Worker Rights

Mitch Cahn, CEO of Unionwear, Talks About his Lean Journey

| Posted by unionwear

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.

CREATING VALUE

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.

Righteous Capitalists Podcast Features Unionwear

| Posted by unionwear

Who says that the only way for a manufacturer to make money is to send production outside of the USA? Not Mitch Cahn. After graduating from Wharton and working on Wall Street, Mitch decided he wanted to create something. So, in the early 1990’s he bought the distressed assets of a hat manufacturer and very purposely brought back the unionized workers that had been employed there. Twenty-eight years later, Mitch’s company, Unionwear, is the only manufacturer of American made baseball hats produced by unionized employees. In fact, he is the go-to source for every presidential campaign and anyone who wants the world to know that they care about where their merchandise is made and who makes it.

Listen here:

https://www.therighteouscapitalists.com/podcastepisodes/ep012mitchcahnunionwear

Alternet: Buying America-Many Ways To Express Values with your Wallet

| Posted by unionwear

Buying America: The Many Astounding Ways You Can Express Your Values with Your Pocket Book
Shopping can be an ethical act.
By David Morris / AlterNet July 27, 2015

“Every person ought to have the awareness that purchasing is always a moral – and not simply an economic – act,” Pope Francis announced early this year. How can we spend our money as if our values matter?

In some sectors and for some values this is fairly easy. Food is an obvious example. Those who want to protect the environment and human and animal health will find abundant labels guiding them to the appropriate product: USDA Organic, free range, hormone free, grass fed. For those who want to strengthen community, shrink the distance between producer and consumer and support family farmers a growing number of grocery stores label locally grown or raised.

For those who want to support farmworkers as well as farmers, however, little guidance is available. The recently launched Equitable Food Initiative and Food Justice Certified labels hope to fill this gap. The former identifies food that has been harvested by workers paid a fair wage and laboring under safe and fair conditions. The latter offers three tiers of certification covering farm, processor and vendor/retailer. Only farms have been certified.

As for grocery stores, we can easily identify those cooperatively or locally owned. Going one step further along the supply chain we can use the Restaurant Opportunities Center United (ROC)’s Diners Guide to Ethical Eating downloadable app to identify restaurants that treat their workers well. Extra credit is given to non-chain businesses. To earn a favorable rating the restaurant must pay its non-tipped workers at least $10 an hour and tipped staff at least $7 an hour, grant all employees paid sick days and enable internal promotion.

The ethical consumer who wants to patronize a locally owned retail store in general can visit Independent We Stand and download its mobile app. Or go to AMIBA and BALLE to find a list of independent business alliances in over 100 cities many of which have hundreds and even thousands of individual member businesses.

There are few guides to locally and rooted manufacturers. But 3-year-old San Francisco Made offers an excellent model, interconnecting and nurturing its 325 member manufacturers located in that city.

The vast majority of products we purchase will come from regional and national firms. One can easily check to see if the company is American and sometimes that will be necessary even when we think we know from the product’s name what nationality the company is. As Roger Simmermaker, author of How Americans Can Buy American and My Country ‘Tis of Thee points out, “Swiss Miss is American (based in Menomonie, Wisconsin) and Carnation is owned by the Swiss.”

For those who want to go beyond where a company is headquartered to who owns it, a list of companies owned by their employees is available from the National Center for Employee Ownership.

Finding American made products as opposed to American corporations requires more legwork. Almost 8 in 10 American consumers say they prefer to buy American made products according to Consumer Reports. (Another survey found that for Americans ages 18-34 the percentage drops to 4 in 10.) Patriotic buying has gained considerable cache in the last few years and is beginning to change corporate behavior.

