Apparel in America

April 17, 2013 5:43 am 0 comments Views: 18

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images (59)Last week I posted on making toys in the US; this week it’s apparel — specifically, T-shirts and sweatshirts. Let starts with sweatshirts and a firm called American Giant. The story starts back in December with an article in Slate describing the company’s business model and extolling the wonders of its product (This Is the Greatest Hoodie Ever Made, Dec 4, 2012). In effect, American Giant uses technology to cut its distribution cost and rolls a good chunk of the savings into offering a superior product.

In the 1970s, when the fashion industry morphed into a mass-market business dominated by mall stores, its marketing and distribution costs began to skyrocket. To keep retail prices down, companies began to shrink the price of producing clothes. Today, when you buy a hooded sweatshirt, most of your money is going to the retailer, the brand, and the various buyers that shuttle the garment between the two. The item itself costs very little to make—a $50 hoodie at the Gap likely costs about $6 or $7 to produce at an Asian manufacturing facility.

American Giant has found a loophole in the process. The loophole allows Winthrop to spend a lot more time and money producing his clothes than his competitors do. …

American Giant doesn’t maintain a storefront, and it doesn’t deal with middlemen. By selling garments directly from its factory via the Web, American Giant can avoid the distribution costs baked into most other clothes. …

But there is really no comparison between American Giant’s hoodie and the competition. It looks better and feels substantially more durable—Winthrop says it will last a lifetime. When you wear this hoodie, you’ll wonder why all other clothes aren’t made this well. And when you hear about how American Giant produced it, it’s hard not to conclude that one day, they all may be.

OK, so what do you think happens when such glowing press hits the web a few weeks before Christmas? Right, they sell out of everything. Here is a BBC report how they got hit by a tsunami of orders (American Giant: The problems of being an overnight success, Mar 10).

It is not surprising that a small firm could unexpectedly sell out all of their inventory by a sudden surge of publicity right before the holidays. By why are they still so low on goods? The same Slate reporter who wrote the first piece went back to find out (The Only Problem With the Greatest Hoodie Ever Made, Mar 21).

Why couldn’t American Giant keep up, and would it have been able to handle the sudden demand more deftly if, like most clothing companies, it manufactured its goods in Asia?

In a lengthy conversation, Winthrop argued that wasn’t the case. …

[I]t helps to know the three-step process for making an American Giant hoodie. First, raw cotton gets knitted into spooled fabric, a process that takes about 50 days. Then the fabric must be finished and dyed, which takes about 15 days. Finally, the fabric is cut and sewn into a finished product. This last step takes about 45 days. In total, then, American Giant’s pipeline—the time it takes from ordering raw material to getting a bunch of sweatshirts—is about 3 1/2 months long.

Winthrop argues that nothing about the delay suggests a flaw in American Giant’s production process. A three-month pipeline might sound long, but it’s a relatively quick cycle in the garment business. Winthrop believes that if American Giant were manufacturing overseas, many of the steps in the process would take much longer. For instance, to ramp up production so quickly, executives would have had to travel overseas to find new partners to work with. They would also have been unable to monitor the quality of the garments coming out of the new, higher-capacity production system—which, in the long run, would have been terrible for a company that’s trying to distinguish itself by focusing on the quality of its products.

The article then goes on to grudgingly accept the story above but generally chastise the company for not working at Internet speed. All of which strikes me as a little unfair. First, a flow time of three to four months to go from cotton to finished product is not out of line with pretty much every example of apparel manufacturing that I know.   They certainly benefit from having a relatively simple product and a limited product line. But as a small firm they would have trouble of speeding things up even more. I would venture that American Giant is really only controlling the third part of the process, the actual cutting and sewing. They are going to be at the mercy of some mill to get the fabric they need. Maybe a firm the size The Gap can get a mill to jump when they say so but it is going to be much harder for a small player to get a mill to redo its production schedule.

The other part of this is about expectations. The web is supposed to be about instant hits and businesses that scale; it is not supposed to be about month-long back orders. The second Slate article hints at this.

