Monday, February 18, 2013
American Apparel-keeping it in America
When walking down Walnut Street this past weekend I passed American Apparel and remembered that a friend’s group had used this company as their own supply chain topic. This led me to research the company and learn exactly what it was that my friend’s group had focused on. After some research I learned that American Apparel executes vertical integration and has integrated distribution, retail, and manufacturing. This business model decreases the use of off-shore labor and sub-contractors and relies on repeatable and efficient store item-level inventory. It was also interested to learn that almost every step of the company’s processes are completed in downtown LA including garment design. Their employees serve as their clothing models and take the photographs that are used in advertisements and American Apparel owns all of their own retail stores, rather than franchising. Through these examples it is clear to see that American Apparel is focused on keeping their processes in-house, all the way from production to advertising.
To speak more specifically to American Apparel’s supply chain, this company wanted to streamline their supply chain, and therefore purchased several local facilities for their dyeing and finishing. They also do not rely on outsourcing and are focused on having more flexibility and faster turnaround times. Their website reveals that my keeping distribution operations within a few miles the company saves money, time and unnecessary fuel usage while helping the LA community. It also highlights that by not subcontracting like most other fashion retailers they help ward off poor labor conditions and supply chain redundancies. Other ways to save money include switching to an RDIF based system to track inventory which helped decrease cost and replenishment issues for their in-store inventory. With this new system in place, it is estimated that each store saved approximately 188 man hours per month and over $27,000 per month.
What is American Apparel’s next step in improving their supply chain processes? While it may be cheaper to outsource some components of the supply chain, why are more companies not following American Apparel’s lead and building a business that is concentrated mostly in one city?