Bollman Hat Co.'s Domestic Manufacturing Problems

Bollman Hat Co., the U.S.'s oldest hat maker and parent company of Kangol, decided recently to start manufacturing its products in the U.S., moving its manufacturing operations from China to Adamstown, Pa. Despite its long history and popularity among celebrities, like Samuel L. Jackson, the company saw a sharp increase in its cost of production, and a loss in profits.

"It has been certainly a bigger challenge than what we could've ever dreamed," Don Rongione, president and CEO of Bollman Hat Co., told the Associated Press.

The company is, however, optimistic that it will turn things around as manufacturers in the U.S. get better at making the Kangol caps, but this sheds light on an issue many other companies face when returning their manufacturing to the states.

The Associated Press reports:

Employment is down 85 percent since 1990 - the biggest decline of any manufacturing sector - as cost-cutting apparel companies shifted production to Asia in search of cheaper labor. Bollman spends about $11 an hour per worker in Pennsylvania vs. $2.60 in China.

So why move?

In an industry where trends come and go quickly, "it's incredibly important to incorporate speed into the delivery of the product," Rongione said.

But, since 2009, U.S. apparel production has increased 50 percent, showing that companies are willing to eat the extra cost of production to allow for greater inventory control and proximity to customers in the U.S.

Another interesting fact reported by the Associated Press:

Last year, for the first time in decades, the number of manufacturing jobs created by U.S. companies that moved operations back to the nation and by foreign companies investing in America exceeded the number of jobs lost by companies moving overseas, according to the Reshoring Initiative, a nonprofit set up to bring factory jobs back to the United States.

Yet the U.S. garment industry's production gains also show why President Donald Trump's campaign pledge to return manufacturing jobs to the U.S. could prove difficult. Increased automation is making it cheaper to sew and knit in the U.S. but requires fewer workers. So, even as apparel makers crank out more U.S.-made shirts and shoes, the industry is losing more jobs than it's creating. Employment stood at more than 131,000 workers last year, down from a high of 1.4 million in 1973.

For Bollman Hat Co., the overall cost of producing one hat in the U.S. is twice as high as it was in China due to the fact that the crew in Pennsylvania can't produce as many hats per day as the factory workers in China. But, at first, that price ratio was 3-to-1, so the domestic manufacturers are showing progress.