CONTRACTORS WORK TO CONTROL SHRINKING PROFITS, RISING COSTS

Byline: Brenda Lloyd

WILLIAMSBURG, Va.--Contractors are keeping busy, but profits appear to be an endangered species.
That was the talk at the spring meeting of the American Apparel Contractors Association at the Williamsburg Lodge here. The two-day parley ended Saturday.
Many attendees reported they are even working at full capacity now, which they attributed primarily to a shrunken U.S. contractor industry. But they complained they are being squeezed for profits, the result of pressures stemming from retailers, at the same time that they are trying to control increasing overhead costs, such as workers' compensation, health care and wages.
In fact, following the conclusion of the Saturday morning session, the AACA board of directors voted against President Clinton's proposed minimum wage increase. They are urging members to take a stand against the issue and contact their Congressional representatives.
According to Allen Edelman, president of Fashion Sources Inc., North Wales, Pa., his apparel contractor clients are "fairly busy, but in many cases their profits are marginal. There are few manufacturers who are profitable. Most are compelled by the retailers to seek the lowest cost."
Edelman's company represents contractors looking for work. Currently, he is searching for work for contractors who make jeans, better women's slacks and moderate women's and men's knit tops. His clients are busier than a year ago, he said, but he attributes that to other contractors going out of business.
"The ones who still exist are getting more work. The ones who are succeeding and making a profit are the ones who see problems as opportunities...and some factories are keeping very current with automated equipment," he said.
One of Edelman's clients recently went out of business because "his customer pushed him to the brink...and the union wouldn't give him a break," Edelman said. Another shop closed because of quality control problems with a large customer that resulted in the contractor losing all its capital.
A big problem for contractors is the continuing wave of foreign competition, fostered by the North American Free Trade Agreement and the GATT Uruguay Round. These trade pacts are prodding contractors into investing in automation, computers and new manufacturing methods, in an effort to make plants more efficient and better able to compete with producers in low-wage countries.
Traci Novoson, president of Santana Inc., Durham, N.C., said she is investing in automated equipment and made the move last year to modular manufacturing, as well as implementing in-line quality control. Those moves, Santana's answer to NAFTA and 807 manufacturing, have resulted in reducing work in process and made the firm capable of moving orders from cutting to shipping in five to seven days, she said. Also, business has improved.
A contractor making men's, women's and children's casual knit and woven bottoms, Novoson also has begun her own line of women's casual sportswear for the mass market. She said she just needs a sales representative to sell it."As a domestic contractor, I believe that it would be difficult to generate real profit," she explained. Novoson said she thinks the answer is to go into wholesaling.
Novoson also has joined Internet, where, she said, she is making contacts under the fashion section of the computer network. It also helps her keep up to date on issues such as NAFTA, GATT and Mexico.
"I'm looking toward the future and taking steps," she continued. "If we don't, we'll all be antiquated because of things like NAFTA and GATT."
Don Singer, president of Singer Manufacturing Co., Phila-delphia, said that his business, tailored clothing for men, women and children, is good but not operating to capacity. Currently, the plant is producing 2,500 to 3,000 units per week, but is able to produe 5,000 per week.
Singer produces low-volume, high-style, fully fused clothing; high-volume production has gone offshore, he noted.
The company has laid off workers, but has re-engineered the plant, restructured middle management and is about to install modular manufacturing, Singer said. The modular setup, he said, "will make us much more efficient and reduce work in process, which is the key to making turns and quality more reliable and having less dollars tied up. The end result is that we will be more profitable."
Singer Manufacturing has been profitable, he added, but may not be this year because of the investments the firm must make. As for NAFTA and GATT, Singer observed that the industry "has always had to fight that [trade] battle. We've lived with it for the past few years and I'm not afraid of it. We just need to be creative and try new things."

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