[an error occurred while processing this directive]
July 2008
Industry Highlights
     Trends in Sourcing: Will the United States Expand Production?

Sourcing decisions made by brands and retailers have considerable influence over global patterns of production, and apparel manufacturing currently occurs in over 150 countries. The FIBER Journal asked two experts to discuss trends in global manufacturing of apparel, along with consideration of labor standards and working conditions, and contemplate whether there is any chance that a notable volume of production will move back to the United States. See what Gregg Nebel and Michael Londrigan conclude.

New York City Factory of
the Future Project

Michael Londrigan
Michael Londrigan
Chair, Fashion Department,
The Laboratory
Institute for

What is the future for apparel production in the United States? In 2006, Social Accountability International (SAI) decided to try to answer that question — at least regarding production in New York City. SAI teamed with Eileen Fisher, Inc. to put together a grant proposal for demonstrating and testing how innovative management systems for social performance could help sustain garment manufacturing in a high-cost environment like New York City. The project was dubbed "The New York City Factory of the Future." The name conjures up factories that are technologically advanced, using modern computer-aided design and manufacturing equipment, but that could not be further from the truth as many NY factories rely on old equipment and production methods that have stood the test of time. The Garment Industry Development Corporation (GIDC) estimates that 40,000 individuals still work in the apparel and textile manufacturing sector in NYC, clearly a vital and thriving apparel and textile manufacturing business in the heart of the fashion capital of the world.

The proposal brought together three entities — Social Accountability International (SAI), the Garment Industry Development Corporation (GIDC), and Systain (a German engineering firm) to utilize expertise that each organization could offer. Money was raised from the Hitachi Foundation, Nathan Cummings Foundation, Eileen Fisher, Inc., and GAP Inc. The project included three key objectives:

I was brought into the project in January 2007 to act as a consultant. The methodology for the overall project was sound, but given the fractious nature of the apparel industry in NYC — with some companies offering only cutting, others producing samples, some creating markers, with the balance providing sewing and finishing — it was difficult to find factories willing to participate in the project. With the assistance of GIDC, we agreed on six factories that showed a willingness to work with us. One of our original goals was to seek out brands that maintained a manufacturing presence in NYC and to work with the factories in which they were producing. We targeted those brands that had publicly supported programs to aid and strengthen their suppliers’ social compliance. Unfortunately, the brands that still produce regularly in the city are proprietary about their relationships with suppliers. Other impediments we encountered in finding and qualifying willing participants included language barriers and companies that were not compliant. We found immigration issues, factories keeping two sets of books, workers putting in overtime and being compensated at regular rates, cash payments to workers in addition to W2s — and this was just in some of the factories that we were able to gain access to. Of course there are many factories that are totally compliant operating in NYC; unfortunately, they decided not to participate in the project or we failed to reach them.

The six factories that agreed to work with us were evaluated by the engineering firm for work flow, productivity, and health and safety issues. Recommendations were made to each factory manager/owner, and five of the six declined to embrace the recommendations. The reasons for not going forward included space constraints, money, time, and a real estate rezoning issue. The latter issue alone hampered the efforts of four of the factories. The factories do not know where they will be in the next six months, as zoning is currently tied up in negotiations that are ongoing between UNITE HERE, the realtors, and the city.

Although frustrating at times, we had several successes with the project stemming from on-the-job training conducted under the auspices of GIDC and supported by the grant monies. The project continues to support GIDC’s training with new training recently started at a Hanes Brand Incorporated product development facility in NYC. The Hanes product development center houses 33 sewers and managers, all of whom are taking part in the training. In addition, we have identified a denim textile trading company that is planning to open a factory in 2008 that will become a union shop offering full benefits. This will be a fully integrated company offering full denim packages, from textiles to wet processing, that could serve as a model for the project. We have also identified a sweater factory in Glendale, NY (T2), which I would consider a factory of the future because it has virtually no people. The company runs eight Stoll flat bed knitting machines that are capable of knitting whole garments and rely on expert programming capability. I introduced this company to Eileen Fisher, who is now working on an organic wool program with T2 in an effort to reduce its carbon footprint.

The Factory of the Future project team has also approached and conducted meetings with the New York City Department of Economic Development as well as the New York State Labor Department to investigate ways to get them involved in the project. Based on the results of the project, we are refocusing our efforts to take smaller bites out of the project and are concentrating on worker training and holding events to tell good stories about how the training has improved the workers' lives. The project continues today even though we have learned that the city, the brands, and even the factories that we are trying to help all have reasons or excuses for avoiding participation in the project.

