Successful American Manufacturing

We harp a lot, including yesterday, on American manufacturers that believe subsidies and trade barriers are necessary in order to compete globally.  Some of these companies are in knowledge-intensive technology industries, but common misperception believes that labor-intensive industries are especially impacted by foreign competition.  We believe that by looking inward and using lean methods to reduce internal waste a company can almost always overcome those supposed "competitive burdens." 

American Apparel proves our point perfectly.  Here's a company in the garment business, and not even the glamorous end of it... t-shirts and underwear.  They should be eaten alive by low-cost overseas sweatshops in Guatemala or the Philippines, right?  Quite the contrary.  They are growing rapidly, with 4,000 employees at their factory in Los Angeles, wages are on the very high end of industry average, and their benefits are exemplary... even when compared against high tech industries:

We offer the following benefits to all of our employees, sewers and administrators alike, as a matter of policy: paid time off, affordable healthcare for them and their families, company-subsidized lunches, bus passes, free ESL classes, on-site masseurs, free parking, proper lighting and ventilation, and the most up-to-date equipment (be it the latest cutting machine or software). We are continually striving to improve the work environment. More importantly to our garment workers though, we offer year-round employment and job security, with virtually no turnover. This is anomalous in an industry dominated by seasonal work.

As we told you last June, they do have some peculiarities, specifically a CEO that daydreams about being a porn star and exposes himself to reporters, but that doesn't change the underlying competency of the company: they know how to manufacture.

If you poke around their website you find a unique symbiosis of social activism and manufacturing.  A focus on the people... coincidentally the oft-forgotten other half of lean manufacturing.  They understand the off-balance-sheet benefits of quick customer response, lower inventory, and how that more than offsets higher labor costs.

We've consolidated all stages of production under one roof at our downtown Los Angeles factory—from the cutting and sewing, right through to the photography and marketing. Ultimately, it is this system that allows us to stay competitive while paying the highest wages in the garment industry. Because we don't outsource to local or developing-nation sweatshops (or to ad agencies, for that matter) the entire process is time-efficient, and we can respond faster to market demand.

When we first told you about American Apparel we mentioned that they were looking for investment capital to expand, but were having a problem as all investors believed that they should outsource overseas to remain competitive.  The company stuck to its guns and has just found some capital, although it's a unique type of deal.  Both parties to the deal have reinforced a commitment to the company's ethics and values, including manufacturing in America.

So the next time someone complains about competitive burdens with manufacturing in America, remind them that even a simple t-shirt manufacturer can eliminate sufficient internal waste to compete with overseas sweatshops that have 10% or less of their labor costs, and still have enough cash to provide on-site masseurs.