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The Economics of "Buy American"

In a world driven by the bottom line, how American manufacturers are able to thrive

March 2012 By Michael Cornnell
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American manufacturing, especially in our industry, is sort of a riddle. The economic advantage gained by importing should make stateside production impossible, an easy fact driven by the math of lower production costs and profit-by-volume. Yet this is anything but the case.

American manufacturing is not only able to defy the economics of scale, it's doing so in places and markets that it should have no business competing. From T-shirts to stickers, some U.S. manufacturers have managed to beat the presumed-unbeatable question of "Can you go under the importer's margins or not?"

Is manufacturing less of a numbers game than people think? Or are there just different rules for success than what's assumed? How are these companies able to succeed where it should be impossible, and most importantly, what can you learn from them and apply to your own business?

Creativity: The Main Differentiator?
The main line of thought on how American manufacturing companies are able to compete with importers is that U.S. manufacturing is faster, safer and more nimble. While this is likely true to a degree, it can't be the only reason. After all, there are importers who can match these qualities in varying or superior degrees, so there have to be other elements driving the success of American manufacturers.

An idea worth considering is that it's creativity, not service alone, that causes many American companies to thrive. Many of the companies interviewed for this piece enjoy positions as creative leaders in their product categories, and have managed to successfully get their items desired for their cutting-edge and captivating designs (see American Apparel, Hampden Corporation). It makes sense, considering that having new, beautiful or innovative items that are also exclusive is a powerful buying motivator that operates outside the realm of the economies of scale, making it a sales element unaffected by importers' price advantages.

Ray Hughes, distributor relations for American Apparel, Los Angeles, explained that one of American Apparel's main competitive advantages has been its ability to be a fashion leader in the wholesale apparel industry, consistently providing new and appealing designs that buyers cannot get elsewhere. David Morrison, president of Bruce Fox Inc., New Albany, Ind., expressed a similar sentiment. "We work very hard at being competitive and outdoing our competition based on our designs and quality," he said.

 
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