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“This isn’t really up your alley. . . .” Thus did my editor—knowing my
penchant for the newbie, my desire for the “little guy” to get a fair
shake despite being little—approach me about writing on production
embroidery in the high-volume houses that boast many heads and stitch
‘round the clock.
I know some folks thrive on the idea of banks of machines, legions of
employees, multiple shifts, non-stop problemsolving and work, work,
work. There are also those who think the bottom line is all that
matters. They might not be interested in what they do, just that they
do it profitably.
“This isn’t really up your alley. . . .” Thus did my editor—knowing my penchant for the newbie, my desire for the “little guy” to get a fair shake despite being little—approach me about writing on production embroidery in the high-volume houses that boast many heads and stitch ‘round the clock.
I know some folks thrive on the idea of banks of machines, legions of employees, multiple shifts, non-stop problem solving and work, work, work. There are also those who think the bottom line is all that matters. They might not be interested in what they do, just that they do it profitably.
So, naturally, I was intrigued. Contract embroidery production isn’t my dream, but it is part of the landscape of our industry and, in researching this article, I learned that it is also becoming part of our history. There was a time when low cost contract houses dotted the face of this nation. But when I went looking for production embroiderers I felt like I was stalking the dinosaur: lumbering and loud, once king of the earth, now gone with the ages.
Where have they gone, and why? Who still pursues this particular dream, and why?
More to the point, given my assignment: How?
One-hundred-three, and holding
“It isn’t brain surgery, it’s decorating shirts,” is how Anna Johnson of Super Embroidery (Phoenix, Ariz.), describes her business. She has grown carefully and creatively, and there’s an aura about her that reflects a caring spirit rare in the world of big business. She’s never too busy to help other embroiderers, whether advising them on email forums, helping them fill their bigger orders, or mentoring them as they grow.
Johnson is a perfect melding of the personal, quiet embroidery world and the large, busy factory of stitching machines. She cares for profit and people with the same passion for both, and makes it work. She cares about her customers—most of whom are smaller embroiderers in need of her larger capacity— as evidenced by a strict policy of never going past them to their customers. And, even after 20 years in business, she still runs a sample before stitching any order, even on reorders.
With 43 employees, Johnson has her hands full: “I schedule ten-hour days four days a week. It increases production and slows down absenteeism, and it gives employees an extra day during the week for personal pursuits. This also means they lose more hours if they call in sick.”
Her machines—all 103 heads of production capacity—are also the beneficiaries of her thoughtful approach: “Preventive maintenance is important. We train the employees to report problems. If you turn off a head on a twelve-head machine you lose eight percent of your production and most of your profits. Employees don’t understand this unless you explain how it affects their wages.”
Here are a few of Johnson’s rules:
Any missteps to report? “If I had it to do over,” Johnson says, “I wouldn’t offer Christmas bonuses. I once offered a week’s pay, but some called in sick during our busiest times. Now only employees of over six years get it. I learned that if you offer and try to take it away later, it is very hard.” Job staging is where Johnson really shines. “There are so many ways to save time, starting with run larger orders on machines with more heads. Sounds simple, but employees will not think of it and will run a twenty-four-piece order on a fifteen-head and a two-thousand-piece order on a six-head.”
She considers employee knowledge when she assigns stitching orders—long runs of simple logos for newer workers and more complicated designs with many thread and color changes for seasoned hands. She also teaches her staff to group orders of like colors for less threading.
Johnson’s recipe for growth has been dynamic and successful. “Take your monthly payment and supply costs, add insurance if needed. Then divide that by the days you’ll be running the machines; for most that would be twenty days a month. Now you have your costs per day that you need to make before your labor. You can also do it adding in your labor which is what I always do.”
When Johnson was actively growing her embroidery business, she would often get behind. “I subcontracted orders to another company until I was sure the added business was permanent. If I still had it three months later I bought the machine knowing I could cover the base costs.”
Johnson runs two shifts to make sure she has enough work to cover one shift before purchasing equipment. Then she works on growing into her second shift. “Second shifts are great! The only added costs for a second shift are thread, backing and labor. The first shift already covers all the payments and overhead.”
Some years ago, she made the decision to move away from strict contract work and into a wholesale environment. She has stopped adding equipment and, instead, is replacing with newer equipment as needed.
“I now go after work directly if none of my customers has pursued it. The newly opening casinos were the answer. You have to be licensed to do business with them, prove you have no illegal ties. I could court that business as none of my ‘contract’ customers had made the effort to be approved. Only problem was, I had to be my own salesman, and that took time I needed to spend on running my business.”
