As our dear friend Jesse pointed out, when I last discussed this topic of small-batch manufacturing, I only listed the negatives to not owning production.  And then I listed the negatives to owning production.  The reality is, I’m actually a positive and optimistic person! But, I’m conservative, and so I always like to know and identify the downside to any venture.

Plus, isn’t the upside obvious?  CONTROL.

That sounds psycho.  Let’s put it in softer terms.

The UPSIDES of Owning Production:

It’s creative freedom.  We can figure out how to make anything we want as long as we own production.

It’s also lead-time freedom.  No, we can’t fill an order for 400 units by next week, but frankly, neither can your standard NY-based fashion company either, unless they are holding plenty of overproduction stock.  The fabric is still coming from overseas almost 100% of the time.

It’s a chance to really craft the product.  To be in touch with the product.  We are making tangible things.

People like working in places where they make things by hand.  There are plenty of people out there-  I’d bet a significant minority of the population-  who really feel somewhat lost if they don’t actually make things by hand.  We find these people in so many other industries now:  chefs, furniture-makers, carpenters and builders, landscapers, jewelers, potters-  I’m sure you can fill in the list.

I feel lost if I don’t physically work with my hands, making things, on a frequent basis.  I know this is a common feeling.  Look at the prevalence of handmade-hobbies:  knitting, cooking, models, etc.

It leads to newness.  It’s very hard to get something that looks new and different from a factory that produces for lots of other people.  They will have optimized their tools, training, and systems for certain types of garments, certain types of seams, certain types of finishes.  They will not want to adjust or deviate from their optimized state very far.  If you own production, you can invent new or novel optimizations that are perfect for your product line.

It’s less risky.  Owning production means that it will be easier-  and necessary- to oversee production.  Mistakes can be caught quickly and corrected. There is practically no risk that you’ll end up owning 400 units of a garment that came out wrong because of a mistake in the tech pack.

Small-batch makes experimentation possible.  Rather than committing to 400 units of a style, you can make twenty and sell them directly.  If you already have a factory/ workshop, it’s pretty easy to add a direct distribution model-  ecommerce and shipping of products can be added to the business with practically no marginal cost.

It’s not particularly expensive.  Industrial machines, new, are $900-$5000+ ….but for small batch, it makes sense to go with the all mechanical, less specialized types.  They provide a little more flexibility.  So, yes, outfitting a workshop and finding people to work there will costs some tens of thousands of dollars…. but so will over-producing offshore.

Remember the 400 unit per colorway minimum number I described in the previous post? Let’s say you are making a SMALL collection, producing offshore. There are 30 pieces you plan to produce this season, including all colorways.  That’s 12,000 units total. Let’s say your average landed cost is $10/unit, or $120,000 dollars.

Let’s figure out the breakeven sales figure to buy those twelve thousand units. Remember the prior post, and say that your average costs (office space in a major metro area, small staff, showroom, PR, and tradeshows) are running $170,000 per year.  That will get you a very small staff, a tiny office, a mid-range PR firm, and upper tier showroom, and two tradeshows a year.

Those 12,000 units, simplified to one price in this discussion, will wholesale for $25 apiece (2.5x markup on the $10 COGS.)

$120,000 in COGS + $170,000 in overhead = $290,000

These numbers worked out nicely, because 12,000 units at $25 wholesale apiece is $300k.

So, profit is $10k a year.

Now, consider an alternative model.

Skip the office, keep the PR and showroom/ tradeshows. Take the $120k in COGS and the $48k in office and redirect it to building your own workshop/ factory in a smaller city in the US.  Make 6000 units instead of 12,000, with a COGS of $20 apiece.

Focus on quality.  It’s 100% possible to build a factory with staff & buy materials for $170k, and produce 6000 units of a $20 COGS product/ year.  (It would actually cost much less, but there are a lot of variables, including location, to consider.)

