Trying to make due
North Carolina has lost more than a third of its manufacturing jobs since the end of 1999, and the exodus accelerated last year when the state shed about 6% of its factory jobs through November. The apparel industry has been hit particularly hard. Since the end of the ’90s, employment has dropped 68% to 15,000. Many apparel makers have gone out of business. One that has thrived is VF Corp. Between 1998, when it moved its headquarters to Greensboro from Pennsylvania, and 2007, it increased annual net sales 30% to $7.1 billion. Mackey McDonald stepped down a year ago as CEO but remained chairman until retiring in August.
BNC: Aside from technology and foreign competition, what caused the loss of factory jobs?
McDonald: There has been a redefinition of manufacturing. For much of VF’s history, it was very dependent on its manufacturing expertise to drive success and add value. As the world has gotten smaller and competition more global, the entire supply chain has become much more important. So it’s critical for a company to understand consumers and have the capability to supply the right product at the right place at the right time.
Haven’t successful companies always done that?
Yes, but they have done a lot of it through their ability to manufacture core products in bulk. In this global marketplace, it’s much more challenging to compete on commodities.
Consumers can choose products that are manufactured anywhere in the world. The ability to create value these days comes from being able to differentiate your products. People are only willing to pay more if the product has unique qualities. We compete a lot more on consumer knowledge — and the ability to translate that into a complex and differentiated product offering — than we do on just the manufacturing capabilities.
VF succeeded partly through offshoring.
Yes, it was important to have some of the core products manufactured in locations where they can be cost-competitive. But it created more highly skilled jobs here in the U.S. to manage this operation.
Would those jobs have been generated anyway? You still need people to manage the company.
But because we were able to supply products that were competitive around the globe — 150 countries — we were selling a much higher quantity of products. We were able to acquire a lot of brands that addressed different consumer segments. We were able to create a lot of jobs that would not have been created here were we dependent on a much smaller capability that was much less competitive in global markets.
Is there value in preserving our manufacturing base, if only for national defense?
It’s very important to have a manufacturing base. But it’s equally important to have a company’s brain center, which collects data about consumers and manages a supply chain that may cover the globe.
What manufacturing sectors will thrive in North Carolina?
Traditional industries in North Carolina — apparel, textiles and furniture — are going through challenges. They’re changing and could transform themselves into companies that will have some of the same opportunities that VF has created. Pharmaceuticals, health care, logistics, transportation and biosciences are growing in North Carolina as well. Those are knowledge-based industries that can also benefit from what I’m talking about.
How do you ensure free trade is also fair?
We need to have markets open to us. There can’t be unusual tariffs, taxes or other things that restrict our ability to sell our products in other markets. Currency valuations have to be handled in a fair and equitable manner. Employees around the world need to be treated fairly. We have a policy of inspecting all the manufacturing facilities that we’re involved in and making sure that they’re the right kind of facilities for our employees.
Which countries will get the most Tar Heel jobs?
Much of the action has been in China and India, but wages are going up in those countries, so you’re seeing more diversification of sourcing. There’s not one hot area, so it’s important, from VF’s standpoint, not to be concentrated in a few areas around the world but to have a flexible supply chain that operates in many different areas, so that if a product can be made more effectively in one area we have the capability to do that.
When will manufacturing in North Carolina start to recover?
I don’t have a feel for that. We need to focus on creating jobs here — whether they’re involved in actually manufacturing the product or whether they’re involved in product development, the financial side, systems or managing the supply chain.