QE2: Quality + environmental responsibility increase attractiveness of U.S. manufacturing

Earlier this year my company, Metcam, announced it had been certified as a finished goods supplier for global office environments manufacturer Steelcase. In doing so, U.S.-based Steelcase was choosing to source highly cosmetic finished components from a U.S. firm (ours) rather than from overseas companies.

Steelcase is far from alone in this behavior. Although manufacturing jobs have been on a 30-year decline in the U.S., in recent years an ever-growing pool of firms are bucking that trend. U.S. manufacturing orders and production are on the rise, and it’s not just because more consumers are purchasing products already made in the U.S.

An increasing number of firms are discovering that U.S. manufacturers and fabricators can offer benefits overseas producers can’t. Some of these benefits have little to do with the actions of U.S. companies (more about that later). However, in the instance of Steelcase and other highly respected durable goods providers, the rise is at least partly due to their commitment to quality, ethics, and corporate responsibility.

Fortunately for manufacturers and fabricators, you don’t have to be ISO 14001-certified or have an ironclad ethics program in place to attract favorable attention, although they don’t hurt. The attributes that Steelcase considered in selecting Metcam are becoming universally popular and can increase your chances of regaining business. All you have to do is support them.

Ethical Partnerships

Beyond the specifics, Steelcase’s certification of Metcam can be described in two words: common mindset. As Steelcase Finished Goods Supply Chain Leader Dave Roerig noted at the announcement, “Metcam’s principles are aligned with those of Steelcase to meet and exceed quality standards and improve efficiencies and effectiveness, all while managing resources well for the good of our customers, our employees, and the environment.”

Steelcase is dedicated to specific principles, and it seeks these qualities in its suppliers. It publishes a set of Supplier Relationship Standards and maintains a strict approval, selection, and management process. Metcam’s mission aligns well with Steelcase’s, and we have a proven record of waste reduction, process improvement, and environmental stewardship. Nevertheless, we’re not perfect. We recognize that quality and sustainability are journeys, not destinations, and we take another step, every day.

If you’re already making that journey with us, you should be seeing a jump in business. If not, your marketing and salespeople are missing the big picture. Even companies that don’t have a robust corporate responsibility program are hopping aboard the responsibility bandwagon. For reasons that follow, this decision often leads them to bring manufacturing business back to the U.S.

Consumer Confidence

Corporate responsibility arguably is the hottest topic of the decade, and statistics prove it. According to survey firm Neilsen’s March 2012 report, “The Global, Socially Conscious Customer,” 66 percent of customers around the world say they prefer to buy products and services from firms that give back to society. (In North America, that percentage is 64.) More important, 46 percent are willing to pay more for such products and services (35 percent in North America). Among those under 40, who represent much of the world’s buying power, 60 percent are willing to pay extra.

Companies are recognizing this trend, and they want to capitalize on it. They want their customers to admire them for these practices and reward them with their business. This doesn’t always mean they fully achieve the goals they espouse, which presents an opportunity that U.S. manufacturing and fabricating firms can leverage.

Does this mean you need to procure materials from a small village in Ecuador or serve fair-trade coffee in the breakroom to win offshored business? Fortunately, the answer is far simpler. In the Neilsen survey mentioned earlier, the single most important area of social responsibility cited by respondents by far was environmental sustainability (66 percent). Commonly touted social causes, such as eradicating poverty and extreme hunger or reducing the incidence of cancer and other noncommunicable diseases, placed far lower (53 percent and 39 percent, respectively).

Environmental sustainability is an area in which U.S. manufacturers have excelled for years as they trimmed waste and increased production output. Since the recession started, many of you have been cutting the fat from your production lines, ordering processes, and other operating areas. You’ve learned to warehouse less material.

All of these things don’t just save your firm money; they help the environment and make those 66 percent of consumers happy. They also give you a pitch that encourages prospects or former clients to bring business back to the U.S. from Mexico or China (our two biggest manufacturing competitors).

Focus on Quality

Another aspect of corporate responsibility that’s important to top companies is quality. If you’ve streamlined your production processes, you’re probably seeing an improvement in quality. If not, it’s time to adjust your focus.

Quality is the yin to the yang of corporate social responsibility (CSR). In fact, the American Society for Quality (ASQ) recently debuted a report entitled “CSR and Quality: A Powerful and Untapped Connection.” (Download it from the Knowledge Base section at www.asq.org.) As the ASQ reports, “Quality tools have been used by industry for decades to create lean operations, reduce waste, and improve efficiency, but they have not been widely recognized in the corporate social responsibility (CSR) space.” The reality, as the report points out (and I agree), is that quality and CSR share concepts and core values. One can help advance the other, and with both in your arsenal, you can be unbeatable.

Finding the Prize

Earlier I promised to tell you the other reasons companies are turning to U.S. manufacturing and fabricating rather than offshore companies for export purposes—whether or not they are CSR leaders. According to a 2012 report by Archstone Consulting, which evaluated conditions over the past three years, reasons include:

• Ocean freight costs have increased 135 percent, highlighting risks and cost volatility.
• The global commodity price index has risen by 27 percent.
• The Chinese yuan has gained 18 percent in value compared to the U.S. dollar.
• Chinese manufacturing wages have risen by 44 percent.

In addition to these rising hard costs, Archstone found the following soft-cost issues with offshored products to be factors in executive decisions:

• Slower cycle/delivery time (59 percent of respondents)
• Reduced supply chain flexibility and responsiveness (56 percent of respondents)
• Lost visibility, coordination, and control over the supply chain, including quality (50 percent of respondents)
• Bottlenecks in logistics networks (e.g., ports, transportation) (50 percent of respondents)

Most exciting for U.S. manufacturers and fabricators, the study found that nearly 90 percent of companies surveyed have already begun or are considering changing their manufacturing and supply strategy. While you may have a hard time convincing a firm shipping products to Russia or France that they should use U.S. production resources, there is no doubt many products produced for sale in the U.S. (the world’s  No. 1 importer of goods by far) are becoming less expensive to produce here.

A New Opportunity Emerges

With so many reasons for companies to begin working with U.S. manufacturers and fabricators again, it might be easy to ignore our primary arguments of quality and environmental (or other corporate) responsibility. I urge you not to take that path. Change is in the wind, and firms returning business to the U.S. are looking for those suppliers to be better than their overseas counterparts (note that 50 percent of executives in the Archstone study cited poor quality as a soft cost). Furthermore, by incorporating quality and sustainability into your offering, you will appeal to even the most selective customer.

You may even be able to help a client begin their journey to excellence. Metcam has helped some of its customers increase their environmental responsibility quotient by devising just-in-time delivery systems that reduce the client’s overhead in warehouse space and energy consumption. That gives them yet another environmental success story to share with their customers. Make such strategies a part of your value proposition, and you’ll not only win business, you’ll win hearts.