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Made in America

by randomridge | 4:44 am, January 10, 2009 | 3 Comments

When the pundits of business tell you that low-skill, low-margin goods like clothing can’t be produced in America anymore, and simply must be offshored to sweatshops in third-world hellholes, think of American Apparel:

Brief background on why I like them so much: this is a $500 million manufacturer of t-shirts, underwear, and the like. Typically low margin products, the kind of thing that usually comes from Asian and Central American sweatshops.

But not at American Apparel. This company makes over 1 million articles of clothing per week, from their one factory in Los Angeles and they grew 40% this year. They pay their 5,000-person workforce significantly above minimum wage (average is $12-$15 per hour), give them full subsidized benefits (such as high quality health care insurance for $8 per week), and they turn a profit.

This should embarrass the heck out of any executive who thinks he has to outsource in order to find effective labor. Or at least call into question his fundamental competence as a leader. If American Apparel can manufacture low margin clothing efficiently enough to beat the sweatshops (in California no less), then anyone should be able to. If they try hard enough.

How are they doing it? Among other things, by listening to the efficiency and product ideas of their employees, by keeping design, management and production close together to provoke fruitful interactions between them, by cleverly turning waste into new profit-generating products, and by keeping product cycle times short enough to enable rapid product changes and the ability to profit from short-term trends.

The American Apparel example shows that clothing companies are being perfectly honest when they say they can’t produce clothing at a profit in the U.S. – because they don’t know what they’re doing, and they aren’t interested in doing the hard work of figuring it out. Like the Starnes Heirs from “Atlas Shrugged”, they are too focused on trendy causes that show everyone how much they care about the world to take care of their business, or too worried about when the etched-glass shower doors in their executive washrooms will be installed to worry about continously improving their products and production methods. Or like many other industries in the U.S., they are too bound to the old way of doing things to see the benefits of institutional change, or even to see that there is a problem with “the way things have always been done” — offshoring allows the old ways to continue, in a different locale.

While this incompetence doesn’t excuse the excessive costs imposed on manufacturers by union extravagance and regulatory lunacy, it shows that another big factor driving manufacturing offshore is the lack of innovation and skill among those very people who point the finger of blame at work rules and government meddling.

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Category: Economics
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Comments

  1.   Nivi
      January 10th, 2009 @ 4:52 am

    Very thoughtful. Thanks!

  2.   Bruce
      January 11th, 2009 @ 2:08 pm

    American Apparel is chock full of illegal alien labor. They make no bones about that. the owner is/has been up on many sexual charges. He fancies latina women. He has banners all over his buildings about “legalizing LA” and backs many answer type protests here in LA. He is a Canadian who is suing the name American Apparel and the guise that he is “made in america”, but he left off the part “…by illegal aliens”. He has peter schey as a lawyer and has told ICE don’t even think about raiding us. Read more about him here, or in the website link above by my name. American Apparel is just another company that instead of off-shoring, brought the cheap labor ashore and threatens our government with lawsuits if they try to stop him… dirty bunch… read more about them so that you don’t unknowingly allow them to further their agenda…
    http://www.americanpatrol.com/REFERENCE/SCHEY-Peter-Reference.html

  3.   Bruce
      January 11th, 2009 @ 2:20 pm

    Read this story as well.
    http://24ahead.com/blog/archives/007664.html
    and making no bones about it, in his own words PEter Schey/American Apparel
    http://www.immigrantslist.org/index.php/blog/entries/check_out_american_apparels_new_ad/

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