When asked why D’Addario & Co, the world’s largest manufacturer of guitar strings and other musical instrument accessories, is always searching for new reshoring opportunities, its president, John D’Addario III, can quickly pull from a seemingly bottomless supply of reasons.
“Rising labor costs in Asian factories, freight costs…I could go on and on,” remarked Mr. D’Addario. But his reasons for reshoring extend far beyond the typical glut of offshoring issues. When offshoring problems combine to form complex and costly multi-layered challenges, reshoring often provides the most elegant and effective solutions.
“First and foremost,” said Mr. D’Addario, when asked about the impetus behind his company’s continual drive to reshore, “the costs have been rising, in terms of labor and benefits in Asia, in just about every factory.” But that’s just one piece of this particular puzzle. “We spent a lot of money with a firm in Asia that was our eyes and ears, in terms of quality,” Mr. D’Addario continued, “And still when the product gets here we have to do inspections to ensure that we are comfortable putting our name on it.” Whatever value D’Addario once found in sourcing production from Asia, it disappeared quickly when expenses started accumulating. “Having local manufacturing, and having it within a controlled work cell, made a tremendous impact in quality and in our confidence in the product.”
These offshoring issues, and others related to inventory control, freight costs and even intellectual property protection, have presented expensive challenges for D’Addario. But they aren’t the only ones fueling their reshoring decisions.
“After the recession, a lot of businesses had to look themselves in the mirror and find a way to be competitive,” remarked Mr. D’Addario, “and that included us, too.”
This realization inspired the company to become uniquely able to design, manufacture, package and ship its products from its Long Island, New York corporate headquarters. Now when the company needs to source specific parts or components, it identifies local suppliers. For example, they’ve found a company that does “injection molding, literally around the block from us,” Mr. D’Addario said, “who we’ve found to be very competitive.”
Just five or six years ago, D’Addario was offshoring about 15% of its finished goods, with the remaining 85% being produced domestically. Since that time they have ratcheted up their reshoring initiatives, elevating their percentage of USA-produced goods to about 95% and creating an estimated 25 to 30 additional local manufacturing jobs—and that’s not counting the ones created by their local manufacturing partners to keep up with D’Addario’s orders.
Through its dedication to reshoring, D’Addario has granted itself incredible leverage, flexibility and confidence in its products and future. As their reshoring success stories continue to replace their complex offshoring challenges, the company gets to pass the benefits on to its customers in many ways— D’Addario products carry the Made in USA label, as well as the higher level of quality that people expect.
Written by David Patrikios
Find out more on the interview at WSJ Marketwatch:
Thanks to D’Addario & Co for sharing this post with the Initiative.