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Farouk Systems Inc. brings manufacturing to U.S.

Texas Governor Rick Perry helped Farouk Shami, a Palestinian-born hair stylist whose company, Farouk Systems Inc. is a $1 billion firm specializing in hair-care products, cut the ribbon at a new facility in Houston. Shami is relocating the company’s manufacturing from China to the U.S., where 60% of Farouk Systems’ products are sold.

Texas Governor Rick Perry helped Farouk Shami, a Palestinian-born hair stylist whose company, Farouk Systems Inc. is a $1 billion firm specializing in hair-care products, cut the ribbon at a new facility in Houston. Shami is relocating the company’s manufacturing from China to the U.S., where 60% of Farouk Systems’ products are sold. Farouk Systems is headquartered in Houston where it employs 400 people currently, and another 1200 will be hired as the company brings R&D, manufacturing, assembly, packaging, shipping, and global distribution operations to the U.S.



Farouk Systems is investing in “Made in the U.S.A.” with jobs transferred from China.
Farouk Systems manufactures and exports professional hair-care products, including CHI and Biosilk brands. The CHI hair iron and low-electromagnetic field (EMF) hair dryers are two of the specialty products Farouk Systems manufactures. The popularity of the CHI products has made them ripe for counterfeiters “knocking off” its products, and costing the company upwards of $500,000 a month to battle the counterfeiters, including replacing defective CHI irons and dryers that turn out not to be manufactured by Farouk Systems.
   
“I’m hoping that the U.S. will be more involved in checking for counterfeits at the border to make sure products coming into the country are authentic,” said Shami in a telephone interview. “The government should help manufacturers uncover counterfeits, and they need to file criminal charges against these people. It’s costing me money to fight them and we closed hundreds of companies in China and thousands of e-Bays selling knock-off products.
   
Shami says that he is aware that manufacturing overseas has a significant cost advantage, but he’s certain that he’ll be able to offset higher labor costs using tax breaks, eliminating import duties, and marketing his products as “Made In the U.S.A.,” said the company. “People want ‘Made in the U.S.A.’ on the products they buy,” said Shami. “I want ‘Made in the U.S.A.’”
   
As it turns out, Farouk Systems’ move to the U.S. isn’t an isolated case. Many companies are bringing manufacturing back to North America, primarily because the bulk of their customer base in here. Cost increases in materials and transportation, counterfeiting problems, and logistics problems in the supply chain have caused many manufacturers to relocate production either to the U.S., Canada, or Mexico.
   
A 2009 study by Archstone Consulting LLC, cites 10 “macro forces” that are currently undermining the offshoring trend, with nearly 90% of manufacturers reporting that they are considering or have already begun rebalancing their manufacturing and supply strategy due to cost increases in offshoring: 40% have reported an increase in aggregate cost of 25% or more; 90% expect further increases of 10% or more, said Archstone’s study.
   
Shami believes it goes beyond the cost factors, but that it’s the first duty and responsibility of any U.S.-based company to bring jobs back to the U.S. “The Chinese are running short of labor and we have an abundance of labor with our nearly 10% unemployment,” he stated. “We’re an American company and this is our responsibility to bring jobs back to the U.S. This is the fastest way to stimulate the economy and recover what we’ve lost is to bring jobs back.”
   
Shami adds that if  jobs are brought back to the U.S., healthcare can be accomplished through companies providing employees benefits. “We export our jobs and our money to China, and here the states and federal governments are paying people unemployment,” he said. “It’s devastating to the economy, so if we can employ people, they have healthcare.”
   
Shami has already located custom injection molders in Houston and Lubbock, Texas that can mold the plastic components in the hair irons and blow dryers for about the same price as the Chinese supplier because Farouk Systems has provided long term, high-volume contracts. He’s also hoping to find good mold manufacturers in Texas. “We are in-sourcing rather than out-sourcing,” Shami said. “We’re meeting with the mayor in San Antonio, looking to buy or partner with a company and open a plant to make molds. I want to spread employment opportunities around the state.”
   
Farouk Systems has big plans for expansion. “We want to expand our molding here by doing small kitchen appliances,” said Shami. “CHI is such a major name and we have such innovation with our products that we want to expand that into kitchen appliances as well, which means more plastic and more molds, and I want to work with more companies in Texas. That will stimulate the economy. Charity starts at home.” Clare Goldsberry
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