Johnson watches the world of apparel decorating and sees constant change. “We have to change with it. All the bigger contracts are going overseas. I watched my orders getting smaller. I was doing ten times as much work but my profit margin was less. Some of the Mexican work came back to the U.S. because of poor quality, but the writing was on the wall. I never had salesmen because I couldn’t risk them going to my customers’ customers. My whole life is my reputation. Now it seems that the [ad-specialty] people are my sales force. Production embroidery is a big part of their market. But [ad specialties are] often relying on overseas stitching. It is hard to rely on others for growth.”
Johnson also found that garment buying became an issue. “Garment manufacturing started being jobbed overseas and the cost of the shirts was going down. That’s great for the end user, but it means the embroiderer makes less per garment and, even with the decorating, isn’t making as much per shirt. Many of the shirt companies also started offering embroidery themselves. Some offer it for one dollar if they sell you shirts. That saves the customer money and time—one-stop shopping. And overseas shirts mean those companies have now become the distributors, not the manufacturers.”
She has an uncanny sense about her numbers. “People think we make so much money on embroidery. But if you don’t supply the garments, and make three dollars per shirt, by the time you pay the labor, machine payment and overhead, only five to ten percent of that filters into your bottom line.
“If you do supply the shirt with a fifty percent mark-up (no overhead, just some phone calls) and the embroidery, those shirts can bring you a thousand dollars plus the embroidery, another six hundred. If all this is done on the second shift, with the first shift paying the costs of doing business, you can make money. That second shift—and adding screen printing—made my bottom line much happier.”
Johnson says that, when she added screen printing, she instantly became a onestop shop for her ad-specialty sales force. “When I stitch two-hundred shirts in ten hours with two employees on the job, I net six-hundred dollars before expenses. When I screen print, I need one and one-half employees— same, overhead, same machine payment—and can produce two-hundred to four-hundred shirts per hour. Even at a dollar a shirt, that’s three-thousand for the same ten-hour shift. Make that a second shift and the profit is greater.”
She confesses that, while she loves embroidery, screen printing makes her business more profitable, actually subsidizing the embroidery: “We have put our focus back into smaller contract orders and screen printing.”
Ten years ago, with 86 heads, Johnson was busy 20 hours a day. And if a machine broke down it was the end of the world. Four to six-week turnaround time was normal. “In today’s world that translates to forever,” she says. “Now it has to be one or two weeks or less. People won’t wait. You have to bring in the customer with timing. Quality and speed: You need them both now. You have to be willing to change to stay ahead of the game.”
Johnson has changed. She relies on screen printing to allow her to help keep the embroidery side of her business alive, she contracts out most of her digitizing— often overseas—and she has added advertising specialties to her mix. Yet when she speaks of embroidery, her voice is somehow warmer, her excitement and passion more evident.
Forty-three, and loving it
“It’s been a tough transition,” is how Kathy Downs describes her growth since three years ago when she jumped from six heads to 43 and from three to nine employees. She offers benefits to what she calls “the best employees in the world”— six paid holidays, one week paid vacation after two years and two weeks after five. She also co-pays health insurance for those who want to participate.
Does she like driving her Sonoma, Calif.- based Fox Fabrique any better in the wider lane? “We didn’t have the same business problems when we were smaller. We tried to resist growing; turned down the offer to buy a friendly competitor three times be fore we took the plunge.” Would she do it again? “Probably—and that’s growth. A year ago I would have said no.”
That no would have been because the offer’s promised “blue sky” just wasn’t there. “I don’t think it was intentional, but stemmed from the fact that they had started to tell people they were selling or closing, and a lot of the customers had already gone elsewhere. We saved maybe twenty percent of the customers we expected. We had the overhead but not the sales. It made the first two years the toughest I’ve spent in business.
“But last January we turned a corner. Growth was up and it seems to be stable.”
What words of caution does Downs offer those looking to grow? “Try to figure out the worst that could happen, multiply it by two, then figure out how to solve it.” She doesn’t want to grow any more right now. Citing lack of space, she’s also leery of a second shift although, like Anna Johnson, she readily admits that a second shift is more profitable. “But my husband designs and builds race cars and we share space. Too much expensive equipment that would have to be secured discourages a second shift.”
