Low production costs increase U.S. manufacturing output

Global Business

Manufacturing is returning to the United States as the costs of production grow higher in Asia. Three years ago, the Chesapeake Bay Candle company moved jobs from Vietnam to the state of Maryland so it could finally make its candles on the Chesapeake Bay. 

CCTV America’s Jessica Stone reported this story from Glen Burnie, Maryland.

Low production costs increase U.S. manufacturing

Low production costs increase U.S. manufacturing

Manufacturing is returning to the United States as the costs of production grow higher in Asia. Three years ago, the Chesapeake Bay Candle company moved jobs from Vietnam to the state of Maryland so it can finally make its candles on the Chesapeake Bay.

Light a candle and you welcome more than illumination. Indeed, in the global marketplace, a candle is a home decoration, a mood-setter, a sign of celebration.

“People call it affordable luxury. You don’t have to use candle every day, but it really make people happy,” co-founder David Wang said.

David Wang co-founded Chesapeake Bay Candle and for 20 years has been designing and making candles. “Every culture has a tradition of making candles. The ancient Chinese, they used wax made from insects. The ancient Romans used animal fat.”

But the Chesapeake Bay Candle company isn’t just concerned about what is in the candle, but what it does for the whole room.

“It’s more about the fragrance, aromatherapy and also a good decor,” Wang said.

The company’s chemists fuse dozens of colors with hundreds of fragrances to keep their candles on the cutting edge. As a young graduate student in geophysics at China’s Beijing University, David Wang was never supposed to leave the lab.

“To make a candle burn perfectly, you have to have a good formulation. I think my science background does help,” he said.

What Wang and business partner Mei Xu began in their basement with some soup cans and a cooking pot led to a factory in China in 1995 and a second one in Vietnam seven years later. Wang watched as the value of the Chinese yuan rose against the dollar and American customers demanded quicker delivery.

“There is a good trend now because the cost advantage in China and other Asian countries is no longer as significant as before,” Wang said.

So in 2011, Chesapeake Bay Candle began manufacturing its candles the United States, moving jobs from the factory in Vietnam to the U.S. The opportunity came at a good time for Maurice Owens, who had been unemployed for six months.

“It’s been a blessing for a lot of us,” said Owens, now a forklift operator.

Wang said he’s paying half of what electricity cost in China and that rent was cheaper here, too. But best of all, he said, he can target American customers who want products ‘Made in the USA.’

Xu has shared the company’s story at the top levels of U.S. government alongside President Barack Obama, who has pledged to create one million new manufacturing jobs by 2016.

In Maryland, the company expects to triple its production capacity by next year and sees more room to grow. 

“I think this will be our main growth engine for the next 10 years or 20 years,” Wang said.

 

  • Sandy Montalbano

    Many companies like Chesapeake Bay Candle are finding that localization often reduces total cost. Having manufacturing in the same market as customers gives them better flexibility to respond to customers changing needs, eliminates higher shipping
    expense, minimizes supply chain disruptions and eliminates the larger production
    runs and inventories associated with long distance offshoring.

    Also, there is a growing consumer sentiment for Made in America products as mentioned in the article. The “Made in America” label can be a powerful PR tool for branding.

    As companies adopt a more comprehensive total cost analysis, the rising offshore labor rates combined with other “hidden costs” of offshoring often counterbalance any
    remaining savings from cheap price or labor abroad. These companies are sourcing in the U.S. because it makes good economic sense for them to do so.

    The Reshoring Initiative Can Help.

    The not-for-profit Reshoring Initiative’s free Total Cost of Ownership software
    helps corporations calculate the real P&L impact of reshoring or offshoring. In many cases, companies find that, although the production cost is lower offshore, the total cost is higher, making it a good economic decision to reshore manufacturing back to the U.S. http://www.reshorenow.org/TCO_Estimator.cfm