And, instead of investing in someone else’s factory, you are investing in building the skills within your own company. Spending COGS money directly with your own equipment and employees is an investment in your company and your future— spending it buying product from someone else is, well, not.

The scenario I described above is grossly simplified, of course, but the numbers are realistic.  It’s not what we do-  because we’re aiming at a significantly higher pricepoint than described here. We’re interested in producing less, but higher quality and higher novelty.

 

So then, back to the challenges of owning production:

This is an expanded list of the outline I made in the previous post.

1.  the skill set is hard to hire. You have to teach yourself.  Fashion and design schools seem to be completely ignoring this part of the market and do not teach these skills at all.  (Extrapolated purely from my own experience of questioning fashion grads regarding what they have learned in school.) However, teaching oneself is possible.  Books exist.  Websites exist.  (Fashion-incubator.com is the one I recommend to everyone.) Examples of products are all around us, all the time.  Literally.  Just take them apart.

2. sourcing is difficult.  One thing a full-service factory does is source all the little notions and bits of things, as well as help with fabric sourcing.  (Sourcing is probably my least favorite activity, so I *think* of it as really difficult.  It’s probably not.)

3.  it was cheaper to produce overseas for a while, but that is becoming less true.   Tech companies are insourcing, other industries will follow.  However, having staff in the US means that someone (you, the owner) will have to figure out and follow all the relevant human resources protocols.  Again, not exactly rocket science.  And I do think the costs even out, as identified above.

4.  specialization of skill sets is what made the industrial and technological age possible.  This is a complicated little topic that I will probably end up turning into a post in the future….  So, I’m a clothing designer who also knows pattern-making, grading, and construction.  I actually think this makes me a better designer, not a worse one:  but in this industry, it makes me unusual.  Most designers do not do patterning or construction.  And grading by hand is practically unheard of, from what I can tell (and completely not addressed in schools. And I’m not implying grading by hand is better, but it’s a limitation we have due to not having CAD software and not having a plotter.)

I think restaurants are a good point of comparison, for this issue, to clothing companies.  Restaurants sell one of the few products- prepared food- that is still always made in the US.  Restaurant workers are also an interesting comparison to textile workers: they too often like to work with their hands.  They too work in a production environment.  They too often come from a creative background.

For some people, working in a sewing factory is going to be a much, much better personality fit than working in a restaurant.  The hours are day-based.  The temperature is constant (vs kitchens, which are are hot). It’s basically clean work, no need to wear an apron or change after work.

I think, for the most part, clothing companies in the US no longer specialize in clothing, they specialize in design.  In marketing, merchandising, and styling. In atmosphere.

5. Variety.  We can’t make sweaters in our space.  We can only do cut & sew of light-to-mid-weight garments.  It would require another room and another set of equipment to add sweaters.  The reason companies manufacture with lots of different contractors is the desire for variety, and the reason contractors optimize to a certain style is efficiency.  Cost-based competition- i.e. commodification – requires lean margins.

6. this is fashion, and production is not sexy. A workshop is usually in some state of mess. It has piles of unfinished or half-finished garments.  It’s hard to keep a workshop constantly art-directed.  Since our workshop is literally open to the retail environment, we’ve been striving to make it look nicer.  More like what it “should” look like.

7. fashion is a creative industry, and many creative people are not well suited to be managers.  so they outsource the management of the product.  (can you imagine if restaurants did that? well, fast food does.)

 

As before-  thanks for reading.  Questions, Comments-  always welcome.

~Brook & Daniel

Posted by:brook delorme

2 replies on “the reasons people don’t own production- and the reasons they might like it if they did.

  1. Great post. I’m a tech designer and I sew for myself. It is literally my biggest fantasy to own my own small production factory here in the US. I haven’t crunched any numbers and I know very little about business though. your posts on the topic are fascinating.

    1. hey Grace! So nice to hear from you and thanks for writing.

      It’s a lifetime of learning, and we’re evolving our business and strategies everyday too :) Hope to hear more about your ventures in the future!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s