American Giant’s story illustrates the problem with applying that same expectation to tangible products. The success of its hoodie revealed a yearning for quality, American-made apparel. But that yearning proved overwhelming for a company that had to rely on an antiquated, slow backend. And it suggests a lesson: If you make stuff that can’t scale at the speed of the social Web, instant demand might be more of a curse than a blessing.

I am not convinced that it is fair to call their backend antiquated. Apparel making — particularly with natural fibers — is what it is. As I argued above, there not many ways to speed it up. I would also argue that apps and others bits of digital content are not the right comparison. The right comparison is, well, other apparel sellers. Having a hot style of some item sell out quickly is not unusual. Indeed, it’s something fashion designers generally aspire to. The difference here is that basic sweatshirts are more of a timeless item. While a fashion house would generally not do an additional run of this seasons must-have dress (in part because they don’t have time to do it in season), American Giant is going to keep selling the same sweatshirts and hoodies. Hence, their flow time is exposed to the public.

Now to T-shirts and American Apparel. NPR had an interesting story on American Apparel and how they compete by keeping their operations in the US (Fast Fashion’s Challenge: Making Money With ‘Made In The USA’, Mar 13). We have posted in the past about how American Apparel has adapted their operations to be viable making clothing in LA. The NPR piece had two nuggets that are interesting in their own right and but also highlight part of what makes American Giant unique.

First, the NPR piece explains that one of the reasons why American Apparel keeps its manufacturing in the US.

“It doesn’t make sense to drive to Vietnam to pick up a T-shirt,” Charney says. By boat, it takes at least a month to get T-shirts shipped in.

For Charney, that’s too long. So instead, he drives to the seven-story American Apparel headquarters in downtown Los Angeles. From his top-floor office, Charney and his staff figure out what’s selling well and quickly, then fill in the sewing managers one floor below.

The quick process means the company’s supply has a much better chance of matching demand. The American Apparel factory is so nimble, it can get 1,000 T-shirts out the door in a single day.

So being in the US gets you speed. As pointed out by the American Giant CEO, moving production to Asia would not bail them out from their backlog of orders overnight. Even if they could scale up the sewing capacity in Vietnam or some other country, the distance would add to the lead time.

Now American Giant can’t knock out 1,000 sweatshirts in a day like American Apparel can pound T-shirts if only because they have not built up enough capacity. But it’s not just a question of lining up a sufficient number of sewers. It is also about the kinds of materials that American Apparel works with.

Frank Bober, CEO of Stylesight, which keeps fashion companies abreast of trends, says it’s all about the type of product the companies are selling. Bober has been in the industry a long time — long enough to know the difference between knitwear (T-shirts, leggings and sweatshirts) and wovens (dress shirts, blazers and jeans).

And knits, he says, are the key to making money by producing stateside. “Knitwear is the only area, because it’s so machine-driven, that can actually still be made profitably in the U.S.,” Bober says.

Back at the American Apparel factory, you can see why. Knitwear for T-shirts comes off the machine in tubes, rather than flat bolts. “You’ll see if you look at our T-shirts, a lot of them don’t have a seam, or they only have one seam,” says Emily Nerad, the American Apparel tour guide. “It’s because that fabric is already in a tube. And then the sleeves and the finishing are sewed on.”

The company’s secret to profitability is simply more knitwear, meaning more machines, fewer hands. American Apparel can turn out its 1,000 T-shirts a day because it takes less work than other types of garments.

Producing in a America forces American Apparel to work with a more limited palette. Their success is built around a particular kind of fabric that allows them to substitute machinery for hands (there is an analog here with K’Nex redesigning its products so they could bring production back to the States). But that won’t work for American Giant. Part of what their selling is old fashion high quality. That requires more labor to produce and working with fabrics that cannot simply be knitted.

By Marty Lariviere, from: http://operationsroom.wordpress.com/2013/03/25/apparel-in-america/

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