The benefits of staying home

Nation's Business, Feb, 1997 by Joe Charles

Dorothy was right. There is no place like home.

Many companies, both large and small, go overseas to cut labor and production costs. My company--Charles Industries, Ltd., a manufacturer of telecommunications, electrical-power, and electronics components--was no exception, moving overseas when this strategy was particularly popular in the late 1970s and early 1980s.

About 10 years ago, however, I began reversing the process, closing first a plant in the Philippines in favor of expanding our Marshall, Ill., plant. Shortly after that, we closed another factory, in Port-au-Prince, Haiti, and moved its operations to a new facility, in Jasonville, Ind.

And finally, we moved an acquired company's production lines from Nogales, Mexico, to our plants in Jasonville and Casey, Ill.

The moves increased our base-line labor costs, but the higher costs are more than justified by the greater productivity and work ethic of our employees. In the United States, we also have superior quality assurance, reduced inventory and shipping costs, and improved customer service.

Since returning all production to this country (with the exception of one plant in Canada), Charles Industries has grown to $100 million in annual revenues, with more than 1,000 workers at our seven domestic plants.

For anyone who is considering foreign sites for manufacturing--or who is overseas now hut rethinking--a review of the advantages of domestic manufacturing is in order.

In addition to the pride we take in the quality of our American-made products, a number of bottom-line benefits have resulted from returning to domestic production.

The big pluses are increased productivity and drastically reduced rates of product rejection and repair. We have also improved employee dependability. And we have eliminated the risk that the nuances of instructions and documentation in English will get lot in the translation.

In addition, we have eliminated problems such as those that occurred in Haiti, where we lost thousands of dollars to cargo-shipment and customs fees and other transaction costs.

Given the higher labor costs that exist in the United States, however, it's vital that domestic operations work at peak efficiency. Here are some ways we make it work:

Look beyond the big city.

Our plants are all in small communities, where we can build a factory for about $15 per square foot as opposed to $80 or $90 in a large metropolitan area.

Look for cost savings at all turns and from all employees.

In addition to automating our production as much as possible, we have developed teams of employees from all areas of the company whose aim is to generate ideas for cutting costs and improving labor effIciency.

Involve employees in setting goals.

We have signs posted throughout our plants stating our production and sales goals. The whole company is geared to a sense of urgency and the belief that if people don't know what's needed from them, they can't meet the expectations.

When we opened our facilities in these small Midwestern towns, we found a community atmosphere that helped us increase overall productivity, product quality, and customer service while allowing us to meet our financial objectives. There is just no substitute for good old American know-how.

Joe Charles is president of Charles Industries, Ltd, based in Rolling Meadows, Ill. He prepared this account with Contributing Editor Susan Biddle Jaffe. Readers with insights on starting or running a business are invited to contribute to this column. Write to Entrepreneur's Notebook, Nation's Business, 1615 H Street, N.W., Washington, D.C. 20062-2000.