The Best Jobs Stayed In America

This week I’m at my apparel factory in the Free Trade Zone in the village of San Pedro de Macoris, Dominican Republic coordinating and planning back to school programs. Key staff or I come here about every third week; it’s a Monday through Friday drill, from 7 AM to sometime after 7 PM. With about 100 offshore employees, key relationship building, on the spot problem solving and being a good corporate citizen keeps you busy for the week. Expenses are minimal, a hotel room is $29 a night, roundtrip airfare is below $500 and the fillet mignon I had for dinner was a whopping 285 pesos or $8.50.

It’s rewarding to be here and interact with the people who make our products, especially knowing every person here is supporting a family in a village where the unemployment rate is north of 20%. These jobs in an American factory are extremely hard to fill because first generation Americans with a cutting and sewing skill set are retiring in droves and their children have no desire to labor behind a sewing machine or a cutting knife. Many times I think it would’ve been better to keep the jobs in America that are now here in the Dominican Republic, but I come back to this very issue; the jobs I sent offshore are the jobs nobody wanted in the USA.

The high paying jobs are what stayed in America. Corky’s core group of designers, managers, sales people and customer service associates have more opportunity for advancement than at any other time in our 15 years of business. Further, the skill set that they develop everyday in technology and global commerce make them a more valuable employee to any business. The turnover in our administrative jobs is very close to zero as compared to our turnover in the warehouse which runs about 25% annually. The management jobs are stressfully challenging, but provide a sense of purpose and this is the type of job most young people aspire.

If you’re an American or Dominican you’re still a human being and neither ethnicity should feel entitled to more respect. However, opportunity is very discriminatory because some countries are further developed than others and where you’re born plays a large roll in the economic opportunities available. By providing opportunity to our employees here in the Dominican Republic, we’re helping the country develop economically and albeit in a small way we’re improving the opportunities that will be available to their children.

Let me be clear about the treatment of our employees in the Dominican Republic. Everyone is older than 16 and receives a wage significantly above the legal minimum, the legal work week is 45 hours after which overtime pay is provided, medical care is provided to all and everyone participates in a retirement program. We could drastically reduce these costs, but I want the best people to work on Corky’s products. My mandate in the Dominican is simple, a Corky coat, swimsuit or dress should be a work of art and nothing less is acceptable.

Yesterday morning I challenged my plant manager in a heated meeting as to why a five minute inspection was added to every coat coming off the production line, something we could never afford to do in the USA. In the apparel business, even in the Dominican Republic, a savings of five minutes in a garment production cycle is huge; it’s equal to $3.00 at retail (in an American factory it would be $9.00 at retail.) On the flight here I made a firm decision to countermand his action. In the end the inspection stayed because he reminded me of my mandate, “a Corky coat should be a work of art.” For an increase of three dollars at retail, every seam inside and outside of the jacket is inspected, every embellishment and button placement is measured to spec, the fabric is checked for the smallest defects, thread colors are checked and finally the coat is put on a hanger and it must pass a very subjective test of being ascetically pleasing. Senor Solano, thank you for standing your ground.

Mill to Produce Fabric for the Domestic Market?

The Fashion Incubator wrote an interesting post today titled, The Impending Crisis. Three issues were explored 1) the state of the economy 2) the rate of exchange and 3) the price of energy and how this has affected the apparel industry based on comments from Birnbaum's Newsletter.

Just last week I wrote a post, 5 Tips to Export: America is On Sale, where I explored the effects of the rate of exchange and the price of energy on American designers and manufacturers. I concluded that a 90% increase in transportation costs were more than offset by a 40% dollar depreciation which set an unprecedented state for small manufacturers to export American designs.

Kathleen Fasanella, goes on to ask the question, "I wonder if the [production] losses in Mexico and Caribbean Basin represent opportunities to those [small manufacturers] who want to outsource but not far afield?" The answer is yes! The American apparel infrastructure has crumbled and there is just no way to bring it back. However, the apparel infrastructure and labor rates in the Caribbean Basin and Central America are competitive given that inflation in China is running at 15% annually, a trip to Central America from New York is only a four hour flight and door to door delivery of a container is one week.

Then Kathleen hit a grand slam with this comment, "Assuming I had the interest and the capital (including intellectual capital), I'd open a mill to produce fabric for the domestic market." Although it might have been written as a joke it would have a significant amount of merit if you said, "I'd open a mill in the Caribbean Basin or Central America to produce fabric for the US domestic market."

With ratification of DR-CAFTA, a free trade agreement was established between the Dominican Republic, Central America and the United States. However, to take full advantage of the duty free provisions for imported apparel, the cloth needs to be made in one of the member countries. Imagine the demand for any mill that could eliminate a 20% tariff on products entering the US. Well, if quality knit and woven mills, and dye and print shops set up in the Dominican Republic or Central America the small manufacturer would be close to cost parity with China or Sri Lanka.

I have pitched this idea to the President of all my domestic fabric suppliers. Not one has bit. I hope one sees the light and begins the painful but rewarding process of setting up shop offshore, but very close to home. Yes at first the orders would be small, but then the lost volume accounts would be sucked right back from Asia and we would once again have a vibrant local apparel industry.