Bringing work home, Illinois firm gives China a run for its money
Updated: Sunday, September 19, 2010, 12:38 PM
Western companies take a new look at manufacturing outsourcing
Peerless makes television mounting brackets and other TV accessories. As U.S. companies flocked to Chinese factories in recent years, so did Peerless, outsourcing 35 percent of its manufacturing there.
Then Campagna did the math.
"The unit price of the product is enticing," Campagna says. "But when you include the inventory-carrying costs, the freight costs and all the things it really takes, it may not pencil out."
Peerless pulled a U-turn. The company now makes all 3,600 of its products in a green-certified factory in Aurora, Ill. Managers have said goodbye to long lead times, product piracy and lack of manufacturing control.
Each week, assembly workers at the plant squeeze out more costs, pursuing parity with the so-called China price.
"We're going to probably be within 12 to 15 percent of the Chinese cost," Campagna says. "It might cost us a point or two on the bottom line, but if we can provide more jobs and really get the plant humming, it's worth it."
Campagna, 44, has an MBA from the Keller Graduate School of Management of DeVry University. He worked his way up over the years at Peerless, a privately held company with annual revenues well exceeding $100 million.
For four years, Campagna watched as Chinese factory workers churned out aluminum products for Peerless. The company had outsourced those goods because it lacked aluminum dye-casting equipment and expected savings from China's reduced costs.
Campagna realized Peerless was holding months of extra inventory -- say, a month's worth in the United States, a month in ships, a month at Chinese factories and a month at suppliers in China. What's more, knockoff Peerless products were popping up around China as copycats ripped off company designs. And China's labor costs were rising just as wages had climbed in Mexico as that country developed a middle class.
Peerless managers decided to pull back. They bought used aluminum die-casting equipment for pennies on the dollar. They hired skilled operators from the struggling U.S. auto industry. They planned to automate wherever they could, minimizing labor costs.
Peerless, which had no debt, used Illinois recovery-zone bonds toward a bargain on a 10-year-old, 318,000-square-foot building. Campagna promised the state in return to hire at least 85 more workers within three years. The new headquarters replaced a plant in China and four older buildings on two Illinois campuses.
The refurbished building bears a LEED green-building certification. It's designed to draw power from solar panels and wind turbines. Heat from powder-coating ovens will be recycled to warm the building in winter.
"We control the process, we control the quality, we can react to customer demand faster because the manufacturing is here," Campagna says. "We're just tightening up our processes and bringing costs down every week."
Peerless has taken advantage of prior economic slumps to expand. The company set a sales record in 2008, then saw revenues plummet 25 percent in 2009. This year, sales are flat. The company is gearing up for an economic recovery that Campagna expects in 2011 or 2012.
Peerless has gained good publicity for its Made in America strategy -- mostly in the Chicago media but also nationally on PBS.
"Look what the Japanese did," Campagna says. "Instead of just shipping cars over here, they set up shop and began making them here. If they can make cars cost-effectively in the U.S., why can't we manufacture here, too?"
http://www.oregonlive.com/business/index.ssf/2010/09/bringing_work_home_illinois_fi.html
Updated: Sunday, September 19, 2010, 12:38 PM
Western companies take a new look at manufacturing outsourcing
Peerless makes television mounting brackets and other TV accessories. As U.S. companies flocked to Chinese factories in recent years, so did Peerless, outsourcing 35 percent of its manufacturing there.
Then Campagna did the math.
"The unit price of the product is enticing," Campagna says. "But when you include the inventory-carrying costs, the freight costs and all the things it really takes, it may not pencil out."
Peerless pulled a U-turn. The company now makes all 3,600 of its products in a green-certified factory in Aurora, Ill. Managers have said goodbye to long lead times, product piracy and lack of manufacturing control.
Each week, assembly workers at the plant squeeze out more costs, pursuing parity with the so-called China price.
"We're going to probably be within 12 to 15 percent of the Chinese cost," Campagna says. "It might cost us a point or two on the bottom line, but if we can provide more jobs and really get the plant humming, it's worth it."
Campagna, 44, has an MBA from the Keller Graduate School of Management of DeVry University. He worked his way up over the years at Peerless, a privately held company with annual revenues well exceeding $100 million.
For four years, Campagna watched as Chinese factory workers churned out aluminum products for Peerless. The company had outsourced those goods because it lacked aluminum dye-casting equipment and expected savings from China's reduced costs.
Campagna realized Peerless was holding months of extra inventory -- say, a month's worth in the United States, a month in ships, a month at Chinese factories and a month at suppliers in China. What's more, knockoff Peerless products were popping up around China as copycats ripped off company designs. And China's labor costs were rising just as wages had climbed in Mexico as that country developed a middle class.
Peerless managers decided to pull back. They bought used aluminum die-casting equipment for pennies on the dollar. They hired skilled operators from the struggling U.S. auto industry. They planned to automate wherever they could, minimizing labor costs.
Peerless, which had no debt, used Illinois recovery-zone bonds toward a bargain on a 10-year-old, 318,000-square-foot building. Campagna promised the state in return to hire at least 85 more workers within three years. The new headquarters replaced a plant in China and four older buildings on two Illinois campuses.
The refurbished building bears a LEED green-building certification. It's designed to draw power from solar panels and wind turbines. Heat from powder-coating ovens will be recycled to warm the building in winter.
"We control the process, we control the quality, we can react to customer demand faster because the manufacturing is here," Campagna says. "We're just tightening up our processes and bringing costs down every week."
Peerless has taken advantage of prior economic slumps to expand. The company set a sales record in 2008, then saw revenues plummet 25 percent in 2009. This year, sales are flat. The company is gearing up for an economic recovery that Campagna expects in 2011 or 2012.
Peerless has gained good publicity for its Made in America strategy -- mostly in the Chicago media but also nationally on PBS.
"Look what the Japanese did," Campagna says. "Instead of just shipping cars over here, they set up shop and began making them here. If they can make cars cost-effectively in the U.S., why can't we manufacture here, too?"
http://www.oregonlive.com/business/index.ssf/2010/09/bringing_work_home_illinois_fi.html
