Many people ask, “Mitch, how does Unionwear — a unionized manufacturer in Newark, NJ compete with China? Your real estate and labor costs are among the highest in the world.”

The fact is, Unionwear cannot compete with China on cost. In fact, Unionwear is the most expensive manufacturer in the world for their product categories. 

So they changed the game.

Instead, Unionwear competes on value.

There are a lot of misconceptions about competing on value. Here, Unionwear CEO Mitch Cahn clarifies what it means to compete on value.

1. Manufacturers cannot create value with work in process, because parts have no value until clients are willing to pay for them.

2. Manufacturers cannot create value by cutting labor costs. If manufacturers cut labor costs with lean manufacturing but do not redeploy that labor to another task, there is no value created. 

3. Manufacturers cannot create value by focusing on profits. Using productivity as a tool to increase profits is the other side of the labor cost equation, and a NJ-based manufacturer cannot compete on labor.

4. Manufacturers cannot create value by having people work faster. If they are working fast without adding value to the product, they are destroying value. 

Manufacturers only create value when their finished product sells for more than it cost to manufacture. Otherwise, you are not creating value, but are just moving it around.

This is the game Unionwear plays: knowing what it means to add value and focusing on that instead of decreased costs.

Discussion from 2:58 – 4:56: