Mitch: Hi, I am the Chief Executive of Unionwear. We’re a small company, about 120 people, and I didn’t necessarily support the Lean program, I was the Lean program. I lived and breathed the Lean program. I was the point of contact for our consultant, and I still am. I would say the number one thing that I do at our company is to enforce the principles of Lean and make sure that they work.
Gerry talked a little about unions. One connection between unions and Lean is that without Lean manufacturing, we would not be able to afford union labor. Union labor is expensive, but it’s expensive because union people earn a living wage, and they have great benefits. They’re happy employees, and happy employees make productive employees. Productive and happy employees who want to do well for the company to follow the principles of Lean manufacturing.
I was introduced to your organization when I spoke here about five years ago at the request of Dave Hollinger from the New Jersey Manufacturing Extension Program (NJMEP). We went through a Lean transformation between 2004 and 2006, and then we bought a bag factory, which was the complete opposite of Lean. It took Dave’s help and all of our experience, but at the end of that process, we took a factory that was in 60,000 square feet with about 80 workers, and we fit them into an 8,000 square foot space with 60 workers, and we doubled our production in our first year.
That’s the kind of experience that we had with Lean. So, let me tell you a little about our company. We manufacture bags, such as backpacks, handbags, and tote bags, and we do a lot of military business. Homeland Security is one of our biggest clients. We manufacture ammunition pouches for the army and garment bags for the air force. We also have a very big hat business, and it’s the reason we’re called Unionwear—unions are a very big part of our clientele. We are the only union shop in the country that produces baseball hats, and one of four that produces bags. Just imagine every Teamster who steps out of a truck wearing a Teamster logo hat—that’s us! That’s still a big part of our hat business.
We are ten miles from NYC in Newark. We have union labor, which means that for all of our product categories, we probably have the highest labor costs in the world. A lot of people ask me how we compete with China. We can’t compete with China on wages, so we compete by creating value. That’s our focus, and it’s one of the key aspects of Lean. A lot of people have misconceptions about creating value, and I just want to say a few things here to clear up some of those misconceptions.
Manufacturers can’t create value by building up work in process, because parts have no value until clients are going to pay for them. Manufacturers can’t create value by cutting labor costs. You can cut your unit cost on a product by using Lean tools, but unless you redeploy that labor into creating more value, you’re not creating value. Manufacturers can’t create value by focusing on profits—using productivity as a tool to increase profits is just the other side of the labor cost equation, and a manufacturer in New Jersey cannot compete on labor. As a manufacturer, you only create value when your finished product sells for more than it costs you. Otherwise, you’re not creating value; you’re just moving it around.
I say this because a lot of people think creating value is just making work, without necessarily making finished products, but you’re better off keeping people home. Manufacturers can’t create value by getting workers to work faster, because if they’re working fast but not adding value to our product, they’re actually destroying value.
We’ve survived by developing a single-minded focus on creating value, and this Lean transformation that we went through, nine years ago now, was just the beginning. Staying Lean, however, is a constant, never-ending struggle against human nature that consultants like to call continuous improvement. Continuous improvement means that our Lean team—the team of supervisors that reviews all of our Lean procedures—tries every day to create more value with the same people. When we measure productivity, we measure only finished products, and after nine years of continuous improvement across the board, we have tripled our productivity.
At the same time, the cost of imported textile products has more than doubled, so our products went from being five and often ten times higher in price than imported products to being in the same ball-park. Our bags maybe 20-25% more expensive on average, which is in the range of a premium that people are willing to pay for Made in USA products. That’s part of the reason we’ve been able to grow from 40 employees in 2004 to about 130 right now.
WHAT TRIGGERED THE LEAN TRANSFORMATION?
I started Unionwear in ‘92 when I saw a niche that was not being served— sewing to markets that value the country of origin enough to pay a significant premium for those products with, for example, a “Made in USA” label. There are a lot of markets, such as political campaigns, that will only buy products made in USA. I started the business in ’92. From ‘94 until about 2004, we were competitive with the rest of the country, and we were really just focusing on the Made in USA and Union-made markets. In 2004, New Jersey passed a law to raise its minimum wage, and then we were no longer ahead of the rest of the country.
We were not paying people minimum wage, but we weren’t paying people right off the street with no experience eight or nine dollars an hour, either, and that’s where we would have to be pretty quick, so we were looking for a way to stay competitive with places like Georgia. In 2004, we calculated that an entry-level worker in a non-union shop in Georgia could make about five dollars an hour, whereas an entry-level worker in the union shop in New Jersey was being paid about $11 an hour with the benefits. We were unable to compete nationally, and we were looking for a kind of a magic bullet to solve this problem. That’s when I stumbled upon one of NJMEP’s Lean 101 simulations.
The Lean 101 simulation is a simulated clock factory—an eight-hour program run by NJMEP. In the beginning, a lot of senior professionals who think they know everything, myself included, sit down, and work in teams. Everyone’s very competitive, and they try to make the highest number of clocks in the way that they know. Lean principles are introduced throughout the day. In the first hour, your team might make 15 clocks, but after a day of Lean training, you might make 300 per hour. It’s a really great program! I highly recommend it to anybody, and when I came back from that program, I looked around at my factory. All of a sudden, I was angry. I couldn’t believe all this stuff that I hadn’t noticed for the past twelve years. All I could see when I came back was non-value-added work. I saw people spending fifteen minutes looking for a pair of scissors, people waiting for their boss to get off the phone, people sitting there while their machine was down, people desperately looking for a thread, people building work-in-process inventory, people manually measuring every single garment to make sure they did the job right. They were working very hard, very diligently—but they weren’t adding value to the product.
Those are all things that I can’t put on a client’s invoice, so if I get rid of them, that’s bottom-line profit right there. We figured out pretty quickly how to calculate where we stood—we just did time studies of how people would work at 100% efficiency and compared that to how much time they were actually working. We found that people were adding value to a product about 20 percent of the time, for about two of their working hours. During the other six hours, they were working just as hard, they just weren’t adding value.
Our floor supervisors had been focusing on problems like people talking, sneaking calls on their cell phones, or going to the bathroom. Those things added up to maybe ten minutes of unproductive time, and here we are—not adding value for six hours! The supervisors’ focus was completely off-base. We’d brought in consultants and their focus was to measure our labor in minutes: a tennis shirt might take 23 minutes of labor to produce when we first add it, and by introducing all these attachments and methods, they could get that down to 20 minutes at best. That would be a home run for the consultants, but they weren’t even considering the other 40 minutes in each hour that people weren’t sewing at all.
So, we never really touched on a non-value-added work. We pretty quickly hired Dave Hollinger through NJMEP to come in. He had absolutely no garment industry experience; in our first meeting with him, I brought our plant manager, who’d been in the textile industry for about 40 years. When we sat together, and Dave said he had no garment industry experience, Mike, the plant manager, said “I don’t see how you can help us to sew faster.”
