Breaking the Rules at Liz Claiborne
Liz Claiborne, Inc. began with a 1975 lunch meeting between Art Ortenberg, who was Liz Claiborne’s husband, and Jerome Chazen, then a partner in a New Jersey clothing store. Fourteen years later it was the world’s largest apparel company. Here, Jerome Chazen describes how the company became an unintentional pioneer in offshore sourcing.
The four of us [Jerome Chazen, Liz Claiborne, Arthur Ortenberg, and Leonard Boxer, another partner] tried to have dinner almost every night to discuss business, as each of us was too busy during the day. At one of these dinners, Leonard shared with us his concern over finding additional contractors to handle our product. We could only go to union shops and, frankly, there weren’t enough of them capable of making merchandise at our quality level. We kicked a lot of ideas around, including trying to find nonunion shops that we could use. As the conversation moved on and I thought about my own background working with foreign suppliers, I suggested that we might want to try looking to Asian sources for help.
Liz’s reaction was swift and impassioned. “Never!” she exclaimed.
She went on, “We can’t even supervise the factories we’re using in New Jersey and Pennsylvania! How can we possibly control work that’s being done 10,000 miles away?”
I suppose I shouldn’t have been surprised. As the only one of the four of us with experience producing garments overseas, my comfort level with the idea was pretty high. I felt strongly that we could control the situation, and that we could get the quantity and the quality we wanted — at a significant savings over our current US production.
Testing the Waters
We identified a company in Taiwan that was making blouses for some European manufacturers and had a good reputation. Leonard suggested that we could do a test and evaluate the results. We put a small quantity of one blouse into a factory in Taiwan. It was a relatively difficult, complicated style. In fact, we had not been able to find a factory in the States that could sew this blouse properly. Some weeks later that first lot arrived by air in our offices, and Liz was blown away. It was nicer than anything we had done domestically, and it cost far less than what we had been paying.
Leonard found a factory in South Korea that was making men’s wool suits for an English retailer. He figured that if they could make quality men’s suits, they certainly could make ladies’ jackets, pants, and skirts. He was right. They did a beautiful job for us, and, encouraged by the results, he looked for and found other factories for our other types of merchandise. Leonard became a virtual commuter to Asia, flying to Hong Kong, South Korea, and Taiwan to find more factories that we could contract with.
The good news is that the factory owners were smart, entrepreneurial, and would go out of their way to make sure we were properly taken care of. The bad news is that despite everyone’s willingness, the complications for us were enormous.
We were still using domestic fabrics, so we had to send our fabrics overseas. We had to work with the factories to make sure that they did the job right with these fabrics we were sending them. And then of course we had to arrange to bring the finished goods back to the United States. There were all sorts of rules and regulations in customs that we had to learn about at the beginning. There were duties that had to be paid on the garments were brought into the Unites States. And in the early days we had to deal with quotas that the US government had set up to protect the domestic garment industry.
Because we were still in the Cold War and our country had a strained relationship with China, we could not manufacture anything there. In fact, we had to be very careful to make sure the merchandise we were ordering was not being made in China and then transferred to Hong Kong for finishing.
What Would Customers Think?
Meanwhile in New York, a lot of discussion was taking place about the possible effect that the foreign labels might have on the sale of our merchandise. US law mandated that the country of manufacture be prominently displayed on a label in the back center of the garment. We worried about whether our consumer would consider clothing made in Hong Kong or South Korea or Taiwan to be of lesser quality than what they were used to. I did as much testing as I could in the showroom, asking people what their feelings were about the label issue, and by and large they didn’t seem to care.
When the first of our Asian-manufactured merchandise got to the selling floor, we held our collective breath. But everything was fine — there was no problem at all. As a matter of fact the remarks we got back from consumers were complimentary because people were noticing how well made these garments were.
Little by little we took all of our production overseas. Soon it made sense for us to begin buying fabric overseas as well. It was much easier for the Asian factories to use goods made in Asia than to send the fabric over from the US. The textile industry in Asia and particularly in Japan had grown up while no one — in the United States at least — was looking. They were equipped with the most modern machinery, a dedicated workforce, and terrific processes for achieving a high level of quality in their work.
In retrospect, if I were asked to identify the one thing that was primarily responsible for the financial success of Liz Claiborne, I would say it was the movement of our production to Asia and the development of our overseas supplier structure.