Consider this story of Florida orange juice. In 2007 Pepsi and then Coke began to mix oranges from other countries with Florida oranges. Florida’s Natural, an agricultural cooperative owned by 1100 growers, whose motto is “we own the land, we own the trees, we own the company” added a logo to its packages sporting an American flag and the words “Product of U.S.A.” For a few years Pepsi and Coke thought price would trump homegrown but in early 2012 the Tropicana Products division of PepsiCo began to proclaim in print ads, “Grown, picked and squeezed in Florida,” (Florida’s Natural responded with its own new tag line: “All Florida. Never imported. Who can say that?”)

A 2013 survey of more than 200 U.S.-based investors interested in the luxury sector, found 80 percent of them concerned that the reputational risk associated with offshore manufacturing is beginning to offset the cost savings for luxury goods manufacturers. After Ralph Lauren proudly unveiled its new uniforms for the U.S. team for the 2012 summer Olympics it was discovered that every piece of the uniform was made overseas. A considerable public backlash led the company to promise to make the U.S. uniforms for the 2014 Winter Games from USA components.

Mitch Cahn, the CEO of Unionwear, a Newark, New Jersey clothing manufacturer told John Oliver about why both Democratic and Republican candidates buy his company’s hats. “Both want to demonstrate their commitment to made in USA. Plus, whenever one of their vendors messes up and sources something from overseas or switches. When they get caught, which they invariably will, it’s going to cost them so much more money to fix the problem, backpedal, apologize, change their message, that it’s easier and cheaper to just patronize clean shops.”

Finding out if a product is made in the United States is easy. All imports must carry country of origin information on the outside of the package. Finding domestic products that are largely made of domestic components, however, may be more challenging.

How American Is That American Product?

Even if we buy American made how much of the value of the product is actually made in America? For automobiles, textiles, wool and fur products the law requires disclosure of the percentage of a product’s domestically produced content.

The 1994 American Automobile Labeling Act (AALA) requires all automobiles and trucks to prominently display a sticker showing the percentage of its value made in the United States. The AALA has several shortcomings. For one, it does not distinguish between Canadian and U.S. production. It does not take into account where the profits go (e.g. is the company foreign owned). Finally, it allows the “content percentages to be calculated on a “carline” basis rather than for each individual vehicle and may be rounded to the nearest 5 percent.”

The more sophisticated Kogod Made in America Auto Index, released annually by American University incorporates the (AALA) but adds seven further criteria: site of body, chassis, and electrical parts manufacturing (50 percent); site of engine production (14 percent); site of inventory and capital expense allocation (11 percent); site of transmission production (7 percent); site of assembly labor (6 percent); site of research and development (6 percent); and finally, where the profits in each aspect of the transaction go (6 percent).

In 2014 the Ford F-150 truck, the best selling vehicle in America topped the Kogod charts with 87.5 points out of 100.

As a general rule, automakers are more likely to build larger vehicles with higher profit margins in the U.S. and smaller ones overseas. The Kogod index seems to bear this out. The F-150 and Chevy Silverado score in the 80’s while the Chevy Spark and Ford Fiesta have scores of 15.5 and 19.5 respectively.

Aside from cars and textiles and furs, no U.S. supplier needs to identify where the product is made or its components. But if the company boasts that a product is “Made in the USA” or “Made in America” it must “contain no – or negligible – foreign content” according to regulations issued by the Federal Trade Commission (FTC) and the product’s final assembly or processing must take place in the United States.

Nevertheless, the buyer who sees a Made in America sticker must still beware. The FTC investigates several complaints a year, almost all submitted by manufacturing competitors and the vast majority end in a settlement with no civil penalty. The civil penalties themselves are modest. California has its own higher and more rigidly enforced standard. No component of a product advertised as Made in the USA can be imported. In 2011 California’s Supreme Court ruled that the company Kwikset could be sued for using the label on one of its locks because the screws in it were manufactured in Mexico.

Americans don’t like to be misled by faux patriotic corporate advertising. As Consumer Reports notes, “Readers who have sent us complaints seem most irritated by foreign-made products whose makers have patriotic names (American Mills, Americana Olives, Great American Seafood, United States Sweaters, the U.S. Lock company) or whose packages have flag-waving slogans (“true American quality”) or symbols (pictures of the flag, eagle, Statue of Liberty).”