Dave replied, “I have no intention of helping you sew faster. My experience is eliminating all the work that you do when you are not sewing. It’s always the same, whether you’re in food processing or you’re manufacturing auto parts.” So we gave him a small job (to kind of prove himself ) before we invested a lot of money in it. We asked him to improve our setup time in embroidery.
Our embroidery manager estimated that we were spending about 20 minutes between orders, taking some threads out of the embroidery machine, and putting new threads in. As Dave sat there on the first day, he said, “No, it’s actually taking you more like three hours between orders—20 minutes was what it said on the spreadsheet when you bought the machine.” So we took a look at why it was taking three hours, and the first problem was our embroidery manager from China. Her floor people were mostly from Ecuador, some of whom spoke English pretty well. She would take our orders and write on them gray, forest green, navy blue to indicate thread colors they were to use. She gave these papers to the workers, who would then walk out to the shelves, where they saw boxes that said cement and canary and pewter and lilac. They had no idea what was gray and what was green; they had to open every box, and then when they found a gray, it was never the right one, so they got into a habit of bringing back six grays at a time and asking the manager which one to use. She would look at the boxes and if they were lucky, she’d choose one of them. The workers then went back to the shelves. Each box held 12 spools, but the machines embroidered 20 spools at a time, so they’d have to find another box of the same color. They’d bring the two boxes to the machine and then move on to the next color.
There are usually three or four colors in a design, so three hours later, we are finally ready to start the embroidery. That was one example of non-value-added work, so the first thing we did was take all of our 1500 colors of embroidery thread out of the boxes. We got rid of the names and replaced them with color numbers. We put them in clear zip-lock bags, and then we just created color-coded bins, kind of like a rainbow. Now when the manager gives a worker an order, they walk over, pick out three colors in ten minutes, and put them right on the machine.
That was the first thing that we did; we hired Dave Hollinger and his Lean team right away. We actually got a grant from the Department of Labor to keep them on for about two years, and during that time we made about a hundred improvements in only the baseball hat factory and our embroidery department. Of those hundred improvements, probably 95 of them are still there, and we’re committed to keeping them there for a while.
Baseball caps are very much cookie-cutter products. Every day we make 15 totally different hats, and they’re all custom, but they all have the same elements, and they all go through the same raveling process, so it’s very easy to put Lean principles in place there. That same principle that we applied to the embroidery threads works as well for plastic wraps or fabric. Some of the biggest gains cost us no money and were very easy to figure out and put in place. For example, workers wasted most time just looking for things because the place was such a mess. We went through our 5 Sigma exercise, and we ended up getting rid of every table and every drawer in the factory. We put everything up on walls where it was all visible.
When we put things on walls, we did shadow boards, so if someone took a certain dye or a pair of scissors off the wall, there was a shadow exactly where it had been. They would know exactly where to put it back and didn’t put it in the wrong place. We then made a small investment in tools for every single worker and drilled holes in their sewing machine tables for things like scissors, tweezers, screwdrivers, and things that they previously spent a lot of time looking for. On average, they spent 20 to 30 minutes a day looking for tools, and workers hoarded them because our supply manager charged them if they lost something. As a result of the hoarding (and people having to look for tools), we spent way more in labor than we would have lost in theft.
We got rid of all the marginal junk in the factory. At that time we had 45,000 square feet of space, and when I walked out on the factory floor, there were shelves everywhere. When we got rid of the shelves and clutter, I could see clear across the floor and could see products flow through the factory. That uncovered a lot of other production problems that we didn’t realize we had. It’s amazing how people become blind to things they see every day! I remember when we were doing the 5 Sigma exercise, one operator had a bulky lamp on her sewing table. I was sitting in front of her, watching. Her sewing built up in a pile on one side, and then she’d pick it up, move it around the lamp and drop it in a bin in front of her. Every ten minutes, she had to stop what she was doing to perform this routine. I asked her, do you ever actually use that lamp? And she looked at me and asked: “what lamp?” True story.
We moved sewing machines closer together so the work wouldn’t have to be carried between the machines. Managers in garment industries have traditionally practiced batching—one worker fills a bin with work before pushing it on to the next operation. Eliminating batching definitely gave us the biggest productivity gains. It’s a bit difficult to explain why, but single-unit processing will get you the most bang for the buck in the Lean transformation.
After we’d eliminated batching, we were able to get orders out in three days instead of three weeks, when the order was at the end of the production line. If there was a problem with the order, we could see and correct it early in the process, before the rest of the order was completed. Getting rid of the batching, however, was not without its difficulties. We said, okay we’re getting rid of all the bins now, so instead of a big pile of work behind you, you are just going to get one piece from the person behind you. Isn’t that great? The workers weren’t too sure about that.
The first week without batching, production really slowed down, and it took us some time to realize why. Everyone was afraid we didn’t have any work because they were used to having a huge pile of work behind them. In their previous jobs, they knew that if the plant manager didn’t have enough work, you got laid off. So we started with a written policy telling everyone that we will not lay anybody off due to lack of work, which addressed that concern. Then we started broadcasting our production schedule. We made a huge sign saying we have 32,000 hats in-process right now, and that got the point across. The workers were way more productive than they had been before.
The bigger obstacle was that our plant manager’s management style was based on batching. It’s easy to manage by batching: I give you a big box of something, you do this, and come and get me when you’re done, which could be a day and a half from now. So he gave everybody a bin and sat in his office. He was busy— he was also doing the purchasing— and at any given time there were three people sitting in his office, waiting for him to get off the phone. (There would probably have been more, but he had only three chairs.) He hated the fact that we got rid of batching because then he had to do the planning and had to move around. He gave me an ultimatum: either Lean went, or he would. We decided to stay with Lean, and he made good on his threat and left. He just didn’t want to do this job—he wanted to batch somewhere else, which is what he ended up doing, but as soon as he left, it was like we gained four free full-time employees. The people who had been sitting in his office were suddenly working, and productivity jumped up just from that.
We’re continuing to improve all of our processes. You have to because when you improve one process, something else becomes the bottleneck. Once you improve your productivity, then all of a sudden you’re not sewing fast enough, and then when you start sewing faster, your office and administration become a bottleneck. When you get all that figured out, you can’t make the stuff fast enough again, so we’re just constantly going through and improving productivity in every department.
We learned a lot of lessons that made the transformation easier. One is that the top management has to be involved—maybe not to the extent that I have been, but if top management is not involved, people are afraid to make decisions. For example, I can say it’s okay to throw machinery away, but no one is ever going to throw away a machine unless I’m sitting there. No one is going to restructure a department, and no one is going to change the floor layout. There are obsolete parts that people are afraid to let go of; they just put them in a box somewhere, and it goes under a table. It needs to be thrown out.
