January 31, 2012
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Most small manufacturers just assume that it’s far more cost-efficient to produce their goods overseas, typically in Asia. But rising labor costs in countries like China are contributing to shrinking cost advantages for many companies, says a report released by The Boston Consulting Group. “A surprising amount of work that rushed to China over the past decade could soon start to come back—and the economic impact could be significant,” BCG senior partner Harold L. Sirkin said in the report. “We’re on record predicting a U.S. manufacturing renaissance starting by around 2015.” Among companies returning to the U.S. already are Ford, Chesapeake Bay Candle, All-Clad Metalcrafters and NCR, said the report. Add to that list School House, a small Durham, N.C.-based company that makes fashion forward college clothing for women.
CEO Rachel Weeks, 27, started School House while she was still a student at Duke University and studying the role of women in the global garment workforce. She landed a Fulbright Grant to go to Sri Lanka, where she researched the apparel industry and also started developing the School House brand. “I saw a lot of potential to ramp up the fashion element,” she says, “but I also wanted a social mission.”
A big order from Duke in 2009 allowed her to nail down a partnership with a factory in Sri Lanka—and a commitment that its female workforce would be paid a livable wage. “We tripled the wages in the factory,” she notes. More college bookstores began ordering her clothing, such as school-branded T-shirts and yoga pants that actually fit women properly, and the company grew aggressively.
An angel investment last year allowed her to hire industry veteran Susan Williams, who has 25 year of experience in the apparel industry at companies such as Levi Strauss, Jockey and The Gap. As COO, Williams was alarmed at the increasing number of orders that were shipped late from Sri Lanka. “Having $300,000 in deferred revenue can put you out of business,” says Weeks. “I wasn’t getting answers from 10,000 miles away, so we went over there.” As it turned out, the factory had taken on more volume work and School House was getting pushed to the back of the line. The discovery, says Weeks, was “very painful,” given the effort she had put into improving wages at the factory.
Weeks and Wilson did a cost analysis, which included $6,000 a month for five Sri Lankan employees who were in charge of quality control for the School House brand. “We weighed our options and the U.S. kept coming up,” says Weeks. “I knew about our state’s rich history in apparel and textile manufacturing, but it’s not really on my generation’s radar. But Susan is of the generation that sent manufacturing overseas. We put our heads together and said, ‘this is financially possible.’”
In May of last year, School House made the move back to the U.S. and now sources all fabric domestically and works with three factories in North Carolina, one in Georgia and one in Los Angeles. “Our sweater partner is five minutes from our offices in Durham,” says Weeks. “We have increased speed to market and we were able to move completely out of holding any inventory.” The company, which now has 100 colleges and universities as customers, posted revenues of $790,000 in 2011 and Weeks anticipates $1.8 million in 2012. She’s also hoping to raise $1.2 million in venture capital this year to scale the business.
“I could not have anticipated this in a million years, but we’ve started hearing from customers that they’re with us because of our social mission, which has evolved into Made in America,” says Weeks. “People are so excited about buying domestic.”
Photo credit: Courtesy company
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MSNBC Your Business 3 months ago
MSNBC's YOUR BUSINESS reported last month on Rachel Week's search for a US based factory...watch her in her own words here...brought to you by AMERICAN EXPRESS OPEN:http://www.openforum.com/videos/american-business-finding-a-factory