At Allen-Edmonds Shoe Corp., a Port Washington, Wisc.-based men’s footwear manufacturer, a focus on customers has engendered what some might consider to be an unconventional strategy. In an industry in which high-volume, low-cost, offshore manufacturing has all but wiped out domestic North American production—more than 98 percent of all shoes sold in the United States are now made abroad—Allen-Edmonds is bucking the trend.
Mark Birmingham, chief operating officer, says the company has so far opted to keep manufacturing at home, at factories in Port Washington, Milwaukee and Lewiston, Maine. The company plays at the high end of the market—its men’s dress shoes are priced typically at $200 to $400 or more at retail—and high quality is paramount. Birmingham says the decision to keep production here came after careful analysis of the company’s business model and the expectations of its well-heeled customer base.
Among other things, the firm concluded that sourcing shoes in a low-cost labor country such as China would reduce costs, but would also require an expensive doubling of finished goods inventory to cover the six to eight week lead times required to receive production orders. The long boat ride from China would also play havoc with Allen-Edmonds’ ability to quickly respond to changing market needs and customer requirements. Offshore production “completely changes your business model,” Birmingham says.
As part of its stay-at-home strategy, Allen-Edmonds recently spent more than $1.5 million to convert its main plant in Port Washington from a fixed assembly line to a cellular production system based on lean manufacturing principles. The result, says Birmingham, was a 20 percent to 30 percent boost in productivity, while damage rates have dropped by about 3 percent.
Despite these improvements, however, Birmingham concedes that if cost alone were the issue, the company could still do better by moving production to China. The privately held company—which has sales approaching $100 million—pays its 300 U.S. factory workers an average $15 per hour before benefits, says Birmingham. That compares to published estimates of 64 cents per hour, including benefits, in China. By moving production offshore, “I can virtually guarantee you that we could at least double, if not triple, our profitability,” Birmingham declares.
But such a move, he believes, would be short-sighted. “We’re focused on preserving the Allen-Edmonds brand for the long term,” he explains. And while the company has experimented in the past with limited quantities of offshore production, management is so far not convinced that an offshore contractor could produce the high quality levels that Allen-Edwards’ customers demand.
Keeping production in the United States is no doubt not the best strategy for all domestic manufacturers, Birmingham concedes. “Every company needs to analyze its situation and make the decision that’s right for it,” he advises. Neither does he rule out an offshore move for Allen-Edmonds sometime in the future. But for now, he says, the company’s market share, sales and profitability are all on the rise. “We’re doing a lot of the right things,” Birmingham concludes. “And until the market tells us that we need to start aggressively going down a different path, we’ll stay the course with what we’re doing.”
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