Management has to be involved to make sure that that stuff happens in real-time. You also have to share the productivity gains, in order for people to really buy into it—we had bonuses, those bonuses became raises, and the raises became performance incentives, but we’ve always been keen on sharing those productivity gains. That’s how you get your best ideas from other people on the factory floor. Once a critical mass of workers really buys into Lean, it really takes off. The workers inevitably love it—it’s a cleaner work environment, and they’re less fatigued. After about four years, we did Lean training in very small groups. We weren’t sure how much the factory workers would understand it. We found a training video from a consultant up in Massachusetts; it was in Spanish (most of our workers speak Spanish). It showed our employees how most people naturally use the principles of Lean manufacturing in their kitchens, but when they go to work, they throw it all out the window. It’s called Leaning Toast, and I highly recommend it.
So in 2008, we bought this bag factory. It had gone out of business; it was in foreclosure. We basically bought the assets and took most of the employees from East Newark over to Newark. Then we had the challenge of figuring out how to apply Lean in a custom product situation. It was very easy with hats because it’s the same line, but one day we are making backpacks, and the next day we are making safety vests, and there are days when we’re making backpacks, safety vests, tote bags and yarmulkes, and all these different things. We had to figure out how to make that work, so we have a Lean production team that meets twice a week and discusses production planning and production problems. We ended up hiring an engineer from the New Jersey Institute of Technology who does our value stream maps for every single product, and then we determine whether we can fit it into a basic team of sewing machines, or whether we should restructure them into a production line. We almost always determine that it’s faster to just move the machines around. It might take 90 minutes to move the machines, but an order that would have taken five days now takes three and a half. We’ve also found that it’s worthwhile to have dedicated production lines for products that we make only intermittently. When we make safety vests, we get a pretty big order, but then we won’t make them again for six months, and there was always a very long learning curve when we set these production lines up again. We finally said, you know what? Let’s just leave a line in place—the rent is going to be cheaper than paying for that learning curve and spending that non-value added time for every new safety vest order. We’ve done that with a bunch of different products.
Since then we’ve figured out that the better and less expensive way is to map every production line that we set up. Because we didn’t want to keep taking more space, we now keep track of the production line at the end of the order—we take snapshots of everything, make a grid on it, and then when we get that order again, we put it all back into place.
Now that we have a companywide policy of adding value, we aim for five hours a day of adding value. That’s our minimum; we’re usually getting about six hours a day of adding value, and we use the term hours per day because that’s something that our workers all understand. They didn’t necessarily understand percentages. We got a math trainer from MEP to come in, and we found that most of our workers were at a second-grade math level, and they spoke very little English, but they understood the hours per day, and they also understood that adding value for five or six hours per day and getting paid for eight was a great deal.
We’re a small business, and we’ve had an engineer working with us until last year. We found that by focusing on the value stream maps, we were then able to reengineer products that we didn’t think that we could do before. We would make a messenger bag, and that’s the way that messenger bag was made. In an ironic twist, customers were taking their overseas products and sending them to us, asking us to knock them off, because they wanted the products made in America. In many cases, it’s actually less expensive to make the products domestically. One example is a product that requires very expensive fabric, like a leather handbag. A lot of those are made in the USA or in places that have even more expensive labor, like Italy. The leather is going to cost the same or a little more here than in China—it might be $40 in leather here and $6 in labor versus $40 in leather in China and $2 dollars in labor, but at the end of the day, its $46 versus $42, and you end up paying more in shipping and duties for the Chinese product. We’re seeing a lot of big bulky products coming back, like laptop bags with a lot of foam in them, and when we get these products, we’re noticing much unnecessary labor in the products that are made overseas. A lot of it is a vestige from six or eight years ago when labor in China was basically free. It’s not like there was unemployment insurance there—they had to make work for all the factory workers, and so they would have people trimming between the lining and the outside of a bag, something that no one would ever see, or just doing a lot of unnecessary stitching. A lot of bags had seams at the bottom, where makes it absolutely no sense. Why would you put a seam at the bottom of a bag? It’s only going to rip. It would only make sense if you want to throw some extra labor on there.
The first thing that we do when we get one of these restoring jobs is to take the product and re-engineer it so that it will be a better product and look exactly the same. The difference is, if we make it the way that you want us to make it, it’s going to be $85. If we make it the way that we want to make it, it will be $15. It’s really that much of a difference. Then we’re able to be a lot more competitive without having to exploit workers, without trying to compete on labor costs. We’re basically competing on engineering.
Interviewer 1: Since the Lean transformation, how’s your turnover been?
Mitch: Our turnover is virtually nil. One of the advantages of being a union shop is that health insurance is very inexpensive for union shops. It’s something that we offer all of our workers. Few of the other sewing factories— actually none of them in our area—offer health insurance, so workers will come to work for us because they know we offer it, and once they get it, they don’t want to leave. In fact, during that whole Lean time, the only turnover we had was the plant manager. You would think that implementing Lean would result in fewer workers, but in reality, it lowered our costs and made us more competitive. It enabled us to ship products faster, and as a result, we ended up with more business. With more business, we had more scale, which enabled us to lower our costs even more. Lean really drove the growth of the business and the growth in the number of employees, so turnover has not been an issue.
Interviewer 2: Can you give me an idea of what the competitive landscape is like? For making hats or something like that, who are your competitors?
Mitch: Well, with hats, we don’t compete so much with overseas. A baseball cap has a ton of labor in it and very low material costs. Because it’s almost all labor, we’re still probably twice as much as an overseas hat—we used to be about ten times as much—but still, there are very few clients who will spend that for a product because it’s made in the United States. We’re able to be competitive with bags. There are four other union shops out there, and so we compete with them for union work. We just did an order of 6,000 backpacks for the Federal Government Employees Union and 4,000 backpacks for the Firefighters Union Convention. There’s a larger number of domestic, military, and homeland security and government contractors that we bid against and really, there’s enough business to go around.
Now, however, the garment industry is really starting to come back, for bags in particular, and because of our location close to Newark, we’re seeing a big increase in business. We met with The Limited who came out and did a factory tour yesterday. We actually did work for Victoria’s Secret two years ago, and it was a very interesting experience. They decided then that they wanted to make five to ten percent of their products in the United States. We were doing their pink tote bags, and they did not have a plan to deal with a domestic factory. We took the order—we were really excited about the business—and we had to ship everything to Hong Kong first because that’s where all their testing facilities were. They did not have any facilities domestically that could test for the kinds of toxins that were coming out of China. We couldn’t prove that this stuff didn’t have of these toxins in it, so we just sent everything to Hong Kong. Now they’ve gotten their infrastructure in place and they’re going to start sourcing some things domestically.
There are also a lot of organizations that really focus on labor content. An example is the college bookstore market. The Federal Labor Association began as a monitoring agency for bookstores to make sure that colleges weren’t licensing their logos to companies that produced goods in sweatshops. That fair labor organization is the same one that Apple hired to monitor the iPhone factories, and now Nike has hired it to monitor their factories overseas, but the college market has a very strong commitment to labor content. When you go to a college bookstore, you will see a lot of products that are made domestically, but they don’t advertise it anywhere. You don’t see a lot of college students rushing out to buy something because it’s union-made, but in reality, a lot of the products in the bookstores are actually union-made in the United States, because the bookstores’ standards for labor are so strict.
