Made in America: Still viable for apparel manufacturing?

August 8, 2013 Commentary, Entrepreneurship Comments (0) 159

Does “Made in America” really matter? Are Americans too price conscious, or too financially strapped, to support American made apparel?

In the mid-1950’s America began the transition from an industrial society, where the majority of the jobs were manufacturing-based, to a post-industrial society, where more than half of the available jobs were service-based. In just two generations, large-scale, labor-intensive manufacturing industries, such as the apparel industry, have all but vanished from the United States. The exodus of the apparel industry was fueled in part by higher labor costs, the rising cost of operations, and the natural evolution of American society and culture. Large-scale consumer apparel manufacturing may no longer a viable industry in the United States using current manufacturing techniques.

Textile and apparel production, while labor intensive, is a relatively easy industry for emerging countries to develop due to the low cost of labor and raw materials, and the profitability of finished, exported goods (Bair). As countries grow and evolve, so do the economic basis of their societies and the transition of the manufacturing base from one country to another is not only necessary for the economies of nations to grow but, also a critical and long-established factor in globalization. The most efficient way for emerging economies to move from an agricultural society to an industrial society is by leveraging their most abundant resource, human labor. Labor-rich countries such as China, Indonesia, Vietnam, India, are now “producing countries,” not unlike America was in the late 1700’s when entrepreneur Samuel Slater built the first textile mill to manufacture raw textiles and finished products that were exported to England and other countries.

After World War II, the booming manufacturing sector led Americans to become comfortable with the concept of “The American Dream,” a term first used by James Truslow Adams in his 1931 book, The Epic of America. In this book, Truslow put forth the idea that all Americans could collectively achieve a better life if their aspirations were similar (Adams). Achieving this “American Dream,” or some version of it, became the goal of the factory workers in the 1940’s and 1950’s and ultimately the children of those workers, a generation now known as the “Baby Boomers.”  When Baby Boomers came of age, America was beginning to transition from an industrial to a postindustrial society, and service-sector industries offered more higher-paying desk jobs as opposed to similar wages achieved through hands-on, skilled labor. (O’ Neill). The Baby Boom generation’s “greed” is often thought to be a primary force behind the dismantling of the manufacturing base in America. However, it is more likely Americans placed greater financial value on knowledge-based “white collar” work than on skill-based “blue color” work beginning in the 1950’s, and this became the catalyst for America’s evolution from primarily a producing country to a vast consuming nation.

In the producing-consuming transition, production work may be devalued—deemed menial—by the broader society, thereby making it difficult for factory workers to achieve a livable wage. This is especially true in the apparel industry where only two factors create a competitive advantage for manufacturers: lower cost, or greater product and service differentiation (McCann). Many companies deploy both strategies, simultaneously using knowledge workers in developing countries to create distinction and then manufacture products in producing countries where the cost of labor and production is significantly lower.

Maintaining a competitive advantage through lower labor costs is the critical challenge of American apparel industry. The United States Department of Labor, Bureau of Labor Statistics reports that textile manufacturing employment has dropped 625%, from 938,600 workers in January 1990 to 150,100 at year-end 2011 (United States Department of Labor). While some workforce reduction could be due to changes in trade regulations as politicians and trade industry analysts suggest, the apparent migration of manufacturing jobs is more likely the ordinary, and should perhaps be expected, the outcome of societal transitions from a manufacturing economy to a service- or knowledge-based economy.

Although many apparel manufacturers send production abroad, Los Angeles, California company, American Apparel, has thus far been successful in producing products entirely within the United States. Rather than design, develop and market products internally, then send production offshore, the company claims to employ a process called, “vertical integration,” that has “consolidated all stages of production under one roof at [their] downtown Los Angeles factor…” (Adachi).  This consolidation of functions certainly reduces transportation costs, one of the most significant costs associated with offshore production, yet it does not solve the root problem of apparel manufacturing—the manual process of cutting and assembly that requires skilled human labor.

The cost of labor in the apparel industry is nearly three times that of other sectors (Adachi) and as demand increases, so do the costs associated with production.  Unlike other sectors that may achieve cost reductions from the economies of scale resulting from increased volume, apparel companies cannot substantially improve the garment finishing processes and procedures with technological advancements. Instead, companies, such as American Apparel, must hire additional workers. These extra workers may require larger facilities and investments in equipment, which in turn could raise fixed costs that may, or may not, be recoupable through the sale of finished products.

American Apparel and other niche apparel manufacturers in the United States have demonstrated some American consumers will pay a premium for domestically made apparel.  However, the vertical integration model used by many of these firms is not scalable given the cost factor of labor in the production equation and therefore limits price elasticity of the products produced under this model.  While consumers may endure modest cost increases for American-made apparel, there is a not-yet-established point where the value of the “Made in America” selling proposition will be sufficient to sustain the price of the product at any level. Unfortunately, economic factors will undoubtedly force consumers to look for lower priced alternatives for one of life’s necessities, clothing.  Large-scale consumer apparel manufacturing might only become a viable industry in the United States again if technological advancements can directly reduce the labor costs of production, or if American workers are willing to explore alternative compensation models, including those tied to consumer product consumption, rather than to product production.

References

Adachi, Dean Ryuta and Lo, Valerie. “Made in Chinatown.” Chinese America: History & Perspectives (2008): 51-59. Web. 30 October 2012.

Adams, James Truslow. The Epic Of America. Sky Harbor: Simon Publications, 2001. Book.

Bair, Jennifer and Gereffi, Gary. “Upgrading, Uneven Development, And Jobs In The North American Apparel Industry.” Global Networks 3.2 (2003): 143-169. Web. 29 October 2012.

McCann, Jack. “China’s Textile And Apparel Industry And The Global Market: Five Competitive Forces.” SAM Advanced Management Journal Winter 2011 (2011): 33-42. Web. 27 October 2012.

O’ Neill, Dave M. “We’re Not Losing Our Industrial Base.” Challenge (1987): 19-25. Web. 27 October 2012.

The United States Department of Labor. Employment, Hours, and Earnings from the Current Employment Statistics survey (National). Extracted: 31 October 2012. Web. 31 October 2012. <http://data.bls.gov/pdq/SurveyOutputServlet>.

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Featured Image Source: Wisconsin Technical Colleges Image 81739

David Harkins is a serial entrepreneur, which is a more professional way of saying he is still trying to figure out what he wants to be when he grows up.
When not working for himself, he has had a fulfilling career in marketing, advising both large and small companies including several in the Fortune 500 and many of America’s largest nonprofit organizations. In his spare time, he consults, speaks, writes, hikes, explores, and creates art. Although, not necessarily in that order. Connect with him on social media below:

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Made in America: Still viable for apparel manufacturing?

by David Harkins time to read: 5 min
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