Over 90 percent of shoes and clothing sold in the United States is imported. One will almost always pay more to purchase Made in the USA but often their quality is far superior. If you buy a Brooks Brothers suit, 70% of which are made in Massachusetts, or tie, 100% of which are made in New York or shirt, 15% of which are made in North Carolina the quality is first rate and the clothes last considerably longer than cheaper imported items.

More than 97 percent of American denim jeans are made abroad but you can still find American made denim. In the 1990s Lawson Nickol was working for a U.S. jeans manufacturer who like almost all other jean manufacturers decided to move production to China. He resigned and in 2002 with his son BJ Nickol founded the All American Clothing Co. They started manufacturing their own clothing in 2007. Unique among jeans manufacturers, their customers can enter a code and trace their jeans back to the farm that grew the cotton.

One of the new firm’s biggest challenges was finding suppliers. “The apparel industry has lost 85 percent of cut and sew people in the USA since 2002 when China became king”, Nickol notes. He’s had to pay more for their materials and labor which makes their clothes more expensive which Lawson concedes but proudly adds, “…I buy a lot of higher cost products that are made in the USA in order to support tax base, jobs, SSN, police, firemen, hospitals, infrastructure, military, freedom, etc, etc. I don’t buy foreign jeans and help to support labor atrocities, child labor, poor manufacturing quality, give money to the foreign governments…”

Despite higher input costs his jeans prices are still competitive with denim giants like Levis. Why? “One of the things we don’t do a lot of is marketing and advertising,” says Nickol. American Clothing sells 95 percent of its products online. Nickol adds, “We don’t have as big of margins.”

Sluggish wages in the United States and soaring labor costs in countries like China, coupled with the growing realization of the costs inherent in the rigidity of long supply chains and the potential for product piracy, has made it increasingly possible to buy American in many sectors. Whirlpool already makes 80 percent of the products it sells in the U.S in its U.S. plants and it prices them competitively. In 2000, it manufactured most of its front-loading washers in Germany. Now the company is moving that production back to its Ohio-based facilities. “On the one hand, U.S. labor costs are often higher than in other countries,” says Whirlpool’s Casey Tubman. “But when you look at the higher productivity for American workers and consider the fact that it’s very expensive to ship something as big as a refrigerator or washer, we can quickly make up those costs.”

There are several useful web sites that identify American made products. (Look here, here, here, here, and here.)

Going Beyond Buy America

The same Consumer Reports 2013 survey that found that 78 percent of us prefer to buy American products also found that other values were equally or more important to us. Ninety-two percent preferred products from companies that give back to the local community; 90 percent preferred companies that treat their workers well; 82 percent prefer firms that express public support for causes we believe; 79 percent prefer a company that engages in environmentally friendly practices.

If you are one of the 90 percent who care how companies you want to buy from treat their workers one good indicator is whether the product is made with union labor. For clothing you can look for the UNITE label (the union created from the merger of the Union of Needletrades, Industrial and Textile Employees and the Hotel Employees and Restaurant Employees International Union). Those seeking to buy a specific car made by union members can find a list here. Those seeking web sites that offer extensive links to union made products can go here and here.

Those wanting to know more generally about the character of the company with whom they are doing business can check out whether it is a Benefit Corporation. This new type of corporation is required to consider its impact not only on shareholders but also on workers, community, and the environment. Benefit corporations are required to make available to the public an annual benefit report that assesses their overall social and environmental performance against a third party standard. Twenty-eight states currently permit a corporation to become a Benefit Corporation. A list of Benefit Corporations by state is available here.

Certified B corporations are Benefit Corporations which must achieve a minimum verified score on an Assessment by B Lab, a 501©(3) organization. Recertification every two years is required against an evolving standard. A list of Certified B Corporations can be found here. About 60 percent are American corporations. Each year B Lab publishes a list of its top Certified Benefit Corporations by size and category. Companies are broken out by midsized, small, micro enterprises and sole proprietorships and are graded based on their environmental, worker and community impact.