Because of the premium for domestic products is shrinking, different types of organizations buy domestically now because it’s not as expensive for them to be consistent. Manufacturers would be the first one—GM and Ford, food processing companies like Budweiser—because they’re using Made in the USA in their advertising, they don’t want stuff out in the marketplace that has Made in China labels, but then you also have organizations like NPR and Greenpeace that are buying products Made in USA to avoid any potential conflict concerning sweatshops, pollution and huge carbon footprint associated with shipping. It’s becoming a lot easier for us to compete, because there are a lot more clients who are willing to pay our price, and I feel that trend is only going in one direction.
Interviewer 3: What percentage of your goods is for resale, and what percentage is just for organizations just to distribute as gifts, bonuses, etc.?
Mitch: Right now, it’s probably about 40% of government work, mostly uniforms, and bags. We do a lot of hats for Homeland Security, coast guard, FEMA organizations, etc., and then, of the balance, it’s probably about 20% garment industry, which is for resale. That’s really the only resale stuff that we do. As for licensed goods, even a company like Harley Davidson, which has a strong commitment to domestic manufacturing, made licensing deals several years ago, and they have lost control over the sourcing content of those things, so if you buy a Harley hat, it will still say Made in China. GM is not really licensing their logo except through NASCAR, and that stuff is made in China, so we’re not doing a lot of licensing business. It’s mostly the garment industry, and the balance is mostly promotional work for those kinds of companies and unions.
Interviewer 4: Where are you located?
Mitch: We’re in Newark, we’re right off of Greenfield Avenue in North Newark.
Interviewer 5: You mentioned that now you’re at about six hours of value-added work a day, and originally you had a little about two hours of value-added work a day. What was the reaction of both the union employees and the union as a whole when you started turning up the level a little bit?
Mitch: They wanted to make sure they were included in the gains, but in the backdrop of all this, there used to be maybe two dozen union shops in the area. Now we’re the only hat factory left out of four, and during that time our union was going through a lot of changes. They finally told us to do whatever we needed to do to stay in business; they saw that the workers were really happy that we were increasing and not decreasing employment. It was a non-issue with the union. In fact, I was even surprised to find out that unions, in general, had problems with Lean manufacturing. I found that out after attending a labor conference—apparently, it’s a big issue in China, where labor activists were fighting against Lean manufacturing. I learned, though, that’s because they weren’t sharing the gains with the workers; they were just trying to come up with ways to get more product out of the same number of people. Lean does not work in a top-down environment. It only works when people cooperate—you can’t force somebody to work smart, you can only force somebody to work harder.
Interviewer 6: You said you had achieved gains when you got rid of the batching and moved to a continuous flow environment. I’m kind of curious, did you run into problems where some people on the line worked faster than others, and if so, how did you deal with it?
Mitch: All the time! We balance our teams by doing a value stream map, and we determine that maybe this is a 30-second job, this is a 60-second job and this is a 90-second job. We look forward, and the job that takes the longest is the limiting factor. With a baseball hat, it takes about a minute and a half to sew the visor on perfectly straight; that’s the limiting factor in baseball hats. It takes a minute and a half, so then we say okay, we want to give everybody else here a minute and a half worth of work, which might mean combining smaller jobs. With experience, you figure out what kind of buffer can go between jobs. Maybe you put it in another machine. You’ve got to have people cross-trained to move to that second machine when there’s a problem, but we tend to put the slowest and most unpredictable people at the beginning and the end of the line because that’s how you can make up for your biggest mistakes. If someone is slow or new, you can put an extra person at the beginning of the line a lot more easily than you can put him in the middle. You can always take people from the beginning of the production line and move them to the end if you see things are backing up there.
Here’s what you don’t want to happen, and it’s part of human nature: When there is a backup in production, you notice that everybody behind that person starts to slow down. When I want to determine what is imbalanced in a factory, I walk around. If I see two people standing up and moving around, I know there’s a problem. I’m not paying people to walk around. We took the time to put these machines in the right place, so we did something wrong—the workers didn’t do anything wrong. If I see a big pile of work in process, a machine is down, somebody didn’t show up for work, or we planned or estimated this wrong. People got used to be looking for piles, so they learned how to stay out of trouble by slowing down, not creating the piles. That’s why I say that continuous improvement is just a constant struggle against human nature.
This podcast can be heard on Lean Blog
TRANSCRIPT: Mark Graban: Hi, this is Mark Graban. Welcome to Episode 234 of the podcast on November 16, 2015. Today’s guest is Mitch Cahn; he is president of Unionwear, a manufacturer of hats, bags and apparel in Newark, New Jersey. I first learned about Mitch and his company at the Northeast LEAN Conference recently, and I blogged about that. You can find a link to it at leanblog.org/234. Now, what caught my eye was the political hats they produce, including the famous red “Make America Great Again” hat that Donald Trump wears, among hats produced for other candidates. Beyond the surface of those hats is a fascinating story about competing instead of making excuses. As Mitch explains here in the podcast, Unionwear has been very successful, even though it’s producing in one of the highest-cost parts of the world. Unionwear has had to compete against imports from China and lower-wage southern states here in the US, and LEAN has been a major part of their strategy for improving productivity, reducing cost and being fast to market. Now, whether you work in healthcare or manufacturing, you’ll really love the story, the principles and the ideas behind Mitch, his company and his employees.
So, can you start off by introducing yourself and your company, Unionwear?
Mitch Cahn: Sure. My name is Mitch Cahn; I am the President of Unionwear. I started the business in 1992, and we’re based in Newark, New Jersey. We manufacture baseball caps and all sorts of headwear, and sewn bags, like backpacks, laptop bags, tote bags, garment bags, and messenger bags. Everything is 100% made in USA, and everything is made with union labor.
Mark Graban: What prompted you to start the business?
Mitch Cahn: I started the business in 1992. I bought a bankrupt baseball cap factory. Before that, I was working in investment banking, and I really didn’t like it. I wanted to be the client—I wanted to make stuff. So I spent about a year trying to come up with an idea to start a business, and then I came across this small baseball hat factory that had been foreclosed on in Jersey City, New Jersey, and I came up with enough money to buy the equipment at an auctions sale. I was going to do something different with that business—I was going to start selling baseball caps to the fashion industry, which was not a thing in 1992. You couldn’t go into The Gap or Macy’s and buy baseball caps back then, and I was actually successful very quickly. The idea caught on, and we picked up customers like Ralph Lauren, Nordstrom’s, and Izod, and we were helped by the growth of outlet stores at that time. However, by 1994, our entire business model collapsed because all of those clients started manufacturing in China. It happened really quickly; I didn’t see it coming. It was only a couple of years after Tiananmen Square; China became this giant in the market economy, and one of the first items they went after was baseball hats, because it’s almost all labor.
