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Brick is Back

Execs Make The Case For Production Ownership

Long given up for dead as American retailers and suppliers stampeded over the waters in a rush for low-cost product, bricks and mortar are staging a comeback, and now may even be crucial to a textiles company's survival, say a number of textiles executives.

“You know, only 18 months ago, I, like everyone else, was saying you have to get out of bricks and mortar, you have to be unencumbered,” said Bob Gehm, president of Sheridan America and former president of sales at WestPoint Stevens. “But the truly remarkable thing is that things have changed so much, in so little time, that now you have to have bricks and mortar, whether it's here or whether it's there, or you just aren't in the game, you're dead in the water. It is almost unbelievable how fast the dynamic has changed.”

Clearly on the same wavelength and building its own bricks and mortar — in China — is Glenoit Universal, parent of Excell and Glenoit Consumer Products Division. “You have to control your own destiny; you can't leave it in the hands of others,” said Barry Leonard, CEO.

Ringing a variation on that theme, and possibly creating a new paradigm for the industry, is Revere Mills Inc., based in Des Plaines, Ill., which has formed a partnership with two of its long-standing suppliers — Regal Textile Industries and Eastern Textiles, both of Karachi, Pakistan. But in this case, the two offshore producers have bought into the U.S. company, in effect acquiring all its expertise in the American market. And reflecting its new identity, the company now calls itself Revere Mills International Group.

“It leverages our strengths here with their strengths there,” said John Vanden Berge, president. “They do the manufacturing, and we do the design, the product development, the sales, the marketing and handle the distribution. We do all the logistics, the supply chain. We have an understanding of our culture, our markets. And that cannot be underestimated. They will never completely understand our culture, in precisely the same way that we would not fully be able to understand theirs.”

Crucial to such a bricks-and-mortar partnership, Vanden Berge added, is confidence in the other party. “We have a relationship of long standing, based on experience, trust and respect. The trust factor is critical. That doesn't happen with middlemen, buyers and sellers. You need the legitimacy of dedicated manufacturing. You have to be a legitimate supplier, not just someone who buys someone's product and then sells it to someone else.”

Ditto Mark Grand, chief operating officer of PHI. “Agreed. I'm there. That's one of the reasons I joined this company — it has its own plants.” And in a current retail environment that puts constant downward pressure on prices, “there's no room for the middleman,” he adds.

“It's really important for two reasons,” Leonard emphasized. “It's extremely important to be able to control the production, at least on your core products. And secondly, it's a cost issue, it cuts out the middleman so you can give the best value to your customer.”

To that end, Glenoit already operates one plant in China, and will have another running by the end of the year. By that time, said Leonard, Glenoit will be producing shower curtains, liners, table linens, decorative pillow shells, window treatments and rugs in its own Chinese plants.

“Although we still source some goods, the key product in a category we make ourselves. For example, we'll make the shower curtains, but source some of the accessories. We're not going to get into the resin business, the molding business,” Leonard said.

And owning bricks and mortar is just as important to major mills as it is to smaller and mid-size companies, said Leonard. “If you're going to sell solid color sheets and towels, long term you're going to have to do your own manufacturing. You'll never be a low-cost producer as long as there's a middleman involved.”

It's also a matter of economics, according to Jeff Hollander, president and chief operating officer of Holland Home Fashions. Hollander now owns five plants in China in addition to eight in the United States and one in Canada.

Hollander said: “When you're not involved with bricks and mortar, you lose a real understanding of product development, you lose sight of the processes involved, the sense of what's possible, and the challenges involved. And you can't keep track of the pennies, and no matter what anybody says, this is a penny business. We will always be involved in bricks and mortar, and always be involved to some extent in the United States.”

What gives? What turned things around so quickly, so unexpectedly?

For one thing, said Gehm, the American market is just too big. And while there are a lot of offshore suppliers, most are far too small to adequately serve the demands and needs of America's giant retailers. “Let's face it, U.S. manufacturing will be here in some form, just as Mercedes is here, Toyota is here, and Sony makes TV sets here. The market is just too big not to have some domestic production.”

And the thing about offshore production, he said: “It may be cheap, but then you've got to get it here. You can be the most efficient plant in the world, but if you can't manage the supply chain efficiently, you're dead. The supply chain has to be as short as possible, because retailers are always changing their mind, and as fluid as possible, and as low cost as possible. You can't just be good at supply chain management, you have to be great.”

So where does that leave pure-play marketers? “It depends on the brand and on the value added,” Grand said. “If the brand can command a premium, then they'll survive. Otherwise, they're at risk.”

As retailers move more deeply into direct sourcing, owning production becomes even more critical, some executives said.

And, Gehm emphasized, “If you don't have it, they don't need you and they cut you out. And the sad reality is if you're just a marketing company sourcing abroad, the minute you walk out the door, your customer is walking in trying to cut a deal on his own. The big guys all have their own design, their own product development now. So if you don't have the manufacturing, the reality is they don't need you.”

Said Leonard, “There are some things you just have to control yourself. One is quality. Another is time to market, controlling the supply chain all the way from the fabric through the manufacturing to getting it to the customer.”

Hollander agreed. “You need to do bricks and mortar to control the process. And if you don't do both sides of it, including the manufacturing, then you lose sight of what this business is all about.”

He added: “It reminds you of who you are on a daily basis and keeps you aware and involved. And even where we do source, the knowledge we gain from our own bricks and mortar enables us to understand what's going on with the people who do make the goods for us. And that knowledge is vital. You absolutely have to have your own plants just to understand your own product, ensure your own quality, control all of your costs, and understand your place in the marketplace you serve.”

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