NEW YORK — Peter Liu is trying to change the industry’s perception of bankrupt Burlington Industries Inc., along with its business model.
This story first appeared in the October 15, 2002 issue of WWD. Subscribe Today.
A casual glance at the business card of the executive who now heads the company’s apparel-fabrics operation, Burlington Worldwide Ltd., reveals one change — his desk is in Hong Kong. The flip side of the card emphasizes another subtle shift — the back of the card is printed in Chinese, a feature common in Asian sourcing circles, but far out of the ordinary for the Southern mill set.
Liu joined the company in August 2001, charged with stretching the Greensboro, N.C.-based textile operation’s arms into Asia, where a vast amount of apparel destined for U.S. stores is made. Burlington Worldwide is the company’s venture into outsourcing — buying and selling fabrics made at mills not owned by the company — in a bid to recapture a chunk of the apparel business the company has lost to foreign competition over the past two decades.
Under the direction of Liu, who serves as the division’s president, Burlington Worldwide has lined up 15 mill partners in Hong Kong, China, Taiwan and South Korea, and three months ago began shipping fabric to Asian apparel factories.
“We have the headquarters in Hong Kong because that is where all the action is,” Liu said Thursday during a stop in New York. “Where you have the garments made is where you need to have the fabric made. Next door, if possible.”
The company sees several clear advantages in producing fabrics in Asia, including the lower wages that allow for lower prices and proximity to the region’s apparel factories. But outsourcing also provides financial flexibility to the bankrupt company.
“We essentially are running the mill, but we don’t own the assets and we don’t own the employees,” said Liu. “That gives us flexibility.”
Most major U.S. apparel vendors have found contracting production to be a cost-effective way to compete. Apparel executives contend that getting out of the manufacturing business allows them to focus their time and money on designing eye-catching product, and market their brand names to consumers.
But Liu doesn’t like to use the word “sourcing” to describe the new business model. He prefers to call it “virtual manufacturing.” The difference, he contended, is that Burlington staffers — the division now has 13 employees based in Hong Kong, in addition to a sales and design staff of about 60 in the U.S. — will develop new products to be produced in Asian mills, in addition to handling the selling and shipping.
“We intend to turn these partner mills into a Burlington mill,” he said.
“All the fabrics from Asia will have nanotechnology,” said Ken Kunenberger — who last week was named president of North America for the Worldwide division and reports to Liu. Burlington owns a majority stake in Nano-Tex LLC, which develops and licenses nanotechnology enhancements that can make fabrics water resistant, wrinkle resistant or impart other properties.
The Worldwide division will sell only fabric. Burlington’s failed experiments in full-package garment production — the company in recent years shuttered Mexican factories where it tried its hand at making jeans and other apparel — have convinced Burlington executives to stick to their knitting and weaving, Kunenberger acknowledged. The division will also sell all the apparel fabrics made by Burlington-owned plants in the U.S., Mexico and India.
According to filings with the Securities and Exchange Commission, Burlington’s apparel fabric sales for the nine months ended June 29 were $376.9 million, 33.4 percent below where they’d been a year ago. Liu declined to provide revenue projections for the Asian business, citing the company’s ongoing Chapter 11 proceedings.
Burlington said last week that Joel Futterman, executive vice president of product development in Greensboro, and George Edmunds, vice president of operations in Hong Kong, now report to Liu. Liu reports to George Henderson, Burlington’s chairman and chief executive officer.
The Worldwide division is also in the process of setting up a Shanghai office.
“I thought about whether the headquarters should be in Hong Kong or Shanghai,” said Liu, in a nod to the latter’s rising importance as a commercial destination. “Hong Kong will be a commercial hub for years to come. China is catching up, but Hong Kong is not going to go away. Most of our customers have buying offices in Hong Kong.”
Kunenberger said he believes the outsourcing model will allow Burlington to keep up with future migrations in apparel production. In the past, he said, “the customers moved on and we were a prisoner of our assets.”