So we needed to come up with a new business model quickly, and around that time we came up with the idea of selling products specifically because they were made in the USA—going after the Made in USA market. We started with labor unions. We actually named the company Unionwear because unions were at that time one of our natural markets. We were the only union shop that made baseball hats. They were natural market for us, and then, by the year 2000, we expanded into political campaigns when the Internet made it possible for Al Gore’s campaign to raise money by giving a baseball hat away to every donor. We had that contract, and that’s been a big part of our business ever since.
We slowly looked into other markets that we found were buying American. After our LEAN transformation in 2007, we were competitive with non-union shops in the deep south. We could even compete with shops in Puerto Rico for military business—now that’s huge part of our business as well. In 2007, we bought a bag factory, and we did a LEAN transformation of that factory. Now that’s about half of our business. We’ve continued to expand our markets as the prices of imports continue to surge year after year, while our domestic pricing really remains flat. We’ve been able to break into more markets, particularly B2B markets that are looking at co-brands with the Made in USA label, which is really the most valuable brand in the world.
When someone gives a baseball hat or bag away, they don’t want that product to say “Made in China”. A lot of socially responsible companies give bags and hats away—Whole Foods, Google, and a lot of other companies—and they buy our products because the union label shows that the products were definitely not made in a sweatshop, and the Made in USA label shows that the products were not shipped halfway around the world. We’ve also been able to return to the fashion business over the last five years for the first time since the early 90s; we’ve been more competitive, and fashion businesses have been going for smaller batch manufacturing.
Mark Graban: It sounds like there’s a sense of purpose here, whereas a lot of industries and companies go with the flow. When business started going to China, all the lemmings said, “Hello, we have to go to China!” Even before you discovered LEAN, why was it important to you to stay in New Jersey?
Mitch Cahn: Well, I always reminded myself (and that’s the first ten years I was in business) that if I wanted to make money, it would have been a lot easier for me to stay on Wall Street. I didn’t want to make money; I wanted to make products. I find the manufacturing process extremely rewarding—I come into work, and someone meets me with an idea and leaves a sample. Then I have to figure out how to manufacture that sample, what machines to buy and what people to staff. To figure all that out and then go out in New York City and see people wearing and using the products is very rewarding. So, that was one part of it—I enjoy the maker experience. Second, from the outset I wanted to make sure that all of our employees were well compensated and had the same benefits as white-collar workers. Our union was the Ladies Textile Workers Union, and they said we were the first company (and we’re still probably the only company) that went to them before we started the business. We wanted to start a union shop because I knew we were going to give our employees the benefits that union workers would earn anyway. We might as well take advantage of the relationship that the unions had and use that for marketing purposes.
Mark Graban: I’m curious to hear more about LEAN. How did you first get introduced to the idea of LEAN?
Mitch Cahn: Around 2004, we faced with a lot of increasing expenses that were not really affecting the rest of the country. New Jersey was raising its minimum wage significantly ahead of the federal minimum wage. We were going to see our wages go up by about 30-40% pretty quickly. We also had big increases in health care at that time, and most of our competition was non-union shops in the South, and in right-to-work states. In most non-union shops, until ObamaCare, there was no health insurance offered, and we started to see the cost rise over a four-year period. We used to pay $50 a worker for health insurance, and by 2004, it was about $180. Then our real estate prices right outside the New York area started going up pretty quickly. So we couldn’t compete with the South, even for the Made in the USA work, and I was very concerned with our ability to remain a viable company. I started looking for a magic bullet, and I stumbled upon a LEAN 101 seminar that was being run by a New Jersey Manufacturers’ Extension Program (MEP). I took it, and it really blew my mind. For anyone who isn’t familiar with this program, it’s a national program, a one-day class that trains everyone from executives to factory workers on the whole LEAN process.
It puts people in a simulated factory making clocks. At the beginning of the day, everyone is using their own traditional methods to set up a production line and manufacture very simple clocks with the other executives—these are people who believe they know everything about manufacturing. At the beginning of the day, all these executives working together, with all their brainpower, might produce about 15 clocks an hour. Throughout the course of the day, LEAN principles are introduced one by one. Then they do another simulated flow, where the manufacturers take the principle they just learned and apply it to this mini-production line, and their volume increases. From the beginning to the end of the day, this group of executives will increase their production from 15 clocks to 300-400 clocks an hour! It really opened up my mind to the possibilities in my factory. I still remember when I came back, and all I could see was the opposite of LEAN. I was so angry! I was angry at everyone who worked for me for not seeing that they were doing non-value-added work all day, completely forgetting that I had just gone ten years without seeing any of that myself.
Mark Graban: Yeah, it becomes hard when you suddenly see waste and problems that you would have looked past before.
Mitch Cahn: I just wanted to do everything at once, and of course you can’t do that, but I did go back to MEP. I hired them for a small project while they submitted a grant proposal to the New Jersey Department of Labor to do a LEAN transformation for us. I brought in the consultant from NJ MEP, and he met with our plant manager at the time and me. The plant manager was very old-school, a traditional manufacturing production line person with about 30 years’ experience, and he was very skeptical of the consultant. All he wanted to know was how he was going to make our machine operators sew faster, and the consultant said, “I can’t do that. I don’t know anything about sewing, to be totally honest with you.” The plant manager asked, “How are you possibly going to improve our production here?” and the consultant said “Well, I’m only going to focus on what they’re doing when they’re not sewing. I worked in food companies, paint companies and car companies, and it’s always the same things. All I do is look for those things, and I train your workers and your management to eliminate those things through designing the factory differently and training people differently.” The plant manager was not convinced, but I brought the consultant in anyway, and we started with a really simple project. He went for the low-hanging fruit, and he took a look at our embroidery operation. We run about 12 embroidery machines here in the middle of our production process where we embroider our own hats and bags.
He spent a day observing that process and asked me, “How long do you think your machines are down between orders?” I remembered this from the spreadsheet that I looked at when I bought the machines, and I said about 20 minutes. He’d made a videotape, and he said, “Well, how about an average of about 2 1/2 hours?” I didn’t believe him. I watched the videotape, though, and I saw that the machines were indeed down as he’d said. In the past, I’d walked around and saw everyone working hard and running around, so I couldn’t understand why the machines were down for so long, and this was something that was going on 15 to 20 times a day—that was the average number of orders that we are pushing through the embroidery department a day. It turned out to a very simple problem with a very simple solution.
