This is the post I had intended to write after the recalibration post rather than the slow fashion one. By way of reminder, in the former I’d said that 2010 would be all about recalibrating our expectations in terms of income, value, price but most of all -and the topic of this post- how we do business. Many businesses are not sustainable. The free flowing credit market (60% of entrepreneurs fund via credit cards) and over inflated home values (30% of entrepreneurs finance ventures with second mortgages) permitted people to outsource jobs they may have been better off to have considered developing internally. Yes, I mean conditions are such that you might think about developing your own sewing operation.
Sustainability is a word everyone loves to throw around. Buy organic, slap a green leaf or pretty bird icon (what is up with that, I’m so over it) and most people call it good. I’m talking about regionalism and making your supply chain sustainable. We always had regionalism (meaning manufacturing close to home) but got away from it. I think we’re headed back to it. Or rather, if you go back to it, the time is ripe to benefit from it. It is unavoidable, the more vertical you can be, the more profitable you are (see yesterday’s entry, what is vertical integration?). And yeah, everybody lauded vertical so we ended up with goosey definitions that included things like 16 month production time lines which was considered to be all good as long as you sold it yourself (GAP etc). I mean something else. I mean manufacturing your own stuff under your own auspices. You know, the way we used to do it. A return to tradition. Tradition is popular in a downturn. Old school ways can save money.
Deep down, I truly think people should set this as their goal. I just haven’t said that because I don’t want to offend the legions of people outsourcing services which by implication could mean I think their model can’t work. Too often, if one suggests changes, it can become misinterpreted as a test over values and it shouldn’t be. You should manufacture yourself because it makes sense in myriad ways but it does not hold that manufacturing by contract means you’re a bad person who exploits people or a bad business person.
This is the thing. Over time, many of you will end up producing your own products once you have the means. It’s the opposite of before (a lot of big brands have come back and are desperate to find contractors). Before, you made do in house until you had the scale to outsource abroad. Those days are truly gone at this time and at this level (which is not to say someone could take you there but that’s a minority). Transaction and energy costs being what they are, I believe one will be in a better position financially if they can produce for themselves, the sooner the better. This is sustainability, regionalism, producing as close to your points of sale as possible.
A lot of newbies get into the industry and think hiring a domestic contractor will be easy and cheap because people are hungry with the economy in the can. The conflicts with that expectation are two fold. First, once some businesses lose their foothold, those jobs aren’t ever coming back. Second, people who are good at something have more options. They’re likely to be good at other things too and will go onto other more stable work meaning you’re left with fewer qualified quality choices in domestic contract manufacturing. This is why I think developing in house production should be a greater priority. If highly skilled workers leave the industry, they’re not going to be available later on when you need them. The loss of skilled labor is a crisis; it represents the loss of institutional knowledge. The longer you wait to look for it, the less of it there will be.
If you produce for yourself, you can reduce a lot of uncertainty, you won’t be waiting (hoping) for someone else to make it happen for you and miss deadlines. I think it makes you a better business person. The costs of waste become much more tangible. A lot of waste is invisible to you if you’re using contractors. You’re not seeing all the fabric that goes in the trash. But most of all, your transaction costs are dramatically reduced so it’s easier to keep reign on your costs and the costs of your decisions. If the process is invisible to you, you really have no idea how fees for services can be inflated by less than optimal decisions.
I liken the process of cost monitoring to using kill-a-watt vs a household power usage monitor. The kill-a-watt is pretty cool. You plug it in an outlet, then plug an appliance into it, and it will tell you the amount of power it draws. That’d be like monitoring per unit sewing costs from your contractor for given styles. But a household power monitor (connects to the mains) tracks electrical usage for the whole house so you can compare energy use for different times of day and where it’s coming from. This is akin to producing everything in house because you’ve got the visuals, the workplace is all around you.
