The Outsourcing Evolution - in men's clothing - Statistical Data Included

Bobbin, May, 2001 by Jules Abend

Supply chain shifts in he U.S. tailored clothing industry are moving more volume makers toward global sourcing -- and mid-range makers may soon he following in their footsteps.

Looking at official U.S. trade statistics, it's apparent that tailored clothing is giving way to casual apparel, and that U.S. production of lower-end and mid-range suits is probably a losing proposition in the long run. Overall, the U.S. market for wool and man-made fiber men's and boys' tailored clothing shrank percent from 1994-1999. During the same period. U.S. imports of tailored garments shot up 40 percent -- with much of thc growth stemming from low-labor-cost countries.

For example, in the year 2000, the top 15 countries exporting tailored clothing to the United States accounted for 84 percent of all U.S. imports in those categories. And of those countries, the Dominican Republic, Mexico, Canada, Italy and China accounted or more than 50 percent of the pie. Drilling down deeper, Mexico was the largest exporter of wool suits to he United States last year, surpassing Canada and Italy. The Dominican Republic, on the other hand, dominated in all U.S. tailored clothing import categories except wool.[*]

Volume manufacturers in the United States, such as Bayer Clothing Group Inc. (a major private label maker for JCPenney, Sears and high-end discounters) and the Lanier Clothes operating group of Oxford Industries (a diversified international manufacturer and marketer of men's, women's and children's apparel), have been outsourcing offshore for years -- and they will continue to search for inexpensive production locations.

By contrast, top- and upper-mid-range U.S. makers -- including Hickey-Freeman Co. (along with parent Hart Schaffner & Marx), Oxxford Clothes Inc., Southwick Clothing and Pincus Brothers-Maxwell, among others -- continue to make their own labels, store brands and licensed products in the United States.

Their reasons for staying planted on U.S. soil include skilled operators, consistent production, high-quality construction capabilities and the cachet that U.S. tailoring offers. There's little doubt that a retailer selling $1,500 to $2,000 suits would be hard put to hang "Made in Mexico" or "Made in China" labels on the racks next to U.S. and Italian products. Moreover, most men buying clothing in the $600-and-up range prefer garments produced in the United States, Italy or Canada.

Changing Mindsets

But at the mid-range levels that mindset can be changed -- if not now, perhaps sometime in the future -- according to several industry consultants and participants. They note that tailored manufacturers and contractors in low-labor-cost countries, such as Mexico and China, are becoming more sophisticated with support from U.S. producers. For example, both European and U.S. manufacturers already have technicians in these markets to develop production capabilities.

Still, there remain stumbling blocks in attempting to produce in those environments. According to one representative for a better maker who spoke to Bobbin, a big problem in developing relationships to produce high-end and midrange goods is that most apparel factory employees in low-wage countries -- even at management levels -- have never purchased high-quality garments. Therefore they cannot relate to the requirements of U.S. retailers and consumers.

However, the belief is that China is gradually going to get to the point where it can produce a mid-range product of consistent quality, and the country's tailored clothing producers may make substantial inroads in the United States. They can afford to put in a great deal of handwork, with a very high labor content, says one long-time mid-range manufacturer.

Bill Williams, a Kurt Salmon Associates (KSA) principal with more than 30 years of industry experience, agrees. "Although I don't see the top-end companies going to China, middle-tier companies are going to be there not too far down the road," he says.

The Competitive Edge

If U.S. makers in the upper and upper-mid tiers hope to maintain a domestic manufacturing presence over time, they will have to change the way their garments are produced to remain competitive with Canadian and Italian companies. Industry veterans point to Canadian producers' decision nearly a decade ago to aggressively adapt the German-inspired two-shell construction method, a cost-effective, engineered approach to manufacturing that requires less handwork than traditional methods. Consequently, Canadians have made strong inroads in the U.S. market.

Although some better U.S. makers are using the two-shell method to varying degrees, there have been questions about how far to take it. The fear among traditional producers is that too much engineering will turn garments into commodity items, according to industry observers. However, as more aspects of the two-shell path are incorporated into the production process, labor minutes are saved and it becomes easier to leverage technology and equipment.

"If you look at Hugo Boss, that's a two-shell construction," KSA's Williams says. "So you can make a very nice garment that way if you [don't want to] be in the handwork business to any great extent. But that [method] is somewhat incompatible in the U.S., philosophically."