Diagnostic Devices, Inc. (DDI), a maker of blood glucose monitoring systems, recently moved operations from China back to the U.S. and still managed to cut operating costs by roughly 40 percent. How did they do it? Can American manufacturers be competitive with China? Pete Bosak, director of public relations at DDI, sat down with Manufacturing.net reporter Earing to discuss what it takes to bring jobs back home.
Mnet: What prompted DDI to move manufacturing operations back to the US?
Bosak: Well 15 years ago, the company moved operations to China and they were called crazy for doing so. But in hindsight, scores of American companies followed suit because labor was very inexpensive in China. But over the past five years, DDI has been setting up shop in Charlotte, N.C. and we wanted to bring more jobs back home.
We keep hearing over and over that we can’t compete with China and its cheap labor, but our executives thought there must be a way to do it. To them, it no longer made sense to ship parts to China for assembly, then ship the product back to the U.S.
We also had concerns about our intellectual property. Many manufacturers know that protecting your IP in China is difficult at best. Your IP can be stolen and there’s not any hard and fast ways to protect it. By bringing operations back under one roof, we’re able to protect our IP and have more control over our manufacturing operations.
Mnet: Why should manufacturers considering moving operations back to the U.S.?
Bosak: We believe the technology exists for manufacturers to bring jobs back home. You just have to look. There seems to be this mindset that we just cannot compete with China, so why even try? You can not only compete, but also beat them. We can create our products here and do it less expensively, since you don’t have the shipping costs.
Manufacturers need to take a hard look and ask ‘Can this be done? Can you bring manufacturing back to the U.S. and do it less expensively than what you’re doing in China?” If you take a hard enough look and are willing to be innovative you’ll find that you can do it. We need the jobs here. The economy is not going to come around by itself.
Mnet: How can manufacturers be competitive with China?
Bosak: There are several factors that play an important role in our cost savings.
Innovation is key. Don’t just assume that China and $5 a day labor is the best way to go. Look into automation and robotics to help cut down on labor costs.
Obtain quality employees that can boost your engineering and R&D. If your operations are located near universities, consider partnering with them to mentor and train potential future employees.
Look into incentive programs available through local, state and federal grants. With the U.S. economy in a recession, many cities and governments are willing to help financially to lure manufacturers back.
A strategic location is also important to be competitive. Look at every aspect of your operations to determine a location that will be beneficial to your needs and help keep costs down as well. Our own headquarters were originally in Miami, but hurricane-induced plant closures became a problem. When we opted to move operations elsewhere we carefully looked at the infrastructure and how it would affect our business.
Mnet: What are the first steps manufacturers should take when moving operations?
Bosak: First, a complete and total review of every process in the company is necessary. Our company president and the COO are both engineers and they understand these processes very well. They went through our entire operation with a fine tooth comb. They had the idea to bring operations back home, and went out and found a way to do it. They asked themselves, ‘how could we bring the jobs back, but save money in the process?’ and the answer was automation and robotics.
Mnet: And how is DDI helping the U.S. economy in terms of jobs?
Bosak: We’re actually hiring right now and it’s estimated we will need upwards of 200 workers. Current employee numbers have doubled in 6 months. With automated systems, there is a need for highly qualified engineers and other high-tech, high-paying jobs. Hiring employees in these fields will also help turn the economy around.
With a lot of thought, foresight — and just rejecting the notion that you cannot beat Chinese labor costs — it can be done.
Reporting by Amanda Earing of Manufacturing.net.