its manufacturing operations back to the United States, discovering that doing business overseas was more trouble than it was worth. One supplier lost the molds for the company's decorative shells; another demanded a bribe. Quality problems abounded.

"We just kind of got kicked right in the teeth dealing with China. It wasn't any fun by any means. But it helped us learn to bring stuff back to the United States," said Coy Christmas, Calibur11 owner.

The hassle of operating abroad has triggered some companies to move production stateside, a move called "reshoring" by some. Coming home not only bolsters the speed, quality, and simplicity of doing business, it's also more economical than it used to be. Average wages in China have jumped 10 to 25 percent a year, hitting $4 to $6 an hour in some plants.

Add in shipping and high fuel costs, and offshore manufacturing is no longer as much of a bargain.

The return of offshore production to America has emerged as a surprising silver lining in the U.S. economic recovery. The government doesn't track corporate reshoring, but experts say they are hearing of more companies bringing work back.

"Lots of very encouraging anecdotes and obviously the more of that we see, the better off we all are," said Alan Tonelson, researcher for the U.S. Industry and Business Council.

Mark Phillips, commissioner of the Minnesota Department of Employment and Economic Development, said companies that have moved jobs back to the United States, such as Calibur11, Datacard Co., and 3M Co., have different reasons for the change. But all have discovered that operating in China, Mexico, Poland, and other countries is not always rosy.

"When you are dealing across the ocean, there are logistical issues and language issues," Mr. Phillips said. "It's not perfect [overseas]."

Mr. Christmas called Calibur11's experience in China a nightmare, with one vendor losing $700,000 in tooling equipment and another demanding a $150,000 "fee" to release his product.

"And then we found out our product was being sold on the black market. It's been a horror story," Mr. Christmas said.

Darlene Miller, owner of a high-precision machine shop in Burnsville, Minn., said her company always had quality issues in China.

In 2006, she hired a Chinese contractor to make machine blades with exacting specs.

But each shipment turned up flawed, with some blades not uniform, made of the wrong material, or falsely labeled "certified." What complicated matters is that she had to buy a year's worth of blades at a time.

Miller spent thousands on an outside testing lab, but was at her wit's end after three years. "We found a Wisconsin company to make the blades. And without the shipping, testing, and reject costs, they actually beat the price in China," she said.