Making Our Clients Wealthier is Our Job

By Joseph Greco

In their book, The Firm of the Future, Dunn and Baker remind us that “A business does not exist to be efficient; rather it exists to create wealth for its customer. Your firm’s ability to create wealth outside of itself ultimately depends on your capability to create, disseminate, innovate and leverage intellectual capital.”

The authors detail three types of intellectual capital:

Since our efforts -- in working with uniform and career apparel customers -- have the most impact in “increasing their wealth” via the third category, I will focus on ways “Social Capital” can be advantageously leveraged.

We see that developing collaboration among your vendors and clients --what many have termed “strategic partnerships” -- can successfully leverage Social Capital. This may seem to be counter-intuitive, based on what we were taught in school years ago and how business operated in previous centuries. Although the partnership approaches now taught in most business schools have evolved, the thinking in the apparel business has still been, in many cases, to keep information secret for fear of losing competitive advantages to vendors and customers. The old-line thinking included “You would pay more or charge less than you could and money would be left on the table.” But, without collaboration today, our industry could well be “left on the table” to places like China.

With our business, we have taken a broader perspective and asked how the wealth of our customer can be increased using Western Hemisphere resources and information sharing. We have learned first hand that benefits to our customers include:

In dealing with our clients, we focus on goals and activities that will add value according to their priorities. I suggest that you frequently ask your customers what is important to them. The answers may surprise you and enable you to focus efforts in more effective and profitable pursuits. This approach has helped us to deal better with our customers, meet and even exceed their objectives, and grow our company in directions that provide the service and product our customers want. My advice is do not assume that you know what’s required as you may expend efforts and investments making improvements that do not add value.

We have found that the industry components do exist today to pursue this cooperative strategy. And where they may not exist, we have found it possible to create the relationships that foster this strategy. Fabric mills and trim vendors have become more responsive and supportive to enable just-in-time delivery. Vendors’ distribution centers have been established closer to our manufacturing facilities in Latin America and the Caribbean. Sewing factories are more efficient and well equipped.

Dr. David Birnbaum, in his current “Strategic Sourcing Report” explains that customers source in China, not because it’s the cheapest but because the buyers can “one stop shop.” Birnbaum defines the Asian Model as: “You pay money, we do everything else.” The shorthand for this concept is that the customer wants to offer only a “spec and a check.” The competencies for product development, material sourcing and manufacturing are left to the vendors. The Asian concept of the garment business is to “Let the customer keep the label and the retail, we just want to be the supplier wherever and forever.” The traditional American model of “Give us the lowest FOB, we do not care about anything else,” has been changing recently to “Where is your fast turn and your quick response? We came here for speed to market.”

We find in dealing with and supporting our clients that there are three important factors that produce success:

Client communication and information. Which products are expected and when?

Collaboration of the entire supply chain including: fiber, yarn, fabric, trim, cut and sew and transportation logistics. “Just-in-time” manufacturing needs to be transformed into “Just-as-needed” delivery to the customer.

Source close to home. With production of fabric and manufacturing of garments in this hemisphere we can take advantage of proximity to the market. For example, Greco Apparel’s production facilities in the Dominican Republic (DR) are turning fabric into finished product in less time than it takes to transport garments from Hong Kong to California! Customers rapidly replenish the styles, colors and sizes they need when they need them.

These are some of the keys to increase your customer’s wealth as well as grow your business. At Greco Apparel, we target to stock shelves with the right SKU’s at the right time. We have an advantage in servicing the uniform business over the retail business but that also creates added responsibilities – which we readily assume. Fortunately, the fabrics used have been fairly consistent over time. This enables mills and trim suppliers – especially the ones we use -- to position raw material readily accessible to manufacturing facilities.

Our customers have catalogs and warehouses, but not their own manufacturing or product development. We help to serve those needs. Since no one knows with 100% certainty what uniform and career apparel customers will order next week, an older but costlier strategy was to maintain a huge inventory in order to fill orders completely and quickly. But this approach does nothing to reduce costs and preserve capital. The answer is to produce exactly what’s needed and quickly.

The responsibility we have in uniforms is to outfit our customer’s personnel on a timely basis. In the retail world, a sale may be lost when a consumer cannot find the right product. In our world, if the uniform is not available for an employee our customer will be short-staffed and have reduced capability of delivering a service to their customer. This result is the opposite of creating wealth for our customers.

Dunn and Baker state: “Wealth does not exist in tangible resources but in ideas and their creative expression. Sam Walton’s strategy with Wal-Mart was that he substituted knowledge for inventory.” Let your vendors know which products to replenish quickly thus reducing costs throughout the supply chain. The savings can be passed on to customers, without reducing profits!

We are all aware that as of January 1, 2005, quotas for garments manufactured in China are scheduled to be eliminated. There exist some uncertainties such as the revaluation strongly expected for the Chinese Yuan, which economists claim is undervalued by as much as 40 percent. A parallel situation occurred recently in South Africa whereby the Rand increased in value and costs soared causing serious sourcing disruptions.

In the Dominican Republic, fortunately, the peso is tied to the US dollar, as the DR economy is very dependent on the US. The DR spends 70% of the export revenue received in purchasing products manufactured in the US. So currency exchange is favorable to the US buyer.

We are in a constantly evolving business climate with demands for lower costs and perfect service. Customers can increase their profits and service to retail by taking advantage of the capabilities of sophisticated suppliers in this hemisphere and by contributing to an open dialog of information to foster excellent performance… and wealth!.

Joseph Greco, president of Greco Apparel, has more than 30 years experience in the apparel business. He is currently completing his Masters of Science degree in Organizational Dynamics at the University of Pennsylvania.