We occasionally have the unfortunate duty to report on companies that have met their demise. Often they haven’t even tried lean and therefore are derided as simply being ignorant. Sometimes they have tried lean but have forgotten about the second pillar, respect for people, and therefore actually blame lean. Those guys are simply misguided. But this time we have a company that has implemented real lean… sort of.
The high Canadian dollar, plummeting sales in the U.S., and a tough retail environment for women’s clothing have left one of Canada’s best-known fashion designers on the brink of bankruptcy. "My company is in receivership," a clearly devastated Linda Lundstrom said in a telephone interview. It’s absolutely heartbreaking."
Why? Apparently not because of high high manufacturing costs.
It wasn’t the manufacturing that was the problem for her company," Lundstrom pointed out. "It wasn’t the labour costs that were the problem. Because of our lean manufacturing, we were very, very productive. But it’s the overhead — the administrative salaries, the rent, heat and lights, the taxes that we pay, the cost of selling, all the other things over and above sewing machines sewing the garments. There’s all these other things. And in this country they are high."
That then begs the question… how deep (or wide) was the lean transformation? Did it include office and administrative areas? Or perhaps there were some fundamental business management issues.
While she’s been on the brink of bankruptcy only once before, Lundstrom pointed out she’s experienced 34 years of cash flow crunches. "Because of the cyclical nature of the business, there are times when the cash is not flowing when it should, and other times when we’re flush," she explained.
The seasonality is understandable, since her most famous product is a designer parka. But this is where credit lines come in handy. But speaking of her most famous product…
Ironically, Lundstrom had decided several months ago to retire the Laparka, the design she is best known for, after this winter.
Hmmm… was that a wise move? Isn’t that sort of like Weinerschnitzel retiring the hot dog or Amazon deciding not to sell books? But I don’t claim to be a fashionista. Having spent some time with Tony Sapienza of Joseph Abboud, I know the apparel industry is an interesting animal. Too bad Linda couldn’t hang on this time.