About 40 percent of Downs’s business is direct sales from small corporations including a resort in Costa Rica, and the rest is from middle-men, many bringing orders from the wineries that abound in her location. She hasn’t noticed any offshore or NAFTA impact on her business, but admits she hasn’t been in the contract end all that long. She simply didn’t know what it was like before she arrived. “We do have a lot of people try to cut our price, saying they can go down the street for a lower one. I tell them to go ahead!”
Downs started in 1983 as a cut-and-sew operation, adding embroidery to her offerings when she became disenchanted with the quality-control habits of her contract embroiderer. She has also been offering printed apparel for the past 15 years. “We don’t do our own printing, but provide the designs and a screen printer sends them to us ready to apply.”
She admits the hardest part of her adjustment had to do with a lack of knowledge of pricing for contract work. “I was used to retail and this is very different. Anna Johnson helped me with the big-client/ big-volume concepts. And that’s one thing I would have done differently: I would have talked to her a lot sooner.
Downs says that when she provides the garments she makes more money: a profit on the shirt and also a charge for the embroidery. “But when our contract customers provide the garments—and eighty percent of them do—we charge the same price for the embroidery but require they accept a three percent loss ratio if there is any damage to their goods.”
Equipment maintenance is easy for this embroiderer. Her acquired business came with an outstanding embroidery man, good with machines, along with her husband who can fix just about anything. Between them they have the machines covered. They start with a morning cleaning and set-up and keep a troubleshooting log which includes the what, when, why and how of any difficulties. “You need to plan maintenance, but also allow enough room in your job scheduling for unplanned maintenance.”
Downs says scheduling and managing goods are her biggest challenges at the moment. “Trying to get all the pieces— garments, logos, job specs, employees— all in the same place at the same time without bumping other jobs or running late and pushing the schedule back, that’s what challenges me. We’ve tried calendar systems, post-it notes and binders that can be moved between machines when job locations change. We are getting there, by trial and error.”
If planning to move into higher production volume, she advises, an embroiderer must plan for time to process the paperwork related to orders, plan space for storing goods when they come in, plan space for storing boxes, and space for storing completed goods before they ship. “In addition, you need to plan space for staging the work so it flows easily into embroidery and into trimming.”
Downs doesn’t rely on salespeople. She counts on her website, the Yellow Pages and word-of-mouth. “It is challenging to deal with the feast-or-famine part; seems to me that we’re either bulging with work, or thinking about sending people home.”
She does her own share of contracting work out. Her digitizing is done by an outside puncher and she has no plans to change that. She seems to have learned the fine art of delegating and is also enjoying being the one to whom others delegate. Her excitement is evident in her words and attitude and you get the feeling talking to her that things are going to be just fine.
“You need to have a good back-up system, for computer information certainly, but for your operating systems as well. If everything hinges on one person, you have a huge vulnerability. And you need to be able to handle lots of jobs simultaneously, and be flexible enough to change things as needed.”
Downs shares a respect for flexibility and openness with Johnson, realizing that her cut-and-sew and printing business add a needed robustness to her overall business. But she too has a passion in her voice for the stitching side of her operation: “Embroidery is a wonderful business. I love this job. Over twenty years I’ve loved it. I never loved any thing else longer than five!”
And at the end of the day she looks at what she’s done and is grateful: “I value my customers, I enjoy the refinements I’ve had to make to my scheduling, I love running the large jobs and I love my employees.”
One-fifteen, and holding on
Bill Coleman of LA-based Embroidery Masters does no direct selling. “Our merchandise ends up as promotional products as opposed to retail.” He also does little work for other embroiderers. “Most don’t know about us.”
But his business has changed dramatically since he began—in all, a compelling story.
“We started back in eighty-three with a thousand square feet and a twelve-head machine. Our best year was two-thousand when we had grown to thirty-five-thousand square feet and three-hundred-twenty heads. It was not uncommon to get orders for twenty-five to one-hundred-thousand shirts. Those were the glory days.”
Then came January, 2001. “It was like someone flipped a switch. The Silicone Valley closed, and we’d had an amazing amount of orders generating from the big money of the dot-com days. Then there was NAFTA. Then China opened up. We had a dramatic drop and ended up downsizing to nine-thousand square feet and one-hundred-fifteen heads, which is where we are now. Since two-thousand-one we’ve had to put money into the business to keep it going.”
Why does he do that instead of just closing and moving on? “The first three people I ever hired still work for me. They’ve been loyal and I have a sense of loyalty to them.”