Our embroidery manager was a Chinese National who spoke English, and our embroidery operators were mostly from Spanish-speaking countries; they spoke a little English. The manager gave the instruction to go pick out threads of certain colors for an order. From the time she gave the instruction to the time they brought back the proper cones was about two and a half hours. Why? Based upon the instructions from the customer, she told the staff to look for, say, dark gray and dark green. The employees would go out to the shelves of closed white boxes with the thread color names on them, and the names were things like cement, and soup and canary and so on. They had to open box after box to find the right color thread. If they were lucky, it was the thread the embroidery manager had envisioned in her mind. If they weren’t lucky, they had to go back and return with another armful of threads. Then they would have to count out the threads—threads were shipped to us in boxes of 12, and our machines had 20 heads on them. So they’d count them out, they’d have to find the beginning of each cone and they’d have to bring them to the machine, put them on the machine and thread them, and then go back to get the next color. So the consultant’s first project was to get rid of all the color names and get rid of the boxes. We put everything in giant zip-lock bags. We color-coded our factory thread department like a rainbow, and we referred to everything by color number. We took all the threads and inventoried them in units of 20 to correspond to the machines’ 20 heads. Bags would come out to the table; the embroidery machines would be loaded. When it was over, cones would go back into the bags and be put back on the shelf. The whole process went from about two and half hours to 15 to 20 minutes pretty quickly, and we were easily able to see the power of LEAN in that department. We were sold.
So we went ahead, we got the grant, and we spent about two years putting in every facet of LEAN into the factory. We put in 5S, we put in all sorts of Kanban, we did single cell flow, and every one of these steps was really a phenomenal success for us. The 5S is something that we do every year, and it’s something the owner really needs to be involved in. For example, no one who works for me is going to throw a machine away. I’ll say, “Hey, we’re never going to use that machine! No one is going to pay for it, I just looked on eBay; we’re just going to sell it for scrap.” No one else will say that. So I need to actively show up, ready to get dirty for a couple of days.
Mark Graban: You mentioned the MEP programs, and for people who aren’t familiar with that, it’s a federally sponsored and funded program, but the MEPs operate at the state level. Some of the MEPs are doing work with healthcare organizations—the Ohio MEP, which works under the name TechSolve, is working with both manufacturers and healthcare providers. You talked about your healthcare costs going up. If you went into a hospital, I know you would see the parallels of why it takes so long between cases in the operating room. You talked about sewing—we’re not asking the surgeons to work faster, we’re just trying to maximize the amount of time during the day they can actually be surgeons, and that makes a huge difference in healthcare. Hopefully it’s going to help get costs under control. There are big parallels there.
Mitch Cahn: Yeah, there are a lot of parallels between healthcare and manufacturing, and coincidentally, while we were going through the first LEAN transformation my first son was born. The consultant, Dave Hollander, who shepherded us through this whole process, always tells how I came back from the hospital with all these ideas—it was Mt. Sinai in New York, which was already implementing LEAN—that I wanted to put in our factory. We still use a lot of those processes, like color-coded folders. There are so many LEAN improvements that we made, but one of the first principles that they taught us was to get rid of tables. Tables are evil! Unless you are using the table for a particular job, it’s going to be filled with garbage, on top and underneath, because that’s human nature. I noticed that in hospitals, if anybody needs a table, they get a rolling cart, so we gave everybody their own rolling cart. We designated places on the cart for everything that they need, and we gave them a small personal space on the bottom for their own stuff. We still use that, and apart from the productivity gain, the amount of space we gained was great.
Mark Graban: There is a good general LEAN principle: put everything on wheels! Be flexible so you can rearrange cells, rearrange the layout, make changes as customer demand changes to create different capacity—that’s definitely a great lesson. There was a letter that you had posted at the Northeast LEAN Conference. Could you talk a little bit more about the idea? I think a lot of manufacturers still don’t get the idea that they can’t create value by cutting labor costs. You have to redeploy labor in creating more value. Can you talk about what that’s meant for you and the company?
Mitch Cahn: Okay, we have a single-minded focus on creating value. Once the people who work here understand what that means, then it becomes a mindset, and it becomes very easy to implement any of the features of LEAN. We are here to create a finished product that needs to go right into a box and get shipped to a customer, and that customer will only pay for the value that we added to that product. So, if we’re making products, and we’re putting them in boxes, it’s inventory. We’re not creating value at that time; we’re just creating inventory. If we are creating work in process because people are working faster, that’s not finished product that we can sell. We’re not creating value. Now, if we are able to improve our productivity so that we’re creating a lot of value, and because of that I lay people off, I’m not actually creating value by doing that, either. Creating value means if I have a 100 people, and they used to make 1,000 hats a day, and now they can make 2,000 hats a day, and then 50 people can make 2,000 a day, I’m creating value by taking those other 50 people and creating another product with them. That to me is creating value. One of the keys to our success is our ability to measure the amount of value that we create. We have a process that we use. We do a lot of custom products—baseball caps are a very cookie-cutter process, that’s only about half of our business. The other half is bags, and every bag that we make is different. One day we’ll be making tote bags, the next day we’ll be making messenger bags. They’ve got totally different value street maps, and they’ve got totally different plant layouts.
So the first process for us is to figure out by doing a traditional time study, what is the cycle time of this product? What is the amount of time that the worker is actually adding value to the product, just picking two pieces of fabric and sewing them together? Or cutting that fabric—that’s really all we do that adds value. Everything else we do, such as looking for thread, waiting for instructions from a manager, redoing work or building up work in process, that’s not adding value. So if we take an attaché, and we know that attaché has 20 minutes of time that’s spent just adding value to that product, we can then measure our output in terms of minutes of work created against the amount of time that our workers worked. So we say, based on our time studies, our workers created 10,000 minutes of work today, but based on our time clock, they worked 20,000 minutes. That means they spent 50% of their time creating value. We measure this all the time. It enables us to get our pricing in check, enables us to know if we’re meeting our margins just by walking on the floor and seeing if there is work in process or if there are people moving around. It’s created goals for everybody to know whether the shop is LEAN and creating value or not.
Now, when we started this process, before we did any LEAN stuff, we were adding value only 20% to 25% of the time. The rest of it was all spent on non-value-added work. By the end of the process, we were adding value about 65% of the time, so our productivity almost tripled. It was difficult for most of our line workers to grasp the concept of what we were trying to sell to them, so we changed our measurement from percentage of time working efficiently (or adding value) to hours per day, and then people finally started to get it. We said, hey, you know, believe it or not, you’re only spending about two hours a day sewing, but you’re getting paid for eight. We’re asking you to spend about five and half to six hours sewing and get paid for eight, and they got it. That actually seemed like a great bargain to them. We were able to retrain everybody on LEAN principles; we made our own videos highlighting about 50 different non-value-added tasks that were regularly performed in the factories, so we could help people identify them.
Mark Graban: There are many things that are interesting and impressive about your story, but I think one of them is your involvement as an owner. LEAN is not just an operations strategy; it really is a key piece of your business strategy—it’s how you’re running the business and trying to be successful in the long term.
Mitch Cahn: Yeah, I think if I were to describe my job, I’m in charge of LEAN here. Everything else kind of takes care of itself, but LEAN is a battle against human nature, and it constantly needs improvement. If you’re doing LEAN properly, you need to continually improve, because if you are able to clear up one bottleneck, there’s going to be another bottleneck created somewhere else. You clear up that bottleneck in sales, and there’s going to be a bottleneck in production. You clear up that bottleneck, then you find a bottleneck in order processing. So I leave the top line growth up to the salespeople, and I take care of the growth and capacity by implementing LEAN principles throughout our entire organization.