For example, in 2014 King Arthur Flour and New Belgium were among the top rated B Corporations on labor issues. The 200 year old King Arthur, a company of 388 workers at the busiest times of the year, has a minimum hourly starting wage for full-time workers of $11.25 an hour. New Belgium’s lowest wage for non-temporary workers is $12 an hour. King Arthur Flour and New Belgium are 100 percent employee-owned companies. Both have profit sharing plans. At King Arthur Flour low income employees receive a heavily subsidized Community Supported Agriculture shares.

As Stephen Lurie at Vox observes, despite its high rating, King Arthur Flour puts its USDA organic label on the front of its packages and its B Logo on the back.

Assessing the character of a company is complicated and by its nature incomplete. Some might want to know how willing companies are to pay their fair share of taxes to sustain our public schools and roads and colleges. In 2015 Bloomberg compiled a directory of 299 companies detailing how much of their total profits they’ve stashed abroad to avoid taxes. Bizvizz has an ambitious but spotty downloadable app allows you to use your phone to take a picture of a brand and discover what tax rate the corporation that makes the product pays and in many cases, where its political contributions go.

Often those who want to make ethical purchases will have to assess which of the values they embrace are more important. For example, what do we buy when the organic farm treats its workers poorly? Would you choose a conventional tomato picked by well-treated workers than a local heirloom variety harvested by oppressed workers as the food writer and activist Eric Schlosser declared he would? Or would you choose the tomato that stresses the environment? A Toyota Camry is among those vehicles with the highest percentage of its components coming from the United States. But its plants are not unionized and the company’s profits do not stay in the United States.

With much fanfare Walmart has launched a new Buy America initiative. Would you now shop there given that Walmart’s policies may have single-handedly resulted in the outsourcing of hundreds of thousands of U.S. manufacturing jobs and the erosion of U.S. workers wages? Or that more than 20 years ago it launched a similar campaign and began hanging “Made in America” signs in its 750 stores until NBC’s Dateline offered significant evidence the initiative was “more an advertising gimmick than a substantial plan.” At the beginning of its current initiative Walmart publicized a contract with 1888 Mills, a Georgia towel maker to produce American-made towels for the company’s stores. But 1888 Mills, which has an overseas workforce of some 14,000, will be adding only 35 jobs low paid jobs at its U.S. factory to meet Walmart’s multi-year purchase agreement.

Sometimes different values can lead customers to the same supplier. As I noted above, both Democrats and Republicans buy their caps from Unionwear in election years to demonstrate their support for domestic jobs. John Oliver calls it “electoral jingoism”. But CEO Mitch Cahn points out one key difference between the political parties on their values beyond domestic sourcing, “Democrats brag about their products being union made and the republican don’t want anyone to find out about it.”

Unionwear’s Featured TedX Talk: Made Right Here

| Posted by unionwear

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.

TRANSCRIPT

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.

 

Labor Activist on CNN: Follow Unionwear’s Lead

| Posted by unionwear

Unionwear got a big thumbs up yesterday from the toughest labor activist out there: The International Labor Rights Forum.  ILRF President Judy Gearhart, was on to discuss the major changes in supply chain management that need to occur to prevent more tragedies like the factory collapse in Bangladesh.

CNN: How do we know whether the clothes that you or I are wearing come from a factory under deplorable working conditions?

International Labor Rights Forum President Judy Gearhart: There is no good way to tell right now and there’s no silver bullet… There are a handful of brands that are really trying to produce in a way that is absolutely ethical throughout their supply chain. They include brands like UNIONWEAR,  but really getting this to go mainstream will take consumers getting involved and communicating directly to mainstream brands that they need to make a big change in their apparel supply chain.   It’s incumbent upon consumers and u.s. companies who perhaps can do a better job of vetting or regulating suppliers in countries like Bangladesh.