Coleman has thirty employees and offers five paid days a year for holidays. They get one week paid vacation after one year, two weeks after five years. “We have a lot of good employees with good families. Downsizing was one way to keep them working and keep the company going. We didn’t fire anyone. We let attrition take its course and found, as we decreased, what level we needed for business.”
Coleman sees a real climate change in the industry. “Ten years ago it was time-consuming to send orders overseas, so service was a meaningful thing. Now, because of the advances in technology, orders can get to China as fast as they get to me. They can digitize and do a sew-out in the same amount of time. Their merchandise is in China and has to be shipped, so it would seem that would be an advantage for us, bit we’re paying eight-fifty to ten dollars an hour for labor, while they pay seventy-five cents to a dollar. The result is a cost so low they can fly the finished goods here in two days and still make money. Everything is instantaneous. The Internet, that’s what did it.”
Coleman’s new business strategy is to keep his customer base and look for new orders—ones that are smaller but consistent. “Orders of five-hundred to a thousand pieces are good these days. Since the year two-thousand, the largest order I’ve received was for forty-thousand pieces for the US Army which had to be done domestically. When we get an order for fortyeight pieces the production time may be shorter but the cost for processing the order is the same. The customer service is the same. Our turnaround had to move from three weeks to five working days.”
Minimums are now 36 pieces or 24 for polos. He courts the public on his website offering shirts and decorating, but 95 percent of his customers provide their own garments. “I think we’ve leveled out, though. Our cost of production this year was the best since two thousand.”
Coleman takes issue with customers who expect him to be loyal and yet will go somewhere else—even overseas—to get a better price. “But we always held our quality, never cut corners. Sometimes we would lose a job for a dime on a shirt, but in time they came back.”
What about the issue of the supplier selling to the end user, a thing more embroiderers are complaining about these days? “The [ad-specialty dealer] is going directly to the supplier, buying it already decorated. The suppliers, in turn are going directly to the end users. But the [ad-specialty dealers] started it to begin with. Now it’s all muddled. It’s all melting together.”
Coleman seeks diversity in customers rather than products or services. He tried some dye-sublimation, mostly on elastic waistbands and other novelty applications, but it didn’t seem to be enough. And he has no interest in adding screen printing. “The thought left my mind as quickly as it came in.”
But looking to the future, Coleman thinks things will be all right. Over the next year or two he plans to turn over more of the operation to a friend who has been with him from the beginning. “Hopefully, we won’t close. If we can stay in business, keep working and make a living, we’ll be better off; so will our employees. We owe them that. There aren’t too many people looking to buy an embroidery store.”
Coleman also takes the equipment manufacturing community to task: “How many machines are just worth nothing now? We invested in machines, then the prices got cut and the market was flooded, trying to sell an embroidery machine to everyone. When businesses failed, machines got dumped, going to the thirdworld countries where the embroidery is produced cheaper.”
So it’s a grim kind of advice Coleman offers those looking toward production embroidery. “Pick another medium,” he warns. “I don’t think things will ever be the way they used to be. China is growing. Vietnam is big in wearables. When garment manufacturing left the country, it was only a matter of time before the overseas markets would offer it all.”
What about folks already involved in the industry? “Embroiderers should be suppliers. They should function as supplier, distributor and decorator. Good embroiderers will stay in business if they are willing to put up with the changing world. The riches are not there any more, but a living? Maybe that.”
Coleman still says he loves embroidery, though. “Embroidery has always been optically pleasing. When someone sees both a printed and an embroidered shirt, their eyes are drawn to the embroidered one, they may touch the stitching. There is a connection made, a perceived richness and value. That doesn’t happen with printing. Subconsciously, people think more of the embroidered shirt and the person wearing it. It looks expensive.”
Coleman regrets the lack of control over what has happened in the industry. “We work to build then, en masse, another entity comes in and you lose. But you can’t blame anyone. We haven’t lost the loyalty we earned from our employees. We still have the core of customers that made the business. We have the gratification that people realize the value of what we do and, if the end result is happy people, how can you have regrets? We’re here to make whatever product a better product. That’s our goal. Most of the time it works. And knowing we have made people happier with our product. I would do it again.”
One-twenty, and booming
Bill Stockwell of Added Touch in Tempe, Arizona, and Denver is bullish on embroidery, says it’s a fabulous business. He started 15 years ago with four machines totaling 36 heads, and it’s been full speed ever since. He’s up to 50 employees, now, with 120 heads in two locations. He was attracted to the technology, coming out of a background with IBM and computer consulting, and strongly believes that technology is the key to this industry. “We implemented an automated system three years ago which helps prepare the jobs and give us insight into what’s in house. Our selfdeveloped computerized system supports storage of art and stitch files as well as the complete ordering system.”