So what will the New York City apparel and textile industry and its production resources look like in the future? Will there be a sustainable business model that will allow this important aspect of the fashion business to continue to exist in NYC? I see the answer to that question as yes. In recent months, I have seen an effort on behalf of several brands to bring apparel production back to the NYC area. One case in particular is the Eileen Fisher Company. I have worked with their domestic production manager to locate factories for knit products in NYC. This production would have previously found a home on the other side of the world. In addition, the sweater department continues to work with T2 to develop sweater programs that will hopefully be produced here in New York with the goal of reducing their carbon footprint and satisfying a customer need. I truly believe these examples are just the beginning of a movement back to the U.S. as the environmental aspect of our business continues to grow in importance. I think we will see more socially conscious companies looking for ways to reduce their global footprint, and an obvious answer is to produce locally. One way to support these efforts are through projects such as the Factory of the Future, where we are bringing a diverse group of stakeholders (brands, manufacturers, retailers, nongovernmental organizations, city and state officials) together to develop ideas and plans on how to maintain and grow the base that exists. Through greater efforts involving various stakeholders, coupled with increased worker and manager training, we can improve the atmosphere and increase the competitive aspect of producing in NYC.

My enlightened conjecture is that production in NYC will remain a fractious business, driven by niches and supported by small production runs, product development, and high design. Optimal here is service and flexibility that allow producers to respond quickly to the design and testing process, i.e., fast fashion. Those producers able to engage in some moderate design or design support work will fare better than those conducting only cut and sew processes. As long as New York City remains the fashion capital of the world, there will be some element of production in NYC or its environs.

About the Author
Michael Londrigan started his career in the fashion business with the JC Penney Company when they were headquartered in New York City. After spending several years in various buying departments, he decided to branch out and get involved in the wholesale side of the business. Over the next 22 years, he spent time in sales, marketing, quality control, and sourcing with Oxford Industries, Harper Industries, Cotton Incorporated, Regal Menswear, and Ulster Weavers, with a major concentration in the menswear business.

In between, Londrigan started teaching fashion courses at the Fashion Institute of Technology, the Laboratory Institute for Merchandising, and Berkeley College as well as business courses at Westchester Community College. He holds a master's degree in marketing from Fairleigh Dickinson University. In July he assumed the position of chair of the Fashion Department with the Laboratory Institute for Merchandising, and this August his textbook titled Menswear: Business to Fashion is due out from Fairchild.

Patterns of Migration in the
Apparel Manufacturing Industry

Gregg Nebel
Gregg Nebel
Head of Social and Environmental Affairs, Adidas Group, Americas Region

When considering the apparel manufacturing industry during the last 200 years, there are consistent linkages between garment production, raw material supplies, and the cost of labor. Proximity and availability have driven competitiveness. The historic migration of the garment industry has been driven by the need to move closer to fabric and raw material supplies, illustrated in the best cases by the growth of vertically integrated operations that strategically and commercially ally textile manufacturing and garment cutting, sewing, embellishment, and packaging.

In the heydey of American apparel manufacturing, this meant that cotton from plantations in the southern states was shipped to and processed by textile mills in the southeast and Mid-Atlantic states, and the fabric was cut and sewn by garment factories in states close to the Mason Dixon line. Another competitive advantage in the garment manufacturing industry, labor costs, was maintained by the availability of workers in the less industrialized, more rural states. The relatively low skill sets required in apparel manufacturing, plus the comparatively higher wages than those offered in the agricultural sector, made garment manufacturing jobs desireable and steady. This set of circumstances later drove the migration of U.S. garment production centers from the more industrialized northern states with their more educated and expensive workforces to the southern states.

The migration of apparel manufacturing away from the U.S. started in the 1980s with the implementation of the North American Free Trade Agreement (NAFTA). While the General Agreement on Tariffs and Trade (GATT) established protective trade barriers for garment imports, NAFTA offered an opportunity to satisfy an increasingly price-sensitive consumer demanding high-quality products. With the cost of raw materials strategically competitive by allowing NAFTA-sourced materials to move duty-free between those countries, the obvious opportunity for savings was in the labor component. The workforce in Mexico cost less to employ than their counterparts in U.S. or Canadian factories. But this labor cost advantage was temporary. Globalization offered increased access to offshore markets that had increasingly competitive labor costs and strategic alliances between fabric suppliers and garment producers. Yet another migration of apparel manufacturing was started, moving manufacturing programs to Asian producers in newly emerging economies.