Mark Graban: At the conference you displayed hats you’d produced for Jeb Bush and for Hillary Clinton, and there was the bright red, very familiar Donald Trump “Make America Great Again” hat. I was wondering if there were any stories, particularly behind the Trump hat. I’m curious about getting that business and trying to deliver a large number of hats relatively quickly. Are there any stories that you can share about that?
Mitch Cahn: As for Hillary Clinton’s campaign, we have been doing work for a company called Financial Innovations for decades. They’ve been managing the Democratic candidates for President for quite some time, ever since Bill Clinton. We have a very strong relationship with them. One of the reasons our company is regularly chosen to produce products for candidates is that we can produce goods quickly. Candidates don’t buy for the long-term—a lot of the primary candidates right now don’t know if they’re going to be around in two or three weeks, so they’re ordering every week. Instead of ordering 25,000 hats at a time, they’re ordering 2,000 or 3,000 hats a week. They need people who can turn things quickly, and because of our LEAN principles we can do that. We don’t have a lot of work in process on the floor, so we’re able to rush orders for people who need them. Another reason is that we’re a union shop, and the union label assures political campaigns that we’ve already been vetted for any sort of social compliance issues. That’s a smaller issue for the Republican side, though we have done a ton of Republican work. We did all of the work for the John McCain campaign, and we’re doing about four candidates right now. They just ask that we don’t put a union label inside the hat, for whatever reasons.
The second reason that we’re chosen is that we have a reputation. The candidates don’t want to get bitten by going to unknown manufacturer and finding out the products were actually made overseas. Our reputation as a military contractor says to them that we have been vetted by the military, and military goods need to be made domestically—not just all the labor but even all of the components for those products need to be sourced domestically. So I think that’s why they come to us. We never work with the campaigns directly; we always go through advertising agencies. The particular agency that we worked with on the Trump hat came to us from the Made in USA Foundation. They were concerned after they’d seen these hats being made overseas and contacted that agency, who told them that they don’t need to put “Make America Great Again” on a hat that says Made in China.
Mark Graban: Right. It’s interesting that of the three hats that were on display, the Trump hat was the only one that did not have Made in the USA embroidered on the brim. I think some people misunderstand LEAN as being about cost, when the primary thing is about improving flow, as you’ve described so well here—reducing setup times, improving productivity as a way of being more responsive to customers. Those are really powerful things, and they can lead to being cost-competitive, as it seems you’ve done at Unionwear.
Mitch Cahn: Yes, it has, and in many ways that you wouldn’t anticipate. LEAN has developed our dedication to measuring time and doing value stream maps for nearly every product that we manufacture. Our production process is data-driven. Over the last five years, much of our business has been re-shoring, where companies, usually in the fashion or promotional industry, have been getting products made overseas but are starting to reconsider. In the past, our hats might have been ten times as much as the hat made in China, but now they’re only 25% or 30% more. Companies are much more likely to switch now, so we’re constantly getting products that have been manufactured overseas, and we’re asked to quote on them for domestically made product. We look at the way these products are made overseas, perhaps in China, and it doesn’t make any sense to us. Take a tote bag for example—they throw labor at it to save on materials. It’s a dead giveaway when I see a tote bag that has a seam running along the bottom. If you cut that tote bag in two pieces, you’re going to get a lot more bags out of the roll of fabric than if you cut one big piece, but it adds a lot of labor and makes it a weaker bag. It makes no sense unless you’re trying to save on materials.
So we take these products and we reengineer them in a way that is LEAN and uses the least amount of labor possible. Between our productivity increases and our ability to reduce the amount of labor that goes into the product, we’re able to compete on many items, particularly in the fashion business.
Mark Graban: I really appreciate you being able to share your story both at the Northeast LEAN Conference and for taking time to talk with me here today, Mitch. Again, my guest has been Mitch Cahn, President of the company, Unionwear. Mitch, I was wondering if you want to talk about the company’s website, or ways people can learn more about your business, or if you have any final thoughts for the listeners.
Mitch Cahn: Sure, our website is unionwear.com. We have over 40,000 Made in USA products that you can search for and order directly on the website. You can contact me through the website if you have any questions about LEAN. I love helping other manufacturers who are just getting started in the LEAN process. I just want to warn you—it’s never a good time to start, but once you start, you will be rewarded. You’ll never finish, but you will be continuously improving.
Mark Graban: Well said, and thank you, Mitch, for that final thought and for being a guest here today on the podcast, I really appreciate it.
Mitch Cahn: You’re welcome. Thanks.
Introducer: Thanks for listening. This has been the LEAN Blog podcast for LEAN news and commentary updated daily is at www.leanblog.org. If you have any questions or comments about this podcast, email Mark, at email@example.com.
Unionwear President Mitch Cahn’s 15 Minute Ted Talk–Made Right Here: How the international worker rights and buy local movements are creating a surge in U.S. urban manufacturing opportunities. The talk discusses why the premium for domestic goods are shrinking, and the five types of business to business to market segments with strong convictions about buying USA Made.
Manufacturing is booming in Newark and other American cities after decades of decline.
Newark, NJ has over 400 active factories within the city limits that employ over 10,000 people. Four years ago nobody knew this, now a growing number of people know this. How did this happen in the middle of a recession? Well, as a manufacturer, I can’t say it was anything that our industry did. I am pretty sure it wasn’t anything that our government did. And I don’t think it was a wave of made in USA consumerism that pushed us over the edge.
What happened was over the last 20 years, goods have been made overseas in the third world very, very cheaply on the backs of exploitation of labor and exploitation of the environment. The growth in manufacturing now is because both “overseas” and “exploitation” have become a lot more expensive and a lot less attractive.
Activists did this–labor activists did this, unions, worker rights coalitions and environmental and buy local activists made this happen. They raised awareness, they localized supply chains and they helped to impose regulations creatively. And as a result we’ve seen what’s going on in Newark right now. “Made in USA” has relatively become a bargain. Cities like Newark are reaping the benefits because we have an infrastructure in place still from the 70’s and before that, we have a lot of concentrated labor and we are in the center of a transit hub. We have the ability to move people and goods around very quickly. We are within a day’s drive for something like a third of the population.
What I want to do now is talk about my experiences running Unionwear, which is a manufacturer of baseball hats, bags like backpacks and garment bags, safety vessel scrubs. We manufacture everything from scratch right here in North Newark. We have about a 110 union workers, we are 11 miles from Midtown Manhattan. We have been in business for 21 years. In almost every product category of ours, we might be the most expensive place to make that product in the entire world. So how is that over the last four or five years we’ve grown by about 25% per year after about a decade of being flat.
Well we’ve narrowed it down to five areas. One is market forces, specifically understanding the market forces that are going on and being able to educate our clients about it. How is Obama care going to affect domestic manufacturing? How is immigration policy going to affect in manufacturing. What if China decides to float their currency against the United States? Is that going to make United States manufactured goods less expensive? And more appealing to the rest of the world? Yes.
