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Advice to Start-Ups: Make it in the USA

Made in USA just makes sense for small and medium sized businesses, says Tom Travis, principal at Sandler, Travis, and Rosenberg, a firm specializing in trade provisions. Travis’s business advice, often dismissed as counterintuitive for the labor-intensive garment industry, hinges on the complexity of managing a global supply chain.

“If you dream here,” says Travis, “make here.”

Small firms, particularly startups, simply cannot place large enough orders to attract the interest of the best overseas factories. “They want to make in China, but they only want to do a few thousand pieces. They can’t even get their calls returned,” says Travis.

These makers often get discouraged before they even finish their first sample – a serious waste of innovation.

Bob Bland, CEO and Founder of fast-growing fashion incubator and small factory Manufacture NY, is working to change that. Her firm offers small-batch manufacturing, assistance with pattern making, and access to tools and support.

Bland says, “Right now, there’s a big coming out party for made in USA. But it’s not about volume. It’s about B2B demand for transparently sourced goods, and it’s about the supply chain.”

“Seventy-five percent of first-time entrepreneurs give up before they make their first prototype,” says Matt Burnett, who runs Maker’s Row, a directory of USA sourcing options. This high number has a lot to do with the difficulty in finding a supportive manufacturing partner in America.

Illsa Metchek of the California Fashion Association confirmed the point, saying, “We would make more merchandize in this region if we only knew how.”

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On small-turn goods, including fashion items, high-quality labels, and lines that are just starting out, the overhead in managing a global supply chain can easily cancel out any benefits from lower manufacturing wages or FOBs.

“There’s always going to be a mass market supply chain coming out of Asia, but quick turnaround is a major competitive advantage. Our growth has outstripped my rosiest expectations,” says Bland.

Beyond long lead times, even the cost of shipping can start to take a big bite. Many makers don’t understand that their shipping costs rise dramatically if they are unable to fill an entire container. They pay airfreight for small batches and wind up spending more money than if they made in the USA.

“Anytime that you’re shortening the supply chain, you’re also reducing the amount of travel involved, the communication barriers, and the legal and accounting costs,” says Bland.

According to most industry experts, there are two main forces keeping small firms from making in the USA.

First, they base their sourcing decisions on buzz, not research. Business news outlets only occasionally feature stories on clothing made in the USA. When they do, it’s often high-end product or specialty denim – not something an amateur maker can expect to access. As a result, many small firms simply assume that they have to make their clothes in China or Bangladesh, with no understanding of what’s required to use those factories well.

Young firms wind up struggling to get samples made and connect with reliable factories.

What the media doesn’t cover are the many niche factories in the United States that survived the outsourcing of the 90s and 2000s and are still open for business. Part of the blame for that lies on those businesses, which may fail to effectively advertise.

They are often small family-owned companies, and they lack the expertise to market to a geographically diverse range of small suppliers.

Manufacture NY is speaking to Congress soon to advocate for better promotion of domestic manufacturing. The most rapidly growing share of their business comes from companies that are willing to pay consulting fees just to learn where to make their goods.

Directory services like Maker’s Row and Manufacture NY are playing an enormous role in upping the visibility of USA manufacturers and letting small and medium sized firms reach out to them more easily through Yelp or Amazon-like interfaces.

“There’s nothing that anyone has come to me with where I haven’t been able to find a source in the States,” says Bland. The difference is what firms are willing to pay. The price differentiation is very high for synthetic washes, for example.”

Maker’s Row won’t release hard data on the number of orders they’ve helped firms book, but one leather-making firm who works with Maker’s Row and other web-based sourcing portals said that they have added twenty full-time positions, increasing their workforce by almost 50 percent, since they started marketing online.

“Made in USA makes sense now, and it’s going to make more and more sense,” says Bland.

A report released in 2012 by the Boston Consulting group determined that the cost differential between China and the United States should even out by 2015. This is due to rising labor costs in China, and higher energy costs for shipping goods across the ocean.

“There’s a perception now that people need to make Made in USA a part of their supply chain plan,” says Bland.

American manufacturing volumes are growing and productivity is up in the apparel and garment sector, but connecting makers with producers is the next frontier. Web-based firms are stepping in to fill the breach, but existing American factory organizations could also do more to promote their smaller members. After decades of attrition, only the strongest and best firms have survived, meaning American manufacturing is ripe for a comeback.

The risk now is that background expertise in textile manufacturing will start to disappear. This would seriously impact apparel manufacturing in the United States, as the robust supply chains for cotton and other materials vanish in the next ten years. According to Bland, the average age of a textile worker in the United States is over 60. Serious and concerted effort will be needed to ensure that a new generation takes up the challenge. Fortunately, demand is growing.

“We’re reshoring four firms that were making in China, and they see that the price is the same here, and it’s a lot easier,” says Bland. That ease, more than anything, is driving small makers to stay in the USA.