Making American Apparel in America

When you think of the retailer American Apparel, you may first think of racy advertising or a CEO prone to being served with sexual harassment suits. (My mind, of course, goes immediately to a classic Onion piece that combines both of these.) What you may not know is that American Apparel’s apparel is actually made in America. Just how they go about doing that is the subject of a recent LA Times piece (American Apparel fights the ‘made in America’ fight. For how long?, Jun 3).

The company’s seven-story factory, a former Southern Pacific Railway freight depot, is the biggest garment-making facility in the U.S., according to an industry trade group. Here, 4,500 workers staggered over two shifts cut, sew, fold, box and ship clothes to the company’s 253 stores and other clothiers worldwide. …

In addition to the two large buildings downtown, the company owns four smaller manufacturing operations in Southern California. Fabric for the company’s trademark cotton T-shirts, which come in 52 colors, is knit and dyed in those facilities before getting trucked downtown for sewing.

So what steps do they take to make manufacturing T-shirts in the US viable? For one, they have adopted some techniques from lean operations.

[Chief Manufacturing Officer Marty Bailey's] key innovation, borrowed from his years at Fruit of the Loom, was implementing a “team-based” manufacturing method that upped productivity and — he says — positions the company to successfully make it in America.

On an open factory floor with light streaming in from large windows, workers are divided into teams, with each responsible for sewing one style of clothing from start to finish.

A team, made up of 5 to 20 workers with their sewing machines pushed together, starts with fabric that has been cut on the fourth floor. The first person sews the sleeves. The next may attach a zipper. The items are passed among the team members, one after another.

At the end, there’s a finished shirt or skirt that is inspected by a quality control worker and then boxed up and sent down a conveyor belt to the distribution warehouse next door.

They have also put in place a compensation schemes to get workers to exert a lot of effort.

In the factory, motivation is key: Employees are paid for each completed garment, at a “piece rate.” Although everyone is guaranteed minimum wage — $8 an hour — factory workers typically earn $11 an hour, on average, and the fastest teams can earn $18. Supervisors clock their teams several times a week and devote time to training slow workers. …

“They’re all here because they want to earn, and the more successful they are, the more successful the company is,” Bailey said. “These people are professional apparel workers, and they are better and faster than training people in Honduras how to operate a $5,000 machine, who don’t even know how to flush a toilet because they haven’t seen one.”

It is worth noting here that a piece rate is not at all uncommon in apparel manufacturing. Also it is a little unclear from the reporting how this compensation plan is actually being implemented. It seems that it is not an individual piece rate but a team-based bonus. That would make a lot of sense; a reason to move production into teams/cells is to cut work in process inventory and it is hard to implement an individual piece rate scheme when workers are highly dependent on each other.

That last quote also points to one of the advantages that American Apparel has working in LA: They can get long-tenured “professional” workers. In a developing country, hands might be cheaper but they are not necessarily highly skilled and they may be inclined to jump ship quickly. Much of American Apparel’s workforce is made up of immigrants (which has led to ICE raids) who arguably don’t have better options. I am not suggesting that American Apparel exploits its workers. Rather, I am saying they are the employer of choice. The options one of their sewers has basically come down to leaving the industry or working in a sweatshop.

So how does this pay off? Speed to market.

American Apparel’s skilled workforce can churn out 120,000 T-shirts in a day and quickly whip out new designs. Bailey said the fast turnaround from design to factory to store is a key advantage when jockeying for shoppers with competitors such as Forever 21 and H&M.

“I’ve had ideas on Monday and had them hanging in a storefront on Friday in Manhattan,” Bailey said.

Although they are not necessarily cost competitive.

The company’s products cost more than its fast-fashion rivals’ — a simple cotton T-shirt can sell for $21 if it comes from American Apparel and as little as $8 if from Target. Bailey said superior fabrics and better designs justify the higher price tag.

In many ways, American Apparel is following the modern American manufacturing playbook: Emphasize productivity and offer speed and customization. The difficulty for them relative to, say, a manufacturer of machine tools, is that to some people (such as myself) a T-shirt is a T-shirt.

Also, this hasn’t worked terribly well for them in recent years. That is, they’ve been losing money. One can spin a story in which a combination of high cotton prices with high oil prices and rising Chinese wages closes the gap between their costs and the total cost of sourcing from Asia. That hasn’t really happened yet and if the world economy slows down enough, it is unlikely to happen any time soon. Still it is interesting to see them try.