Fashion forward, other industries to follow
December 02, 2013

Nanette Lepore is a trendy designer who, according to an article in SaturdayaEUR(TM)s New York Times, is making more of her clothing lines in New York. True, itaEUR(TM)s more expensive to produce apparel in New York or in Los Angeles than, say, China or Vietnam. But itaEUR(TM)s also true that factories based in New York can pivot rapidly to supply the countryaEUR(TM)s department stores and boutiques with new designs.

Think of the fashion industry as a metaphor for AmericaaEUR(TM)s manufacturing renaissance. Today, consumers are fickle, and the competition to innovate is fierce. If a designer picks up on a hot trend before you do, it takes weeks at bestaEUR"months, more typicallyaEUR"to match that trend and stock stores with goods imported from Asia. But if you make your fashions in the United States, you can design, make, ship and meet a customeraEUR(TM)s needs in a matter of days. In many industries, speed is more important than cost.

As I point out in my forthcoming book, aEURoeUnleashing the Second American Century: Four Forces for Economic Dominance,aEUR? all industries are becoming like the fashion industry. Smartphones, tablet computers, appliances, cars, and many other types of goods change rapidly in small waysaEUR"colors, for exampleaEUR"and increasingly in big ways too, such as design and features. If you make products thousands of miles away, you risk missing the market. Foreign companies that formerly dominated segments of the American marketaEUR"Nokia, Sony, and many othersaEUR"lost their footholds not because their products were bad, but because their execution was too slow to catch consumer trends.

Though American wages are higher than Asian wages, American energy costs are lower, shipping costs are lower, time-to-market is quicker, and the productivity of American workers and factories is the highest in the world. For those reasons, though the U.S. and China are tied for the top manufacturing country title, with each producing about 20 percent of the worldaEUR(TM)s goods, AmericaaEUR(TM)s share is increasing while ChinaaEUR(TM)s appears to have plateaued. And, because U.S. companies produce another 10 to 15 percent of the worldaEUR(TM)s goods abroad, they can bring production back to the United States to supply the U.S. market, still the worldaEUR(TM)s largest.

The way the fashion industry operates today, changing its designs with the seasons, will be the way most businesses operate in the future. As product lifespans shorten, so must supply chains. Nanette Lepore made a wise decision to manufacture in New York. Increasingly, other industries will follow her lead.