Sustaining manufacturing in the US (or any high wage location) has been one of the recurring themes in this blog. Manufacturing has long meant well-paying jobs for those without advanced education. The loss of manufacturing jobs consequently causes much hand wringing as policy makers and workers about how a large number of people will achieve a modicum of middle-class financial security. Consequently, firms that are finding away to compete with US-based manufacturing are interesting.
Here is the accompanying radio report that has some additional information.
So what is it about Zuzii that lets them succeed?
In many ways, they are following a fairly standard playbook. First, they have taken labor cost out of the equation. For a lot of firms, that means automating like crazy (see this post). Zuzii has taken a different approach by using product design to strip out labor. There shoes are not fancy, consisting of only five parts.
That simplicity means that not much labor is required to do assembly. The downside is that their shoes, for better or worse, all look alike. They do, however, offer some variety by having different prints on their shoes. This is not particularly time-consuming to the extent that printing dots takes about as much time as printing stripes.
The second thing they are doing here is minimizing inventory (see also this post). Why should you do build-to-order when you are producing a standard design in standard sizes? Because then you don’t have to manage finish goods inventory. Size 4 and size 6 shoes are not substitutes. Even with limited style offerings, different sizes creates a large number of SKUs and would require a large amount of inventory. Note that this really wouldn’t be possible if they produced overseas. A foreign supplier would likely require a minimum order size that would increase inventory and risk. For a small company, one dud style could be a serious drain on resources if they have to produce ahead of demand.
That points to a third issue: They are exploiting their US operations to offer something that a foreign competitor would have a very hard time matching. If customer’s value the idea of made-to-order, Zuzii can fill that need while a conventional firm cannot — or at least not at the price point Zuzii hits.
There is no free lunch, so what are the risks that Zuzii faces? I think that the biggest is that this system will not scale well. They are producing 50 pairs of shoes a day with plans to go 100. But this is a very labor driven process, so expanding production means adding bodies. As noted in the report, cobblers are few and far between. Even where there is a concerted effort across firms to train for similar skills (see this NYT article), success is no guarantee.