Five ways ‘Made in the USA’ can cut your company’s manufacturing costs

Tim Boyle/BLOOMBERG – Keeping your manufacturing nearby can trim your minimum orders and hasten your turnaround time.

By: Nicholas Ventura Washington Post

As a young business owner running a clothing line in downtown Los Angeles, I am frequently asked where we source our production. My response, “Right here in Los Angeles,” typically surprises those who ask.

Think about it: In the London Olympics, United States athletes’ uniforms were made in China. Apple’s new iPhone 5, which some have predicted will raise the our GDP by 0.5 percent, is manufactured in China, too. Outsourced manufacturing has become the unfortunate norm.

But in spite of the increased cost to our business, we’re happy to report that all of our production is vertically integrated under one roof. We consider the increased cost of domestic production a smart investment, and although offshore production is cheaper, the benefits of doing everything locally far outweigh the money outsourcing saves.

This can be hard to explain to newlybootstrapped entrepreneurs, who often make the mistake of pinching pennies in areas that require smart investments. Supply chain and inventory are both areas that require these “smart investments” and skimping on either will result in too much or too little product.

The pitfalls of having too much inventory are obvious, but for a new business, too little inventory can be just as disastrous to the company’s future growth.

So is American manufacturing really dead? I don’t think so. Consider the advantages.

1.Without extreme cost-saving minimums, business owners can cut inventory tremendously.

Our company originally brought in product from northwest Mexico, which enabled us to save 20 to 30 percent on production. However, we were forced to do larger production runs to meet their minimum orders. With a large inventory, we were forced to tie up much-needed capital and cash flow into the products we stocked.

Cash flow is crucial for new businesses, but this is a delicate balance that must be finely tuned, because missed sales due to lack of inventory is worse than having too much inventory in the first place. By being made in the USA, we can fulfill these orders and maintain a skinny inventory because turnaround times are quick.

2.The speed of domestic supply chains is leaps and bounds quicker than that of overseas supply chains.

Not only were our overseas factories asking us to meet hefty minimum orders, but their turnaround time was about three weeks slower than that of domestic manufacturers. This hurt because it didn’t allow our product to reach our customers as quickly. For a business to thrive, it needs to fulfill as much demand as possible.

3.Forecasting trends in the marketplace is more forgiving with a quick supply chain.

The larger minimums and the longer turnaround time forced us to buy production runs in large numbers and forecast trends with little confidence in our predictions. It was a bet that cost us a substantial dollar amount — all to save 20 percent. The increased agility provided by domestic production allows you to react on the fly to the market, whereas with overseas production, a bum forecast may leave you sitting on a ton of dead inventory.

4.In the end, you may even end up saving money.

Looking back, we would have made a better investment in developing our supply chains here in America rather than trying to cut costs from the onset. You are more flexible on an initial investment because you can start with lower inventory numbers, and your increased production speed will allow you to fulfill more reorders for your customers. This is a particularly important point, considering your highest margins are made through reorders.

5.Business advantages aside, think of your national pride!

“Made in the USA” is currently one of the hottest trending topics in the country for a reason. Our country needs more jobs, and there is no better way to create jobs in America than to produce here. Production equals jobs — it’s a simple equation that many Americans ignore. A huge impact can be made with a simple push by young entrepreneurs to bring manufacturing back to the U.S. The trend will spark more followers and you will see a rise in jobs and manufacturing in America.

“Made in the USA” is what built my business to what it is today. When starting your new business, ask yourself how you can harness the benefits of domestic production, too. You may be pleasantly surprised — just as those individuals were when they heard where our apparel is really sourced.

Nicholas Ventura is the co-founder of Youth Monument Clothing, Inc. in Los Angeles, California. He is a member of the  Young Entrepreneur Council (YEC), an invite-only nonprofit organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons.