SPENDING WISELY

DESPITE RISING INTEREST RATES, APPAREL MAKERS SAY THEY’LL INVEST IN MACHINERY AND SYSTEMS TO SUPPORT QUICK RESPONSE

Byline: MATT NANNERY

NEW YORK — Apparel makers aren’t posting banner profits. Interest rates are creeping up. Imports are rising. But against that unlikely backdrop, domestic apparel manufacturers are investing in new equipment and computer systems.
What sounds odd is actually sound planning, according to apparel makers and industry observers interviewed by Apparel & Home Technology. They said a shortage of skilled labor and the demands of delivering product on tighter Quick Response schedules are driving investments.
“We have to be much more concerned with logistics, from order entry all the way through marking and shipping,” explained Norman Fryman, executive vice-president at Bidermann Industries Corp. “The bulk of our capital investments will be in getting information where it’s supposed to be, when it’s supposed to there, in the right form.”
“Today, service to the retailer is very important,” added Steve Kurtzman, president of American Fashion. “We just made a major investment in systems support for Quick Response, and our in-stock levels have increased while our inventories went down. I couldn’t point to that kind of an improvement if we had not invested in better systems.”
Like many apparel makers, Kurtzman said American Fashion will continue to invest in technology to speed replenishment even if interest rates continue to rise.
“If we know we will get an ROI, we’ll keep investing in spite of rising interest rates,” he said. “The interest rates are part of a larger equation we look at when we decide to invest.”
Bill Cobb, vice-president of logistics services at Kurt Salmon Associates, said many apparel manufacturers are coming to the same conclusions.
“All the bigger apparel manufacturers are investing to make sure they solidify their positions in the market,” he said. “They are spending more now than last year because they feel more secure about the direction the economy is taking, and they are investing despite higher interest rates.”
Homi Patel, president of Hartmarx, echoed that view.
“Interest rates may dampen our investments a bit, but you have to look at it from a historical perspective,” he said. “We’ve had very low interest rates to date, and they are still moderate compared to where they stood in the 1980s. If we need equipment to stay competitive, we will invest.”
Ed Johnson, director of Johnson Redbook, said manufacturers such as Hartmarx have no choice but to invest in systems that will facilitate fluid replenishment.
“They have to invest to speed up Just-In-Time schedules,” he said. “It’s a little tough because they had a tough year, but they will find the money for these things to keep competitive. That’s why VF Corp. has invested so much money in systems. And manufacturers of all sizes will continue to focus on systems and upgrades. Interest rates are outweighed by competitive concerns.”
“The vendors are in a very competitive environment,” KSA’s Cobb added. “Certainly, there is a need for apparel makers of all sizes to provide the Quick Response services required by retailers. And continued consolidation among retailers is only going to give them more buying clout.”
Cobb said retailer demands are spurring apparel makers to invest in more than systems to support Electronic Data Interchange. Vendors are also retooling their distribution centers to meet retailer requirements.
“Vendors have to regear their DCs, and that regearing is driven by the move toward Quick Response,” he said. “Different retailers want different tickets on garments. Manufacturers are putting printers into their DCs to provide the documentation the retailers are calling for.”
“We had a dozen people on the floor of the Bobbin show looking at equipment and packaged software to help us smooth logistics,” Bidermann’s Fryman said. “We have to redevelop logistics systems and refine UPC ticketing. Our dealings with retailers have changed from the salesman /buyer relationships of the past. Now, that relationship is just a piece of the puzzle, and logistics is the much larger part.”
Herb Winkler, president of Jonbil, also said his company will spend to operate in the QR mode. The apparel maker, however, is already one step ahead of most vendors its size. In addition to transmitting purchase orders and invoices electronically, Jonbil also supplies J.C. Penney Co. with advanced ship notices before merchandise leaves its docks.
“We’re doing EDI already, so we don’t have to invest in that,” Winkler said. “But we are investing in sewing room equipment. Even if interest rates continue to rise, we’ll still look for equipment to help us make better use of our people.”
Winkler’s concern with utilizing labor more productively is the second prong in the investment strategies of most U.S. apparel makers. A shortage of skilled labor, combined with imports from countries where labor is cheap, is driving investments in cutting and sewing rooms.
“The second major area where we are making investments is on the sewing floor and in cutting rooms,” Bidermann’s Fryman said. “Flexible equipment is important because Quick Response is causing us to produce in shorter runs and in a greater variety of styles. We’re moving toward modular manufacturing. Our people have to be able to perform more operations and to use different machines.”
Productivity is also a top concern at Hartmarx, according to Patel. “The labor shortage is what’s driving our equipment investments in our higher-priced business,” he said. “We really have to automate some sewing currently done by hand, but we want to make sure the quality remains high. In our moderate-to-better lines, we are looking for equipment that lets workers produce more garments per hour.”
Winkler said Jonbil is really feeling the pinch from the shortage of skilled labor. “Freeing up skilled workers is the single major reason we are investing in cutting and sewing equipment,” he said. “If I can get a machine that allows one worker to do the work of three, then God bless it. It’s very difficult to get young people to work in sewing rooms when they can make almost as much at an unskilled job at McDonald’s.”
“The labor shortage is a problem, and the best way to correct it is to automate,” said Josie Esquivel, who follows the apparel industry for Lehman Bros., a New York investment firm.
Esquivel, however, said many sewing operations don’t lend themselves to automation. “But there are exceptions — now, there are machines that can bottom-hem T-shirts. One worker can operate two of them at once.”
Carl Priestland, chief economist at the American Apparel Manufacturers Associa-tion, agreed. “You can automate the sewing of straight lines, but it’s difficult to automate things like setting cuffs and sleeves,” he said. “But even in setting collars and cuffs there are advances. There is some automation going on in that area.”
Winkler said one new machine has allowed him to utilize three of his best workers more productively. “We just installed a new machine that folds over and hems pockets for jeans before they’re attached,” he said. “It has freed up four skilled women I need to perform other jobs on the sewing floor. We aren’t looking to reduce our work force. We’d love to hire more people, but we can’t find them. Nobody is investing simply to upgrade equipment.”
Lehman Bros.’ Esquivel said automation also cuts down on workman’s compensation claims by cutting down on repetitive motions that sometimes cause nerve and muscle problems. “Injuries from tedious operations can lead to early retirement, layoffs and worker’s-comp claims,” she said. “All these things compound the labor problem.”
Kurtzman said American Fashion invested heavily in automated sewing equipment three years ago. The move has allowed the company to utilize its workers better and to juggle the shorter runs that are part and parcel of QR.
“We basically rethought our entire factory with flexibility in mind,” he said. “Today, you can’t have a one-product factory. We were a one-image maker. Now, we can make any type of shouldered garment.”
Kurtzman said American Fashion keeps updating its factory, despite the large investment it made three years ago. “We look at much more equipment than we did, say, five years ago,” he said. “You have to keep fine-tuning your factories. Because of our investments in equipment, our cycle time and inventories have both been halved. “We’re getting orders produced and out the door much faster. We had to ready ourselves for the 21st century, and we’ve done it.”

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