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Can the U.S. handle a manufacturing comeback?
By Emily Jane Fox @CNNMoney July 23, 2012: 12:36 PM ET
0:00 /2:11U.S. manufacturer in search of skilled workers
NEW YORK (CNNMoney) -- For years, U.S. manufacturers worried about business being sent overseas. Now, as signs point to a resurgence of American-made goods, a new fear is emerging: that there won't be enough skilled workers to keep up with demand.
Factory owners like Tony Singh, who manufactures high-end women's apparel at Four Seasons Fashion Manufacturing in New York's garment district, have seen orders dwindle as lower costs drew companies overseas.
That's meant a big slowdown for Singh, who manufactures styles for high-end designers from Donna Karan to Mary-Kate and Ashley Olsen's line The Row.
"Years ago, they'd come to us and order 10,000 units," he said. "We don't see that volume anymore. Now they ask for 40 or 50."
That's delivered a blow to Singh's profits, trimming them by 15% since 2005. At the same time, operating costs, from rent to insurance to materials, keep mounting.
"I used to buy thread for $1.80," Singh said. "Now it costs me $3. That adds up."
The pressure has forced him to shed half of his staff over the last ten years, whittling a workforce of 80 down to 40.
But some experts say that the fate of American manufacturing might be looking up, particularly for smaller factories like Four Seasons.
Desperately seeking Americans for factory jobs
According to an April survey of 259 manufacturers by MFG.com, an online directory that connects businesses with domestic manufacturers, 40% of respondents said they'd gotten business back this year that had been sent abroad.
There are a number of factors driving this trend, including the fact that U.S. manufacturers are willing to handle smaller orders and turn them around faster.
It's Singh's proximity that appeals to the designers who work with him.
"There will always be an advantage to having service locally," Singh said. "When people need something banged out quickly, they can't get it shipped in time from China. And here, they're a few blocks away if a pleat's not right."
Perhaps the biggest factor bringing manufacturing back to the U.S. is rising labor costs abroad.
"In 2000, the average worker was making 58 cents an hour in China. Today, it's a little over $4," said Mike Zinser, a partner at BCG who co-authored a survey that asked over 100 companies about overseas manufacturing. "If you continue to play that out, by 2015, it will be over $6 or $7. The economic advantage is shrinking."
The survey found that 70% of companies agreed that "sourcing in China is more costly than it looks on paper." Zinser cites unforeseen headaches that come up with shipping, product quality and complicated supply chains.
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But as companies brace for higher demand, they worry that there will be a smaller talent pool to draw from.
Singh has already found it difficult to bring in skilled workers during his busiest weeks, since most of his former employees have found jobs elsewhere.
"Work isn't consistent in the clothing industry, but people can't afford to stay home for weeks without getting paid. So they decided to become dishwashers or home attendants instead, " he said. "Then they can't come back when we need them."
Zinser said there's a lot of concern about whether the nation's workers have the skills to absorb the production that could be coming back.
"When you're looking for a specific skill in a specific location, we're seeing companies experiencing those pains," he said.
Singh is worried it will only get worse if business ramps up. He offered sewing classes to train new workers last fall, but there wasn't enough interest to keep them going.
"If the work isn't consistent, why would they come back?" he said.
He said that he's trying to hang on as he waits to see if work picks up.
"Right now, we're in survival mode."
First Published: July 23, 2012: 5:12 AM ET
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