Friday, May 1, 2009

Do You Have What It Takes To Be An American Manufacturer?

Could I interest you in some role-playing? Would you like to test yourself by making some important business decisions? Would you like to explore your ethics and values as well as your business savvy? If you’re game, please keep reading.

Let’s review our respective circumstances in this role-playing exercise.

I’m a manufacturer in the US and I must pay at least the minimum wage for labor.

I operate according to guidelines, regulations and laws that govern my product and my conduct. There’s a set of standards and regulations for every manufacturer operating in the US. They govern what I can and can’t do when I manufacture.

Perhaps you’re thinking that my circumstance is somewhat stifling, enough possibly to get in the way of profits. I’m thinking though that I have the easy role in this exercise.

You are a manufacturer in China. Technically, there is a minimum wage but you can ignore that if you like and pay what you wish for labor.

The Chinese government takes no proactive role in manufacturing and only addresses problems if they become known and made public. It’s extremely doubtful that your product will ever be inspected or tested. With no regulations in place to get in your way, you are free to make all sorts of choices.

That sounds rather splendid doesn't it? As a theory, regulations are an unnecessary burden that would just get in the way of your profits, right? Let’s take that theory to the real world and test your ability to make decisions.

All sorts of US companies have come to your country, China, looking for the absolute cheapest price for goods. Quality & innovation can be had elsewhere so everyone comes to you solely for cheap prices. You’re positioned well with great flexibility on how you manufacture and how low you’re able to keep labor costs. You’re ready to make some money, aren't you?

This exercise could be accomplished with a variety of products from any industry, but we’ll use simple, familiar examples.

For now, you get to manufacture paint. It’s okay if you don’t know much about chemicals because I have only 1 decision for you.

Do you use lead pigment in your paint or a more expensive alternative?

I know you just started manufacturing and this is new to you but this decision must be made in your new business. Do you have an answer? You can secure a contract and move product out the door if you've sharpened your pencil. How badly do you want a contract? Using lead pigment lowers your product cost, right?

How nice that the government - delighted with their role in the global economy, doesn't care about the decisions you make in your business. You deserve to succeed, correct? You certainly deserve the contract.

Somehow I sense that you haven’t yet committed to a decision on the lead pigment. Does something give you pause about such a choice? Oh, you know that lead is a poison, don’t you? You might worry that your paint would be used on toys. Children would be exposed to the lead in your paint and they could suffer with blood and brain disorders.

Is there any reason though to drag ethics and conscience into a business decision?

Don’t look at me, I face no such choice. I could have contracted product in China but it never crossed my mind because I don’t want any part of such a decision so I’m manufacturing in the US. You’re the one with the freedom and flexibility, which should serve business well, right?

So, do you use lead pigment in your paint or a more expensive alternative?

I understand your hesitation, believe me, I understand.

Your fellow manufacturers in China will readily make that decision so we’ll leave the paint manufacturing to them and find you another role.

Okay, how about a fun business like making toys? Congratulations, you’re now a toy maker in China. Disney is already knocking on your door with a contract for swell and cool looking painted toys. They want them of course, as cheaply as possible.

Painted toys? Eh. You know a thing or two now about paint in China, don’t you? Your government even signed a meaningless agreement in 2007 that banned the use of lead paint on toys. It’s not enforced and is ignored by your fellow manufacturers.

You’d rather not use any paint on your toys that has lead pigment. Where would you find some and what would it cost? What would it cost to test so you could be certain it was free of lead?

Pressure to produce goods cheaply, always seems to turn you and your fellow manufacturers toward difficult choices, doesn't it? Maybe you can cut back further on payroll and hope your people will still come to work. You can’t save money by cutting frivolous things like safety equipment because unlike me, you never made any such purchases. Ensuring any product safety just adds cost to your product and makes it harder to compete for contracts. You’d certainly like that contract with Disney though…

What do you do?

You haven’t had any fun yet nor have you made any money.

You know it’s possible, but maybe you’re just not cut out to be a manufacturer in China. That’s okay, neither am I.

Maybe you’d like to own an American business and outsource your manufacturing. That role comes with many perks. That could be fun. You see, if you outsource production, you can trade labor & material costs for a massive profit margin. Nice.
Retailers love that margin and they'll throw consumers a dollar or three in savings to bait them into buying something imported over something domestic. Your products will get a ton of shelf space.

Go ahead and arrange that fitting for new suits at the tailor. Check out the Hamptons and choose from the many available homes. Select a designer and get the boardroom redecorated.

You'll make lots of money in business and that's what counts, right? You can nail the American dream. Who would have guessed that the path to the American dream ran through China? You'll be part of the global economy and you can have a nice office building with an American flag flying out front.

The likelihood exists that one of your products will one day be recalled, but given your massive profits, you'll be able to handle the loss from such an event.

Would that role suit you?

You don’t have to wonder at all if I envy someone in that role because if I did I would have outsourced my own production.

You know, there’s a reader I lost earlier when they decided in favor of lead pigment. I lost another reader who would have crossed their fingers when they bought paint for their toys. I lost yet another reader who is daydreaming about grand homes in the Hamptons.

I’m left only with you, someone who hasn't yet found a role that suits them in this exercise.

Welcome brother. Come have a seat by me because it’s clear that you have what it takes to be an American manufacturer. Let me tell you about the role. You won’t make massive amounts of money but if you work hard you can make a good living. In addition to income, you’ll have wonderful people who work with you daily and help you succeed in business. You’ll view them not as an expense, but as family.

You'll make decisions that serve you in the long term, not the short term since you're building a business for this generation and the next.

You’ll have to deal at times with retailers that can be downright hostile to your products because of their smaller profit margin, but you’ll take great pride in the products you produce.

You’ll sleep well and contentedly at night except when you worry about competitors foreign made products because you know where they cut corners.

When shoppers question you about your products, you can tell them honestly that quality and safety matter to you because your actions prove it every day. Any time you like you can leave your desk and step out on the shop floor. Keep your eyes and ears open because the same people with hands on your product can offer tips and ideas that you can use.

An especially good part is the customers. You’ll come to treasure them because they’re the ones who value what you produce. You’ll come to recognize their names and faces because they return so often to do business with you. You’ll be thankful that at no point in your lifetime will you likely look one of these people in the eye and apologize because your product harmed one of their family members.

You’ll also get to set up a special file. It’s not for complaints, no, it’s for those hand written letters from your customers. You’ll be surprised and flattered whenever you receive them, yet, there they’ll be with expressions of gratitude. Yep. You’ll get them and treasure them as well. You might even have them framed so they can adorn your office walls because you consider them the most prestigious awards you won this year.

You and I can laugh at those rewarded only with dollars and who don’t realize that ethics and values are very much a part of smart business. We’ll agree that the American way is the very thing we should
export in the global economy.

Outside your plant, you’ll likely fly the American flag. You might even raise it yourself in the morning. You’ll know the same as I that the path to the American dream doesn't run through China. You’ll recognize everything that is right and just about that flag flying outside your door. It’s fitting for everyone whose love of country is greater than their love of money.

Mary - A proud American manufacturer and web person for