The small ceramics manufacturer was contacted completely out of the blue to make mugs for the coffee giant's new "Indivisible" collection -- a line of mugs and tumblers that will be made exclusively in the U.S. and, starting Tuesday, went on sale in Starbucks cafes across the country.
In an interview with The New York Times, American Mug and Stein owner Clyde M. McClellan said of the surprise phone call: "I almost didn't take [it] because I figured it was a crank call or something."
12 People Back to Work Is a Good Place to Start
East Liverpool was once a bustling ceramics manufacturing enclave, home to some four dozen ceramics factories. But like so many other American manufacturing industries, over time ceramics companies followed the path of cheapest labor and moved overseas.
That trend may actually be slowly starting to reverse, however, thanks to the medicine of simple economics and companies committed to making a difference for American workers, like Starbucks.
That call that McClellan took resulted in a contract that has put 12 people to work at his company, four of whom were previously on the verge of losing their jobs and another eight he took on to meet the new demand.
"I Think We're Better Than This"
Starbucks began its crusade to help put Americans back to work not long after the financial crash of 2008, which displaced millions of workers and caused the unemployment rate to hit a 26-year high of 10.2% in 2009, a fact that compelled CEO Howard Schultz to take action.
"Create Jobs for USA" is Schultz's way to get off the sidelines. Teamed up with Opportunity Finance Network, a national network of lenders that invest in low-income and low-wealth American communities, Create Jobs for USA's mission is to not just create jobs but to sustain them as well.
Putting his corporate money where his mouth was, Schultz seeded the organization with an initial grant of $5 million from the Starbucks Foundation.
Rising Cost of Labor Can Cut Both Ways
Assisting Schultz in his drive to bring jobs back from overseas is the simple economics of labor.
Manufacturing tends to move where labor is cheapest. This has been the story in countless American industries, including steel, textiles, electronics: You name it. Ceramics, too. In the 1970s and 1980s that low-cost labor destination was Japan. In the 1990s and 2000s it's been China.
But as manufacturing moves abroad, standards of living rise, and with it the cost of labor. That's what's happening now in China. As such, it's becoming more cost-effective in some industries to actually move production back to the U.S.
But besides labor costs, there are other considerations as well.
According to The New York Times, American Mug and Stein can deliver mugs to Starbucks in four days; Chinese manufacturers can take months. And the East Liverpool company can also tailor the number of mugs to Starbucks' taste. Placing an order with a Chinese supplier, Starbucks may have to buy hundreds of thousands of mugs, which could leave the coffee maker knee-deep in unwanted inventory.
A bad call by Steve Jobs
|Very Likely||436 (69.0%)|
|I'd probably buy them anyways. I like the style and message.||29 (4.6%)|
|I might||104 (16.5%)|
Last year, in response to a question posed to him by President Obama about what it would take to make iPhones in America, then-Apple (AAPL) CEO Steve Jobs replied with seeming certainty: "Those jobs aren't coming back."
For such a visionary businessman, that may have been too fast and too easy an answer.
John Grgurich is a regular contributor to The Motley Fool. John holds no positions in either Starbucks or Apple. The Motley Fool owns shares of Starbucks and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Starbucks, creating a bull call spread position in Apple and writing covered calls on Starbucks.