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Shoe Company Practices Insourcing For The Sole
Originally published on Wed January 25, 2012 3:01 pm
The American economy lost more than 5,000 jobs to offshore outsourcing in 2010, and in Tuesday's State of the Union address President Obama made it clear that he wants them back.
"We can't bring every job back that's left our shores," he said. "But right now, it's getting more expensive to do business in places like China. Meanwhile, America is more productive."
James Curleigh, CEO of the Portland, Ore.-based footwear company Keen, knows exactly what Obama is talking about. In 2010, Curleigh opened a workboot factory in Portland; today it employs 30 people. Keen still produces most of its shoes in Asia, but Curleigh says starting to manufacture in the U.S. was a big step.
Curleigh tells NPR's Robert Siegel that duty rates, transportation costs, intellectual property and development costs all played a role in deciding to open a plant in the U.S. rather than using a plant in China. He says that if you look at just the money, the move makes sense. But there were also other factors to consider.
"The broader picture is looking at the dynamics of what's happening over in Asia and other parts of the world where we see labor rates increasing at a significant rate," Curleigh says. "We also see vertical integration of our factories being closer-linked to commodities and materials."
But vertical integration overseas wasn't always in Keen's best interest. So Keen used the launch of a new utility steel-toed-boot line to start bringing jobs home.
"When you think about a category of steel-toe, you think about built in America, you think about Americans building things," he says. "By building a factory here in Portland, Ore., we were able to say we completely understand labor dynamics, overhead dynamics, the shift from manual to automation. And as a result ... when we speak to our other sourcing partners, we're much more educated to be able to make better decisions in the interest of cost reduction and quality improvement."
It's a change Curleigh believes Keen fans will appreciate. Part of the company's ethos is, after all, to care for the world around it.
"Just the fact that we have an effort ... that creates product in America I think is important," Curleigh says. "It's the classic 'One small step for insourcing in America and one giant leap for Keen.' "
MELISSA BLOCK, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
ROBERT SIEGEL, HOST:
And I'm Robert Siegel.
President Obama wants to bring manufacturing jobs back to the U.S. Insourcing was a theme of his State of the Union message. And we're going to hear now from a CEO who opened a plant in this country recently.
James Curleigh runs Keen, K-E-E-N, the Portland, Oregon company that makes footwear, bags and socks.
Welcome to the program.
JAMES CURLEIGH: Hi, nice to talk to you.
SIEGEL: And in 2010, you opened a plant in Portland to make work boots. I read that it employs 30 people. I want you to run us through a bit of the calculus that made you decide to open domestically, rather than, say, in China.
CURLEIGH: Sure. I mean we're an eight-year-old company, born this century. So, we looked at all the technical dimensions that we deal with, and that can be areas like duty rates. It can be transportation costs. It can be intellectual property. It can be development costs. And when you put it all together and you look at it in the context of what we need for our business and our brand and our products, from a costing perspective, it starts to make sense.
But the broader picture is looking at the dynamics, what's happening over in Asia and other parts of the world, where we see labor rates increasing at a significant rate. We also see vertical integration of our factories being closer linked to commodities and materials that basically tie us into some deals that might not be in the best interest of our product build, or our product business.
SIEGEL: But you still make most of your footwear in Asia. Does this logic change that? Or should we expect to see some of that production and some of those jobs coming back to the U.S.?
CURLEIGH: Yeah, I mean we've already started. And I think it's a classic, you know, one small step for insourcing and America and one giant leap for Keen, where we decided to embark on a new category that we call Utility, which is our steel-toed shoe. So when you think of about a category of steel-toe, you think about built in America, you think about Americans building things. But also, what we recognize was when it comes to intellectual property and innovation, beyond the technical cost of the product, the cost of protecting your brand and some of your innovation is becoming increasingly more important. So...
SIEGEL: I'm surprised that you attach that much importance to intellectual property. I remember asking the manager of an American shoe plant about 25 years ago, how long does it take you from the time you steal the design in Paris, to the time that that ladies' shoe is in shoe stores? And the answer wasn't very huffy, it was a month to six weeks.
I thought the shoe business is all about taking other people's designs.
CURLEIGH: Yeah. Well, I think when it comes to new categories and trying to, you know, say to our fans that we're going to bring you breakthrough innovation, we have to make sure we can control that innovation. And also, I think there's the balance point of innovation and quality control. So, by building a factory here in Portland, Oregon, we're able to say we completely understand labor dynamics, overhead dynamics, the shift from manual to automation.
And as a result, not only for our own factory but when we speak with our other sourcing partners, we're much more educated to be able to make better decisions in the interest of, you know, cost reduction and quality improvement.
SIEGEL: Are we reaching a point where automation and computerization of production has reduced factory workforces by so much that wage differentials just don't matter that much anymore? If it's only 30 people, what's the big deal?
CURLEIGH: Yeah, I think we're getting there. And this always sounds a little controversial but one of the challenges that I think we see on a, you know, global economic level is that sometimes when labor is too cheap, there is no incentive to automate to improve productivity. So the kind of vision we had was can we improve the quality of the job, the quality of the labor, and actually introduce some automation to improve productivity.
And what we're finding is that we're starting to see that balance point already at our factory in Portland.
SIEGEL: You speak of the fan-base. I went to the Keen website and there's an ethos to your company, talking about hybrid lifestyle. And this has to do with work and recreation and integrating our lives.
Do you think that that means that actually for people who buy Keen shoes or boots, the fact that it's made in America, you think, will actually be a plus, it's a marketing advantage to you?
CURLEIGH: I think to a certain fan they actually do connect with the fact that we're a young company and we're trying things. And just the fact that we have an effort and a very real business and brand effort that creates product in America, I think is important.
SIEGEL: Well, Mr. Curleigh, thanks a lot for talking with us.
CURLEIGH: I appreciate it.
SIEGEL: That's James Curleigh, speaking to us from Portland, Oregon, where he is the CEO of Keen, which opened a factory in 2010 in Portland. Transcript provided by NPR, Copyright National Public Radio.