His method for keeping operators on their toes is a little less techie. “We keep a nice flow going. We find that when our operators see a lot of work they produce more. So we keep two days worth of work in front of each machine. Our expectations for results keep the production high and the damages low.”
Stockwell runs two shifts and says he wants his employees to not only be skilled but to get involved. “Having quality embroiderers is a big part of the package. Our compensation is in the top twentyfive percent in this industry. We want our people to be involved and we compensate them well, including ten paid holidays and a week of paid vacation after one year.”
He has a motto that rolls off his tongue, in answer to any nay-sayer: “We just felt the need for a complete embroidery solution focused on high quality and customer service, to be a company that does what they say they are going to do.”
He admits that it’s a constant struggle not to go after direct sales, but has held steadfast. And, as he supplies very little in the way of garments, the lower cost of offshore wearables hasn’t affected his business. “No apparel is made in the USA any more,” he says, in a tone that’s all fact, no regret. “Ten years ago, seventy percent of the apparel was made here.” He also recognizes that more shirt suppliers are offering embroidery, but that doesn’t bother him either. Remember, he’s selling high quality and customer service.
Stockwell got involved in embroidery before the Asian situation developed, but combats its affects by continuing to assess customer service and broadening beyond apparel into advertising specialties and the golf/resort market. He sees the consolidation and disappearance of major contract houses as an opportunity, not a deterrent.
In the last 12 months he’s added screen printing in order to bring a broader set of services to his customers, and is now targeting the pre-print segment of the resort market. “There is a market in gifts. It is the same size as [ad-specialties] and the large suppliers have gone out of business. There’s a place for us there.”
He also has independent sales reps who offer a selection of 150 designs to the golf market, resorts and national parks. They sell pre-prints and foil embellishments and can name-drop the resort and state as well as customize the art. By adding pre-prints and screen printing Stockwell tries to sell a cross-representation to his customers, a little of everything.
If he has a problem with the industry, it’s not offshore competition; it is, in his words, the people who work out of their garages: “Is that offensive?” he asks. “They Reprinted from Printwear • January 2007 have a tendency to sell on price which drives down the market. People want to work with professionals and they are willing to spend more to do it. The smaller shops just don’t have the critical mass to serve the larger markets.
“I wish them well,” he hastens to add, “but I expect half of them will be gone in the next five years. It is difficult for them to provide the infrastructure and customer service needed to satisfy larger clients.”
When asked to offer some advice to neophytes, Stockwell encourages diversification. He encourages studying what differentiates a market strategy and warns never to lead on price, calling it dangerous: “The norm these days seems to be competing on price. That’s a going-out-of-business strategy. Fear of Asia is a going-out-of-business strategy.”
Stockwell believes that what the customer is looking for is a relationship. “Our hallmarks are customer service and quality. We’re selling thirty-dollar solutions. We supply the decorating and the packaging and that has an impact on our customers. A twenty-five-cent difference in decorating cost isn’t as important as impact.”
It’s been a difficult five years for many embroiderers. Asian competition, the recession, downsized corporate budgets that limit buying. But business, Stockwell reminds, goes in cycles. “I am optimistic. Earnings will get better and people will spend more.”
Stockwell, for all his energy, is another who is soft on embroidery. “I love embroidery,” he admits. “It is a fabulous means to customize and advertise. It is a classic way to decorate and it will be with us for many years to come. The next five years are going to be positive. We are going to be diligent with differentiation, and being a company that does what they say they are going to do.”
2007, and counting
What an amazing journey. Like a peek back to yesterday—and a glimpse into tomorrow. There’s no shortage of the American dream in this industry. Every one of our sources has a love for embroidery and each, in his or her own way, is trying enliven our endangered dinosaur: production embroidery.
They are willing it back to life, finding ways to combat the inevitable and save the core of their businesses—diversifying, downsizing, dreaming, accepting, fighting, being bullish. Coleman is right: we can’t go back, and nothing will ever be the same. Anna Johnson is also right: It’s about accepting change and being flexible enough to grow and make adjustments. Bill Stockwell is right: It’s about establishing relationships and refusing to give on price. And Kathy Downs is right: We can’t go for glad yet, but just maybe we’ll get there.
Reprinted from Printwear • January 2007 ©2007 National Business Media, Inc. All rights reserved
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