Regular readers know I have a fascination for American Apparel, and even their CEO Dov Charney. I was lucky enough to get a tour a few months back.
Brief background on why I like them so much: this is a $500 million
manufacturer of t-shirts, underwear, and the like. Typically low
margin products, the kind of thing that usually comes from Asian and
Central American sweatshops. Not American Apparel. This company makes
over 1 million articles of clothing, per week, from their one factory
in Los Angeles and they grew 40% this year. They pay their
5,000-person workforce significantly above minimum wage (average is
$12-$15 per hour), give them full subsidized benefits (such as high
quality health care insurance for $8 per week), and they turn a profit.
I say each time, this should basically embarrass the heck out of any
company executive that thinks they have to outsource in order to find
cheap labor. Or at least call into question their fundamental
competence as a leader. If American Apparel can manufacture low margin
clothing efficiently enough at a U.S. factory (California no less) to
beat the sweatshops, then anyone should be able to. If they try hard
Most companies we read about are laying off, complaining about the economy and "unfair" trade barriers, dirty unions, incompetent management, high labor costs, regulations… you name it. Everything except recognizing the problems with the internals of their organizations, let alone doing something about it. And the executives are probably paying themselves bonuses to boot just for whining and moaning.
The economy is tough these days. The clothing business is typically very low margin. So how's American Apparel doing? Not too shabby.
has recently faced legal troubles, said Tuesday that its fourth-quarter
profit rose 30 percent as same-store sales increased amid new store
openings. American Apparel Inc. announced that for fiscal 2009, it expects net
sales in the range of $575-$600 million and income from operations
(EBIT) in the range of $55-$65 million.
And the prognosis is apparently good enough for Dov to invest a chunk 'o change himself.
Ok all you guys making high tech chips, helicopters… and dare I say cars? Here's a guy truly invested in his company, paying a decent wage making clothing in California of all places, and beating the socks off his competition. Does he do lean? No, he just does what works.
Here's my final and perhaps most important lesson: do what
works. It's that simple. Tools, even lean tools, are just tools.
Leadership requires people. At American Apparel there are no cheesy
signs with "Teamwork" and "Challenge" on them. There are no glitzy
glass lobbies. There is no sign of lean manufacturing in the
traditional sense, and they don't profess to be lean. No heavy lean
training of employees, no overwhelming visual controls besides the
metrics charts at the cells, no Shingo Prizes or Baldrige Awards.
there are bunch of people recognized and compensated for their
knowledge, creativity, ideas, and experience. A group of people that
realize that speed creates value, knowledge creates ideas, ideas create
profit. They figure out what works, then they do it exceptionally well.
Impressive, eh? If you agree with me, I want you to do something. I want you to click here to go to Time magazine's Time 100 Finalists, move the slider all the way to the right, and give Dov a nice high ranking. He may have his peculiarities, some of which those of us in the traditional business world may wish we could partake in without invoking the wrath of HR, but at least he knows how to really run a business.
Let's give our buddy Dov some love.