Business gets rid of overseas plant to make more products in U.S.
Knoxville-based Bailey International Corp. has consolidated its operations in a new complex at WestBridge Business Park and divested itself of an overseas plant as it moves to produce more of its products in the United States.
“There is a new buzzword of ‘re-shoring,’ ” said Kevin Bailey, who owns the company with parents Adrian and Mary Bailey.
For a variety of reasons, some U.S. companies, including Bailey International, are realizing that it’s more advantageous to produce in the United States rather than abroad, Kevin Bailey said.
“We have been looking at actually making manufacturing improvements here domestically, and plan to produce more cylinders domestically than overseas going forward,” Bailey said.
The company, which makes hydraulic cylinders for equipment, had operated two facilities in Knoxville and one in Chennai, India, but sold the overseas operation to cut costs and as a step toward re-shoring.
About six months ago, the company moved its sales, corporate and manufacturing operations from two facilities on Baum Drive to a 60,000-square-foot building at 2527 Westcott Blvd. in WestBridge Business Park off Hardin Valley Road. The move, which had been planned before the recession hit, provided a facility with more production space, but even more importantly, greater flexibility to lay out production operations for best efficiency, said Ken Baker, chief operating officer.
“The timing has worked out well,” Bailey said. “In hindsight, it was a bit scary with the economy the way it was and us making a big decision to move, but it has been great for us.”
Founded in 1976, Bailey International makes hydraulic cylinders, cylinder components and hydraulic power units, offering a basic line of cylinder models plus the ability to produce custom cylinders on quick turnaround. Its cylinders and power units are found on equipment in agriculture, construction, forestry, food processing, trucking, mining, waste management and other industries.
While the company was not untouched by the recession – Baker said sales were down about 13 percent- it has not suffered as badly as some companies. Bailey said it has helped that the bulk of the company’s products go to agricultural customers – a segment of the economy that has been more stable than others. Construction seems to have been hurt the worst, Baker said.
“Some of our construction customers have seen business drop as much as 90 percent,” he said.
Bailey International Corp. has a work force of about 80 and has hired four people as it moved into its new location and has begun shifting production back to Knox County. About half of the company’s business is custom work and it had been relying on its Chennai plant plus sources in China and elsewhere for components to its standard cylinders. But conditions have been changing, Bailey said.
“Costs are increasing in places like India and China so the cost gap between America and those places is closing,” he said.
Then, there often turn out to be hidden costs in operating overseas, driven by different sets of laws, rules and customs. Quality control is difficult and transportation adds to costs and reduces flexibility.
“The farther away the plant is from the customer, the more difficult it is going to be to service the customer well,” Bailey said. “Having production closer to where our base is offers a huge improvement to our service to the customer.”
Nationally, three manufacturing trade associations are advocating for re-shoring and have organized a trade fair May 12 in Irvine, Calif. The National Tooling and Machining Association, Precision Metalforming Association and Association for Manufacturing Technology have teamed to offer the 2010 NTMA/PMA Contract Manufacturing Purchasing Fair: Re-Shoring to Bring U.S. Manufacturing Jobs Back Home.
“The move to re-shore production has grown increasingly popular in the U. S. in the face of higher transportation and fuel costs, higher wage rates and reject rates (quality control) in developing countries,” a press release for the event reads.
Business writer Ed Marcum may be reached at 865-342-6267.
Source: Knoxville News Sentinel