The Return of ‘Made in the USA’

JSTOR Daily reports…

It’s hard to guess what President Lincoln might have thought about his namesake toy—Lincoln Logs building sets—being manufactured in China for decades. But Honest Abe would surely relish recent news that K’NEX Brands LP, Pennsylvania-based maker of the small wooden playthings, now produces them in Maine.

The toymaker is not alone. In markets as diverse as hosiery, flooring, refrigerators, grills, and plumbing supplies, companies are reevaluating their offshore supply chains. Sometimes the shift in thinking is prompted by health scares associated with foreign-sourced products; for example, pet food recalls helped to fuel an upsurge in US-made edibles for dogs and cats. During the economic slump, many clothing and furniture customers pressured sellers to support domestic factories by stocking American goods. There are also new sales opportunities: in 2013, Walmart promised to boost its purchases of US-made products for Walmart and Sam’s Club stores by $50 billion over the next decade. The retail behemoth followed up last summer with an unprecedented “open call” for more than 500 American manufacturers to pitch their wares to its executives. “This is a commitment around manufacturing and more economic renewal,” said Walmart US’s former chief merchandising and marketing officer Duncan MacNaughton. “We see it as a critical issue for us in the American economy.”

His view appears to be shared by a large majority of ordinary shoppers. According to a 2013 survey by Consumer Reports National Research Center, 78 percent of Americans preferred to buy a domestically made product over an identical one made elsewhere. Over 80 percent of those committed to buying American cited the importance of retaining jobs and strengthening US manufacturing in the global economy, while 60 percent expressed concern about overseas labor practices or believed that American goods are superior to foreign substitutes. In another shopper survey conducted by Perception Research Services International, four out of five respondents said they notice “Made in the USA” claims on packaging—and 76 percent of those who noticed the claim were more likely to buy the domestically produced product.

A key impetus for the “Made in the USA” resurgence is more about business expenses than survey results. Manufacturing abroad—especially in China—no longer offers the cost advantage that was, until recently, overwhelming. Citing “rising Chinese wages, higher US productivity, a weaker dollar, and other factors,” a 2011 Boston Consulting Group report predicted that the cost gap between the US and China will close within five years, bringing to an end the days of routinely viewing China as “the default option.”

But despite all the good news for devotees of buying American, the wave of companies returning to US factories is still far short of a tsunami. Some firms remain nervous about making long-term investments in stateside plants, equipment, and personnel. According to a recent report in theWall Street Journal, “many US-based designers of consumer products over the past two decades have grown comfortable contracting with overseas manufacturers. Some doubt they can get the same expertise, efficiency and flexibility in the US.” Companies also recognize that the costs of American production, while currently on a downswing, could escalate down the road. Ultimately, the issue for such holdouts boils down to this: does “Made in the USA” have staying power? Can they count on stable—and hopefully growing—consumer preference for domestic products?

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