We stay on top of these things and we make sure clients know about them because changes in the economy happen right under people’s noses and they don’t even see it.
Market selection is a big one. There are markets that want to buy local. There are markets that want to buy made in USA. It’s more expensive to buy those things but they are willing to pay a premium. Who are those people and how do we reach them?
Product selection is an area that goes along with market selection. Now someone might not be in a market that wants to buy made in USA but they might want to be a product that might be less expensive to manufacture in United States, so what are those products?
Re-engineering is important because it’s very different to manufacture a product where there is no regulation and people are paid ten cents an hour versus where it is manufactured in an area where there is a lot of regulation and people make 10 to 15 dollars an hour. You can bridge that gap through smart re-engineering.
Finally we take advantage of our geographic advantages. We play up how close we are to New York City and Newark airport and port Newark and millions of skilled laborers.
So I am declaring right now the era of cheap imports is over. It’s dead.
So what’s happened as the price of imports increases is the premium paid for made in USA product shrinks. As that premium shrinks it becomes less expensive for people to have sourcing standards or enforce standards that they already had. So what happens and why the market is grown is there are a lot more people who are willing to pay 25% more for a product that’s made green, made in USA, made union, then they were in 2008 when it might have been 200% or 300% more expensive for that same thing. And it is that a big of a difference.
So one reason for this is labor supply and demand. China has had decades of a one child policy, and as a result there are a lot fewer people entering their workforce now and the people who are entering the workforce, they don’t want to make the iPhone, they want to work for Apple. So there are not enough people working in these factories–when that happens you have to pay people more to get them to work in manufacturing.
As a result of people being paid more there is now a consumer class in China and in India and in Pakistan. That’s driving up the costs of goods, its driving up the costs of gasoline, petroleum which is making goods more expensive to ship to United States.
I put a slide up of the iPhone factory because that’s an example of what has happened because of worker rights activists. When all of the working violations at the Foxconn factory where over a million people are employed were discovered, labor activists came in and negotiated a 40% wage increase and they lowered the amount of hours they can work from a 100 hours a week to 60 hours a week. They came in a year later and negotiated another 40% increase. You imagine what it does when a million people make that much more money. And have to work that fewer hours. They have to scramble the find workers. That’s why prices have been of imports have been going up so much.
And as a result of social media, the rest of the world’s workers are finding out what’s going on and realizing they don’t have to work this way. So you are seeing the same sort of riots, protests, strikes in Bangladesh and Pakistan. This has led to wage inflation of 25% to 30% a year. The response overseas has been to cut corners– poison in pet food, poison in dog food, exploding tires, broken plane parts, that’s led to more regulation which has put more expense on products that come in from overseas.
Companies have moved their manufacturing to places that they thought were cheaper than China like Bangladesh. But they didn’t have the infrastructure and ended up being more expensive. You ended up with month after month, factory fires and factory collapses which led to more regulation and more expense.
So who is buying made in USA, now that their premium has shrunk?
There are five different ways that people can say “buy local” and these are the markets that we try to appeal to. Buy American, people buy American for economic reasons, or if they have standards like the US government. Or if they want consistent messaging, like General Motors who makes goods domestically and they want to buy American-made goods because they are selling made American.
People want to buy union and support their fellow union workers.
People want to buy fair labor, they don’t want to buy goods that were made in a sweatshop.
People want to buy eco-friendly and people want to buy local.
So one of the of the areas that wants to buy American is the US government which makes up about a quarter of our GDP. This is something that is relatively new, this enforcement of the government buying American made goods.
Another area is trade justice and if you say the labels fair trade and sweat free and living wage on goods, those are all ways of saying that these goods were made by workers who are not exploited.
An example of someone who used to not buy products with these labels in is now is NPR. They would give away tote bags for memberships at the same time they were doing stories about sweatshops in China but the tote bags were made in those sweatshops because they get them for 25 cents a piece. Now it’s costing them $2.50 a piece to import. They are going to spring for $3 a piece and buy something that is made in USA and it basically cost less for them to put their money where their mouth is.
The link between fair labor and local and eco-friendly is this: The closer production is to consumption the less acceptable worker exploitation becomes. You don’t want to buy a shirt from someone around the corner who you know as working for below minimum wage and maybe working a 100 hours a week, but its okay if it is around the world.
Also the more likely that goods are produced using your labor and environmental standards. The factories are operating under the same laws that you benefit from.
Another area is product selection. So two examples of products that are less expensive to make domestically would be products that are big and bulky to ship and don’t have a lot of labor like this gigantic case right here that we make. That didn’t need to be made in USA but it is.
Or bags using expensive materials– this bag has $40 in leather in it but only maybe $8 in labor. In China maybe you can get it made for $4, so at the end of the day its $48 verses $44. By the time you ship it here and have the duties on it, its less expensive to make it in the United States. That’s why you see a lot of goods with expensive materials made in countries that are more expensive than United States like Italy.
So another area is small batch customization. There is a big overhead to making products overseas, you have to translate, you have to make tech packs. It is expensive to ship sampling back and forth, there are time zone considerations, so as result nobody wants to make 500 or a 1000 of something in China or Bangladesh. It’s a lot less expensive to make it here.
And finally re-engineering is the area where we are able to close the gap through product design. When we get goods a lot of times now people are reshoring goods–they send goods to us and it was a bag that they had made in China, they want to get it made in United States and I’ll say if you want it made exactly this way, its going to cost you $80 because there is no thought given to engineering the products because labor was practically free over there. We can redesign it so your clients won’t notice the difference that will be just as nice and we can do it for $15.
The other area is Lean Manufacturing and that is the concept where you can take people in a high wage environment and train them to use all of their time to just add value to the product and not waste time doing things that are not that the client doesn’t pay for, like looking for a pair of scissors or waiting for manager or walking from machine to machine.
So finally, Newark is a place that is perfect for manufacturing for a number of different reasons. We’ve got a high concentration of skilled labor, we’ve got a well developed infrastructure of manufacturing. There are lot of other manufactures here which means that there is a market for mechanics and trucks and things where that might not exist in an economy where there is not a lot of manufacturers. We are close to the port, we got Newark airport here and we’ve got access to everything. We have access to New York City we have access to capital, marketing, and technological expertise right here in the city of Newark through our academic communities.
There are other cities where this is happening. There are not a lot of rural areas where this is happening. So this is the time to take advantage of this once in a generation opportunity where people are coming to Newark to get things manufactured. Thank you very much.
Unionwear is featured in this video for Maker’s Row / Newark, a site for sourcing local cut and sew contractors.
The video was launched at an event on May 28, when Unionwear CEO Mitch Cahn spoke at a Brookings Institution panel along with Mayor Cory Booker and NJIT President Joel Bloom on Newark’s Manufacturing Moment, discussed here in NJ Biz Magazine: