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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UPDATE: Something apparently got messed up with the PayPal buttons during this past weekend’s database glitch – fixed now. Yes, it’s that time again — PPC will be conducting training classes for center-right activists on Saturday, April 20 and Saturday, April 27, at Independence Institute in Denver. The tentative class schedule is as follows: Saturday, [...]
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