Other benefits beyond lower costs are flexibility. You can take reorders and not worry about meeting a contractor’s minimums. You can do very small lots. You don’t have to get tied into long time lines, deciding in March whether you’ll cut a style for August delivery because you can do immediates. You can also do more private label or special orders for given customers. Maybe they want an exclusive colorway, you can do that. Inventory is another thing. Tragically, most people (not retailers, that should say something right there) have no idea what their inventory is costing them. In accounting, inventory is considered an asset but in the contrary opinion of many, it’s a liability. Inventory ages, it’s worth less the longer it sits there and you don’t have the money to pay people to make the stuff that is selling. If you make your own stuff, you have no need to acquire inventory. Build it as the orders come in. Remember, deliveries made inside of four weeks are considered to be immediates.
Producing your own stuff is cool, you get to sit at the cool kid’s lunch table. People used to be embarrassed to admit it because they only did it because they had to. Now, it’s something to be proud of. In other industries, vertical integration is having a comeback. Considering transaction costs (which could in part be defined as the overhead that services have to charge you to stay in business themselves), costs may be lower than you think. You won’t have to be overnighting stuff or paying freight coming and going like you are now. Then your prices are lower which represents a better value to your customers.
I don’t pretend for an instant that it’s easy to set up a sewing shop but I also don’t think it’s as hard either. Equipment is very inexpensive these days. I bought a top of the line machine ten years ago that listed at $3,500. Two months ago, I bought an even better machine, new, for $2,200 including shipping. Since you’re breaking new ground, you won’t get stuck with old school mind sets that are bad in some ways. Before, we had roughly one operator per machine. Machines were pricey, people weren’t. Since the reverse is true now, have more machines than people. More machines with varying capabilities expands the range of construction possibilities.
I think the real problem is fear, stepping off into the abyss and seeing what’s really there. A lot of us don’t want to know. It’s easier to write a check and spare yourself the gory details. Then, you have to relinquish control, in a lot of ways you won’t (or shouldn’t) be the expert anymore. If you’re smart, you have to hire people who know more than you do, don’t hire at or below your skill level. That is a recipe for disaster. A lot of people only want to work for you so they can siphon off whatever you can teach them, rifle your rolodex and then go off to start their own enterprise.
I know this isn’t going to be an option for many of you wrestling with family responsibilities, other jobs or maybe the cost of living in your part of the world is scandalous. For some people though, those who live off the beaten path, this could be just dandy. With low expenses and wages, this could work. And I don’t mean to be a classicist or anti-classicist but I think that people in rural areas are better workers. My husband says he’d only hire farm boys if he could. They’re used to working harder, improvising on the fly and making it work one way or another. There’s a lot of advantages -infrastructure and connections mostly- to working in a commercial center but there’s lots of down sides too.
How to start:
Other than reading my book because you can’t wing this by reading blogs all day, even mine, this requires a whole new mindset. Don’t start something new just yet. Pick one thing you’re already doing and do it better. I recommend reading What to do when you don’t know what to do. Exclusive focus on one thing will free you to develop competency and give you the confidence and bravery to tackle the next one on the list.
Many people would be well served to stop doing things -a symptom of bigger problems. Like today, I went to visit a designer’s site. She’s jockeying for position with ambitious goals this year, intending to borrow more money to revamp her sizing, streamline her styles and reach into new sales territories. A better investment would be to shut off the music on her site that’s running customers away and it doesn’t cost a dime. Speaking of, music on a website is rapidly becoming a good litmus test of who is willing to listen and apply advice. If someone won’t shut it off, I’ll know this is more about the designer’s need of affirmation or validation. That’s a personality problem, it shouldn’t be a business one. This is why a lot of people won’t give you the time of day. They tell you something and you’ve got a whole laundry list of why you’re right and they’re wrong. Why would we spend the time telling you what you want to know if you won’t listen to what you need to know?
I think running your own production makes you into a much better business person. If you make it, it will bother you a whole lot less to listen to what people are telling you. You can see why they’re right in front of your eyes. If they’re wrong, you can prove it and it becomes a teaching moment (bonding, don’t you feel the love?). Your conflicts won’t consist of a contractor (rolling his eyes) over the phone, explaining problems that just aren’t real to you. Designers who run their own production are much better about getting rid of dogs, poor sellers that drag profitability down. Which do you love better? That dress that only you like or your best stitcher? Which one would you prefer to keep around over the long haul?