The Domestic Debate: Michael P. Londrigan

Michael P. Londrigan, chair of Fashion Merchandising and clinical assistant professor at LIM College in New York, weighs in on labor costs, increased technology and other issues surrounding whether manufacturers choose to produce in the United States or overseas.

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Michael P. Londrigan

In your article in Fiber (July 2008) you state, “My enlightened conjecture is that production in NYC will remain a fractious business, driven by niches and supported by small production runs, product development, and high design. Optimal here is service and flexibility that allow producers to respond quickly to the design and testing process, i.e., fast fashion. Those producers able to engage in some moderate design or design support work will fare better than those conducting only cut and sew processes.” Do you feel this remains equally true today?
Yes, I continue to think that this is and will be the case for the foreseeable future. Given the high cost to operate in NYC and its environs (real estate, wages, transportation) it would be extremely difficult if not impossible to produce commodity products on a consistent basis in NYC for a large retailer. It goes beyond the production capacity as you have to look at storage space as well. If I had a factory in NYC that could make patterns, markers, cut, make, trim and a major retailer came in with an order for 100,000 shirts where would I store the piece goods, cartons, trims, etc to make the order let alone how would I finance it. Most retailers will not accept partial shipments so it has to be stored as finished product and shipped in one maybe two shipments. A 20 foot container will hold about 24,000 shirts flat folded so we are looking at a lot of space.

As the costs of labor and transportation for producing apparel abroad continue to rise, is it becoming more feasible to competitively produce commodity apparel in the United States?
In the US, yes; In NYC, LA and major fashion centers, no. Look at the auto industry. They have been very successful going into states that have plenty of open space (read that cheap) and the states are willing to give substantial tax abatements and there is a willing labor force reasonably close. Why couldn’t an apparel manufacturer do the same thing. Your question asked is it feasible and again I say yes, but will anyone do it is another issue. The industry has developed the mindset that we need to be overseas and for the most part all major brands and manufacturers have divested themselves of plant and equipment so why go back? What you might find is an overseas supplier looking to get a toe hold here in the US opening a factory. But for me the real question centers around technology – can the industry continue to invent ways (equipment) that reduces the reliance on human labor and if they can crack that nut then it is a whole new ball game and all bets are off as to where you produce, provided you can justify spending thousands of dollars for a piece of equipment versus paying labor rates of less than a dollar an hour.

What are the greatest challenges currently faced by companies who produce apparel abroad?
I would say rising labor prices, political unrest, rising cost of food, natural disasters, cost of inputs (cotton, polyester) increasing. Not in any particular order as they are all quite serious. Labor goes up in China where do you go? Countries like Bangladesh, Viet Nam, Cambodia, India all though that they would suffer as a result of the opening of the Chinese market but they have not and now people are saying China is getting too expensive. Political unrest, I used to do business in Egypt and if my production was there now I would be in trouble. Rising food costs, I ask my classes what does the price of rice in China have to do with garment prices in the US? Many of the factories in China provide free lunches made up mostly of rice, the price of rice goes up so does the cost of goods sold. Natural disasters, floods, earthquakes etc very unpredictable with devastating effects on the supply chain. I was in Taiwan in an earthquake once, not fun. One of the factories I had production in was damaged and consequently deliveries were late and the retailers don’t really care why. Cotton and polyester prices have gone up crazy lately so that will have an effect on global production. On another note finding qualified personnel to work in and monitor the factories you do business with is a real challenge.

What are the greatest challenges currently faced by companies who produce apparel domestically?
Single biggest is cost of labor which of course is directly related to imports. I mentioned above that technology would play any major part in commodity type products coming back to the US as a country we have lost the skilled laborers who for so many years worked in the mills and apparel factories throughout the country and mainly in the southeast. If I opened a factory today who would work in it when I can work at Wal-Mart? One company I worked for had factories in Mississippi and when I had to visit I would find sometimes three generations of women working in the same factory.

What advice would you give to companies that are considering returning production to the States?
Tread lightly, do the research. Make sure there is a target market ready willing and able to pay the prices for the products that you plan on making. Find a niche and exploit it. Find a product that you can manufacturer with the greatest amount of technology to reduce your reliance on labor. Start small, test the market and good luck.

National Retail Federation-Erik Auter, Vice President International Trade Counsel, National Retail Federation

What role do you feel retailers can play in keeping apparel production in the United States-or for that matter in aiding its return to the States?
Currently, 98 percent of all clothing sold in the United States is sewn outside the United States and imported. The simple fact is that jobs cutting and sewing garments are largely gone and will not return to the U.S. The apparel industry jobs that have stayed in the United States are the high-skilled, high-wage jobs in design, sourcing, logistics, and marketing. The reasons are pretty straightforward and can be summed up by providing the following points I’ve heard from industry executives, politicians, and the press:
1. Given the choice, most young Americans would rather work for a retailer designing, buying, or selling clothing, than in a factory at a sewing machine making clothing.
2. What kind of jobs do we want in our manufacturing sector? American factory workers cannot and should not compete with unskilled workers in developing countries making $6 T-shirts; they can and should compete with highly-skilled workers in Europe and Japan making multi-million dollar airplanes, $50,000 bulldozers, and $25,000 motorcycles.
3. Although low by U.S. standards, the wages of workers in apparel factories in many developing countries are well above their national average even compared with doctors, lawyers, teachers and government employees in those countries.
A hand-full of companies have built a business model around selling American-made consumer goods. As a general rule, however, retailers view their responsibility as providing the best value to their customers, offering good and secure employment to their associates, and good financial returns to their shareholders, not ensuring that jobs cutting and sewing apparel stay in the United States. Accordingly, they source their apparel where it makes best business sense to do so.
The only way apparel sourcing could come back to the United States to any significant degree is if American consumers were prepared to pay substantially more for commodity apparel products. Those garments that American workers still make are sold at high price points – fashion and high-performance clothing for example. The American public is simply unprepared and unwilling to pay $15 for a pair of white cotton briefs produced entirely in the United States. Until their customers are ready to pay much higher prices, retailers must look elsewhere for most of the apparel products they sell.

What do retailers stand to benefit by supporting companies that produce their products in America?
Because of resistance by American consumers to higher prices, U.S. retailers turn to a small number of niche apparel producers in the United States mainly for limited amounts of specialty or fashion-oriented garments in small production runs where quick replenishment, and speed/proximity to market are critical, and, because they are high-end garments, cost is less of a factor. These U.S. producers are important parts of the apparel supply chain, and retailers incorporate them into their sourcing plans, but only to the extent that American consumers are willing to support the higher prices for the apparel products they make.

What challenges do retailers face in supporting such companies?
In addition to being extremely cost-competitive, many foreign suppliers (particularly in Asia), generally provide the best customer service because they have a lot of experience with the U.S. market, understand U.S. consumer tastes, are more flexible and nimble in filling orders, and can provide top-notch support to their U.S. customers’ design, logistics, and store operations, and marketing teams.

To what degree do you believe consumers value products that are made in America? Why do you feel they value such products?
American consumers have consistently shown in their shopping behavior that what they want is value (quality and price) when purchasing consumer products, and generally do not care where that product was made. A “Made In America” label has little or no impact on purchasing decisions, particularly if the U.S.-made product comes at a higher price than a comparable imported product.

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