For the first time since 1994, a survey of 528 Georgia manufacturers showed that more of them brought production back into the state than outsourced work across the country or around the world.
About 14 percent of firms included in the 2012 Georgia Manufacturing Survey were affected by outsourcing, while 16 percent engaged in “insourcing.”
For purposes of the survey, which is conducted every two years, outsourcing was defined as moving work outside the state, whether to other U.S. states or overseas. Mexico and Asia were the top international outsourcing destinations.
The findings sparked discussion about where the state stands in America’s so-called “manufacturing renaissance,” which is being driven by rising labor costs abroad, a weak dollar and uncertainty in the global economy, said Adam Beckerman, partner-in-charge of tax and accounting firm Habif, Arogeti & Wynne LLP‘s manufacturing and distribution practice.
“Because of Georgia’s long industrial history, our educational infrastructure, seaport and airport, it is a natural and established leader in the renaissance,” Mr. Beckerman said at the Next Generation Manufacturing conference Oct. 16.
Asia was the biggest contributor to the insourcing trend, with 4.3 percent of survey respondents saying they moved production from the region to Georgia, compared with only 2.6 percent in 2010.
Millennium Mat Co. LLC, a Suwanee-based provider of mats for industrial customers and retailers like Home Depot Inc. and Walmart Stores Inc., is bringing all its China work back to Dalton, the world’s carpet mecca, by the first quarter of next year.
But that was the plan all along, England-born CEO Ian Malpass told Global Atlanta. Millennium was well-versed in rubber products but needed China’s expertise in injection-molded PVC, the key plastic material in a line of car mats adorned with collegiate team logos.
“We’re stealing from the Chinese…” Mr. Malpass said of his intentional efforts to learn methodologies from his Chinese partner’s factory.
He added that he would rather manage his own processes and invest in his people than save a little on labor costs.
“Everything that’s got a reasonable scale to it, it doesn’t matter if it costs more. I’d like to control it,” he said after an entertaining speech at the conference.
The company isn’t totally opposed to foreign manufacturing where it makes sense. Millennium still operates a facility in the Indian state of Kerala to gain affordable access to natural rubber.
The move out of China will also help meet a guarantee that orders will be shipped at 4 p.m. on the day they’re placed. Customers don’t often give adequate warning before purchasing large quantities of an item.
“If you get a run on something, and you’ve got an eight-week supply chain, you’re screwed,” Mr. Malpass said.
That’s one reason Exide Technologies Inc. tries to keep manufacturing local, wherever it’s operating around the world.
The Milton-based lead-acid battery manufacturer has spent the last few years consolidating its global corporate structure and enacting consistent manufacturing processes across countries and cultures. But some of its biggest expansions have happened in the Southeast, said Nevin Caldwell, vice president of operations for Exide Americas.
A grant of $34.3 million from the 2009 Obama stimulus package contributed to the nearly $70 million the company has spent expanding lead-acid battery facilities in Bristol, Tenn., and Columbus, Ga.
The Bristol facility makes batteries with spiral-wound technology for European cars that shut off when idling to save fuel and reduce carbon emissions. Flat-plate batteries made in Columbus are used in mainly in industrial power systems. Employment at the Columbus plant could jump from 212 to 250 by the end of this year.
Despite the growth at home, Exide is still looking to add plants in new markets.
Western Europe‘s woes have slowed growth in countries like Spain, but Exide is expanding on the other side of the continent, Mr. Caldwell said.
State-of-the-art technologies are being installed in a factory in Poznan, Poland, that will make 500,000 batteries per year. Another facility in Pinsk, Belarus, is growing rapidly.
The company is also eyeing manufacturing locations in the Middle East and South America. China, where it has no facilities, is also an opportunity as the government trims the number of lead-acid battery manufacturers in an effort to cut down on pollution.
With seven recycling plants worldwide, Exide sees sustainability as a competitive advantage. Recycling helps reduce raw material costs and stabilize lead supplies, Mr. Caldwell said.
It’s not only American companies that are moving factories to the United States. Foreign manufacturers are attracted by American stability amid turbulent times, especially if they’re selling products here, said Richard Kopelman, CEO-elect of Habif, Arogeti & Wynne and the founder of Next Generation Manufacturing.
Many of the firm’s foreign clients are engaged in manufacturing, which is key to the practice.
“We’re a big player in the market and we look at it as a great growth opportunity,” said Mr. Kopelman, who was headed to China Oct. 17.
That said, Georgia companies generally are not taking advantage of incentives geared toward manufacturers, including national and state tax credits for research and development, the survey showed.
Though 30 percent of respondents performed research and development in-house, only 18 percent claimed R&D tax credits.
Those that do save the extra cash can use it to hire more people, expand their operations or implement measures to boost productivity, Mr. Beckerman said.
About half of Georgia manufacturers had export sales with 23 percent of them increasing exports in 2011 over 2009 levels, the survey showed.
For a PDF of the full survey results, visit www.cherry.gatech.edu/survey.
Visit www.hawcpa.com for more information.