More than 80% of companies bringing work back to the U.S. have $200 million or less in sales.

In recent years, some small and midsize companies have brought manufacturing back to the U.S. but they have found it a bumpy road. Shortages of skilled workers are a common problem, as are difficulties navigating complex regulatory systems that govern modern American manufacturing.



But there are other challenges as well.

Crib maker Stanley Furniture Co. misjudged the willingness of Americans to pay more for domestically produced goods when cheaper imports are available, for example. Meanwhile, the husband-and-wife entrepreneurs who founded 20-year-old Chesapeake Bay Candle have struggled to find workers who can do basic math.

More than 80% of companies bringing work back to the U.S. have $200 million or less in sales, according to the Reshoring Initiative, a nonprofit that encourages companies to return production to the U.S. Many supply parts to bigger companies or, if they sell directly to consumers, are seeking to cut out lengthy supply chains from Asia.

But big companies have the resources and experience to hopscotch around the globe. It’s harder and riskier for small firms to do the same.

Here’s a closer look at the challenges faced by Stanley and Chesapeake Bay, two companies whose reshoring efforts the Journal has profiled in the past:


U.S.A.-Made Cribs Flop

Stanley Furniture shifted production of cribs and other baby and youth furniture from factories in China to Robbinsville, N.C., its last remaining U.S. production site.

The move, four years ago, was a gamble that Americans would pay a hefty premium for U.S.-made baby gear. Its $800 to $900 cribs, marketed under the patriotic sounding Young America brand, were up against similar-looking imports selling for about half as much.

The effort hit a snag last year when a new computer system delayed many orders—a dire problem in a business that involves parents shopping for soon-to-arrive babies. The delays “created opportunities for other vendors,” says Walter Joshi, vice president of Home & Kidz Furniture, a retailer in Paramus, N.J. The company also hit unexpected problems with its U.S.-based wood and veneer suppliers, who have shifted most of their attention to exporting American-grown hardwoods like cherry wood to furniture factories in the Far East. “We were such a small part of their business that we were seeing price increases the Asians weren’t,” says Glenn Prillaman, Stanley’s CEO.

Stanley also misgauged its marketing, overestimating the ability of retailers to persuade customers to pay the big prices. “At the end of the day, it turned out to be a failure because of one reason—price,” says Nathan Friedman, president of Living Quarters, a New York City area furniture store with two outlets that carried the Young America line.

Stanley didn’t scrimp on the effort. Micah Goldstein, chief operating officer and CFO at the 90-year-old High Point, N.C.-based firm, estimates the company spent $20 million—between the financial losses and $10 million for advanced machinery for the U.S. plant. One set of new machinery allowed the plant to do work once done by 42 workers with just nine employees.

Young America never made money, and losses at the Robbinsville factory swamped profits Stanley made on the other lines of imported furniture it also sold. For the first quarter, the company reported a net loss of $4.4 million on sales of $21.9 million.

Stanley’s Robbinsville factory is now in the process of shutting down and shedding its last 300 employees. Stanley is trying to sell the operation. If it doesn’t find a buyer, it will liquidate the plant.

Stanley isn’t the only furniture maker to misjudge demand for Made-in-America furniture.

Bruce Cochrane, founder of Lincolnton Furniture Co. attended the 2012 State of the Union address as an example of a manufacturer bringing back jobs from overseas. His company in 2011 reopened a long-dormant North Carolina factory to make dining sets and other types of wooden furniture, and became a poster child of the reshoring trend. But Lincolnton shut down last January, citing a lack of orders.

Twist for Candle-Maker

Chesapeake Bay Candle co-founder Mei Xu says opening a U.S. factory in 2011 has been “a roller-coaster ride” that continues to bring unexpected turns.

The company, known for scented and textured candles that sell at Kohl’s and Target had previously produced everything in China and Vietnam. The name Chesapeake Bay was originally picked because it evoked a classic American image and represented a place close to where Ms. Xu, a Chinese immigrant, had set up a trading company with her husband, David Wang, in Rockville, Md. She thought it would be relatively easy to open a plant in nearby Glen Burnie.

It wasn’t. Regulators demanded costly upgrades to the factory design that pushed her months behind schedule and added to setup costs.

Some industries have struggled to bring factories back to the U.S. because they can’t find suppliers of component parts and services needed to run plants. That’s not a problem with candles, says Ms. Xu, noting there are plenty of domestic suppliers of items like glass containers, wicks and packaging.

Chesapeake Bay’s other big miscalculation only became clear once the plant opened, says Ms. Xu. “Our biggest problem is the employment issue,” she says. Chesapeake struggled with high turnover in the early days and has continued to have difficulty finding workers with the skills needed to run machinery.

“We have people struggling with math,” she says. “Not middle-school math, elementary-school math. And this includes the supervisors—not just the line workers.”

Finding employees with a good work ethic is also a problem. There have been instances, she says, where the plant announced drug tests would be held the following day and up to 20% of workers didn’t show up. The company screens workers for drugs when they are hired.

Hiring professionals, like engineers and chemists, pose yet another challenge. Chesapeake Bay, as a small manufacturer, doesn’t offer the level of pay and benefits that the large pharmaceutical and technology companies in the area can offer. “We just can’t offer the stock options and bigger paychecks,” she says.

Yet she doesn’t regret her decision. The Maryland factory now employs just under 90 workers and is on track to supply half the candles the privately-held company sells this year. “There are definitely frustrations and times when I question my decision to build this factory,” she says. “But when you see more and more U.S.-made candles in our assortment, I feel like it was a wise choice.”

Most recently, she adds, having the U.S. factory has helped her reassure customers who were hearing about riots in Vietnam in which workers were attacking Chinese factories. “They’re very happy when we tell them that, if anything happens, we can move even more of our production to the U.S.,” she says.

Photo credit: Firms in a Global World EMBA

Via Wall Street Journal