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Made in the USA: The advantages of domestic manufacturing

Volume 27/Number 26; April 28/May 5, 2014

By Ken Ryan

Screen Shot 2014-05-05 at 3.18.57 PMWhen Mannington holds its next shareholders meeting—a gathering of 25 key executives—it will not be held in its hometown of Salem, N.J., or New York or Las Vegas, or some swanky venue. Rather, it will be held in Madison, Ga., home to the company’s new commercial LVT facility.

The choice is synonymous with the company’s Made in the USA message: Madison was built from the ground up, and the click installation system that will be made there represents a first for a U.S. flooring company.

Kim Holm, president of Mannington Residential, said while the company still sells imported LVT, over time the plan is to sell more of it domestically, until perhaps all of it is made here. And that’s just the beginning. “Effective 2014, 100% of Mannington’s laminate will be made domestically,” Holm said. “In wood, a tremendous amount of imported product comes from China because of handscraped, but most of that has been brought back to the U.S.”

Many large and influential flooring companies have similarly moved manufacturing facilities from China to the U.S. or, in other cases, are building entire new structures on American soil. This practice of onshoring is not done for patriotic reasons necessarily, although the idea of bringing jobs to America is great PR for companies.

There are many advantages to domestic production:

1. Patriotism

Armstrong operates 14 plants in the U.S., and all are significant employers within their local communities, said Kevin Biedermann, senior vice president of residential flooring products. This domestic production (the company’s most recent expansion is a $41 million LVT plant in Lancaster) allows companies to engage with their communities through charitable organizations such as United Way, Habitat for Humanity and Homes for Our Troops.

A portion of the sales of Armstrong’s American Scrape hardwood products is dedicated to supporting Homes for Our Troops (HFOT), a nonprofit organization that builds specially adapted homes for our nation’s severely injured veterans returning from combat. The colors, look and feel of each product is inspired by an American landscape. This, coupled with the HFOT support, reinforces Armstrong’s patriotic connection.

“There’s a great sense of pride involved here,” Biedermann said. “It feels good, but it is good.”

Other companies have similarly played up their American-made product theme; Somerset markets the aptly named American Country collection, which was developed at the behest of customers seeking a subtly scraped hardwood flooring made domestically. “While we heard from many American homeowners that they loved the look, they didn’t love that the products weren’t made in the USA,” said Steve Merrick, CEO of Somerset. “Our customers have sent a clear message to us that they want to buy American-made products.”

Florida Tile, which operates a manufacturing plant, distribution center, corporate office and showroom in the U.S., joined 180 other domestic building product manufacturers in the We Build American initiative started by 84 Lumber. The objective: to encourage the use of domestic materials in the homes built.

2. Job creation

There has been a resurgence of companies either touting how they continue to keep their manufacturing in local communities or, in many cases, bringing back some or all of their production to U.S. soil. This extends across all flooring categories.

In the LVT segment alone, companies such as IVC, Armstrong, Mannington and Shaw are all in the process of building or expanding domestic facilities. On the carpet side, Mohawk and Engineered Floors continue to increase the number of employees as they either build or convert facilities.

“The American economy became the most powerful in the world because of manufacturing,” said Xavier Steyaert, co-CEO, IVC US, which created 150 local jobs when it built its fiberglass sheet facility in Dalton in 2012. Its new LVT facility will become operational in 2015. “It was only after experiencing the reactions of the local community and policy makers that we fully understood how Screen Shot 2014-05-05 at 3.19.03 PMimportant it is to create any number of jobs. Even smaller numbers can make big differences and are relevant.”

Mullican Flooring brought the manufacturing of some of its prefinished engineered floors back to Johnson City, Tenn., in 2012. “We have always felt it is important to create jobs for American workers,” said Brian Greenwell, vice president of sales and marketing. “Our Johnson City facility is our fourth in the U.S., and there are more than 500 families that depend on our success for their livelihoods.”

3. Pricing

While some companies have cited the cost of labor and regulations as reasons why they source product from overseas, the cost differential is not as steep as many think. In fact, many are able to offer products and services equal to or better than those that are imported.

James Lesslie, assistant to the chairman at Engineered Floors, said the company can compete because “our productivity in the U.S. carpet industry has never been higher. The wages are higher, and the output of carpet per labor hour is higher here due to the technology used in the U.S. The unbridled spirit of the American worker helps offset any wage difference. Given our investment in new technology, and the fact we keep the entire carpet-making process under one roof, we eliminate the wasteful inefficiencies of using multiple locations and forego shipping expenses, freight costs, etc.”

Many executives rely on automation as another key element of competition. “We take advantage of automation so our people are more productive, and that helps offset higher wages,” said Al Collison, founder and president of MP Global Products. “Also, the difference paid in salary out of the country is more than made up with freight costs.”

4. Collaboration

By manufacturing products in the U.S., companies are able to control every aspect of the customer experience, from production to customer service.

Hal Long, executive vice president of operations at Shaw Industries, said, “We have the sort of manufacturing hub that other industries seek to replicate today. We enjoy a trained workforce, infrastructure and the benefits of design, engineering, production and service collaborating in close proximity to exploit the opportunity for innovation.”

Biedermann said Armstrong can make a product tomorrow for a customer if demand exceeds supply. “We can have product available in no time, and that is important in a growing market. We control the entire process, from the integration of different designs to inventory. It’s a huge advantage.”

5. Environmental

Few countries, if any, have as many laws as the U.S. regarding the protection of the health and safety of its people and the environment, from the federal level to local municipalities. In addition, green building rating systems have put a greater emphasis on how far a product travels, rationalizing the closer it is to the jobsite, the less energy required to get it there.

While some companies may complain about the abundance of regulations, the flooring industry, in many ways, has deemed these rules advantageous to producing products in the U.S.

Randy Merritt, president of Shaw Industries, said the company’s commitment to safety, health and the environment spans past compliance. “Our sustainability practices go beyond basic federal or state requirements. We aim to be an innovation leader, producing products that minimize waste, utilize renewable energy in production when possible and safeguard our natural resources. Shaw has recycled more than 600 million pounds of post-consumer carpet from 2006 through 2011, a major milestone for the growth of carpet reclamation.”