The patterns of migration in the garment manufacturing industry have proven time and again to be transitory, and once they have gone, factories have not returned to countries of “origin.” Examples include the industry’s migration from Europe to the U.S., the U.S. to Asia, and more recently, within Asia. This Asian dissemination has seen garment factories move from Taiwan and Japan to China and Thailand, China to Vietnam and Cambodia, and most recently to Bangladesh and India. The cost component for labor, labor that requires relatively low levels of skill and expertise, has made the garment manufacturing industry a critical driver for emerging economies by fueling new employment opportunities. The available labor pool in most cases is workers transitioning from agricultural and less industrialized work or underemployment.

The garment manufacturing countries left behind have evolved into technical competency centers for the industry, sources for textile manufacturing, design, and development. In some of these countries, the apparel manufacturing industry has survived in small pockets of specialization, sometimes supported by tariffs and trade protections. But the critical mass of the garment manufacturing component has moved on and does not return.

An argument can be made that competitiveness in the U.S. garment manfuacturing industry is these days driven by automation, production efficiencies, and speed to market. U.S.- produced apparel that can be competitive in today’s market is likely to be technical products produced in small volumes at highly automated factories. It is likely to be specialized 'high needle' products that can be run through computerized manufacturing and handling systems. It is products that are produced in factories that are expensive to set up and require major capital investment. In other words, it is not commodity apparel items, it is not labor-intensive apparel items, it is not a notable part of apparel’s global supply and demand. It is not apparel which can be produced in factories that are relatively inexpensive to set up and staffed with inexpensive workforces.

The answer to whether the garment manufacturing industry will return to the U.S. at its previous levels is no, at least not in the foreseable future. Opportunities for producing specialized and niche apparel products exist, but the commodity apparel products that have left U.S. factories for factories in Asia and Africa have an undisputable competitive advantage.

Would production return to the U.S. because U.S. factories treat workers better and pollute the environment less? That would be a broad generalization because, in fact, there are responsible manufacturers in many countries. A critical development of mature economies is the development of a national legal system and the regulatory mechanisms to enforce those laws. The effective regulation of employment, health, safety, and environmental practices has a cost, a cost that is reflected in the price a consumer pays for products. Factories operating in societies where governments regulate and enforce fair, healthy, and safe work conditions have mitigated some of the costs of employment and environmental law compliance with production efficiency initiatives and technology, but it is not enough to offset competitiveness gained through the manipulation of less vigorous governmental regulation. The existence of laws defining wages, working hours, freedom of association, occupational safety, and stewardship of the environment does not guarantee those rights in and of itself; there need to be rules of law monitoring and enforcing the compliance of that society’s commercial actors. The interaction of good corporate citizens, an engaged civil society, credible multinational organizations like the International Labor Organization, and local governmental institutions is indispensible in supporting the rule of law. Multistakeholder initiatives like the Fair Labor Association bring transparency to the programmatic efforts of FLA-participating companies and the systemic noncompliant behaviors those programs are confronting. But it is difficult for such collaborative efforts to keep pace with the growth of globalization, and all too often, the lack of regulatory mechanisms results in unsavory competitive advantages, advantages most often borne by workers and the environment.

As long as this unequal playing field results in a competitive cost advantage, the manufacturing of commodity apparel products will not return to the U.S. or Europe.

About the Author
Gregg Nebel has served as the Adidas Group’s Head of Social and Environmental Affairs — Region Americas since January 1998. He directs regional field operations and compliance activities with the group’s footwear, apparel, and accessories supply chains. He is the Social and Environmental Affairs corporate point person for the Adidas Group’s Americas-based brands (Adidas North America, Reebok International, TaylorMade, Rockport, CCM), subsidiaries, and licensees. His global management responsibilities include strategic planning, monitoring systems development, stakeholder verification processes, and public reporting. He has represented the Adidas Group as a director of the Fair Labor Association Board since 2003.

Nebel has been with Adidas since 1993 and served five years as head of apparel sourcing for Adidas Americas. He has spent 30 years working for fashion and athletic brands and their apparel and footwear supply chains in the Americas, Europe, and Asia. He has a bachelor's degree in political science from Providence College and completed the European Studies Program at the Oest Politik Institute, l’Universite de Fribourg, Switzerland. He speaks French, Spanish, and Portuguese and makes his home in Poulsbo, Washington.