Allen-Edmonds to open shop offshore
The Business Journal of Milwaukee - by Rich Kirchen
Allen-Edmonds Shoe Corp., which has staked its image on workmanship as one of the last remaining American shoemakers, will open a small shoe-stitching shop in the Dominican Republic.
The eight-to-10-employee unit in Santiago will represent Allen-Edmonds' first offshore operation. However, the company's management emphasized that it's not the first step toward shifting production from its plants in Port Washington and Maine.
The move to the Dominican Republic is necessitated by the lack of American employees who possess hand-sewing skills, said John Stollenwerk, Allen-Edmonds chairman and part of a management group that owns 10 percent of the stock. The Port Washington-based company now hand-sews shoe uppers in Lewiston, Maine, where the average age of those specialists is 67, said Stollenwerk.
He described the work as "tedious and very difficult" and said the company has been unable to recruit or train any younger employees for the task in the United States.
"This is not being done to take work from Port Washington and Maine overseas," Stollenwerk said in an interview this week. "We're very, very committed to both Port and Maine."
Stollenwerk sold the majority of the company for $123 million in July 2006 to Goldner Hawn Johnson & Morrison Inc., a Minneapolis private equity firm. At the time, executives with both Goldner Hawn and Allen-Edmonds said they would focus on growing the business rather than cutting costs to achieve the returns demanded by private equity investors.
He said the Santiago shop will open within the next three to four months and expanding it will depend upon "the availability of labor in Maine." He said the company will own the operation so it can maintain quality standards.
While Allen-Edmonds will save on labor costs in the Dominican Republic, it will face higher costs in both shipping raw materials to the Dominican Republic and then shipping the shoe uppers to Maine for final assembly, Stollenwerk said. As a result, he sees no overall cost savings in shifting the work offshore.
"We're trying to solidify some sources for component parts," said Mark Birmingham, the company's president and chief executive officer.
A spokeswoman for the company declined to disclose wages paid to employees in Port Washington and Maine. The company has about 800 employees, the vast majority in Port Washington.
Stollenwerk said Allen-Edmonds could machine-stitch its shoes in the United States, but wants to continue its policy of hand-stitching shoes. The company promotes certain lines, including penny loafers and tassel loafers that retail for $240, as hand-sewn. Allen-Edmonds is the pre-eminent American men's dress shoemaker and many of its dress models retail for $300 or more per pair.
Large industry
The Dominican Republic has the largest shoe-making industry outside of China, which manufactures at least 85 percent of the shoes sold in the United States. The island nation has lost market share to China and has ample available labor with expertise in hand-sewing, said Nate Herman, an economist with the American Apparel and Footwear Association, New York City.
Major American shoe manufacturers, including Timberland and Wolverine, make their shoes in the Dominican Republic.
"The workmanship is excellent," said Bob Stix, a retired shoe company executive who studied the Dominican Republic shoe-making industry in 2005 for the U.S. Agency for International Development.
Hand-sewn shoes are noticably more comfortable and possess a superior appearance to machine-stitched shoes, Stix said. The process allows manufacturers to use more supple leather than machine-sewn shoes, he said.
"One of the unique traits of Allen-Edmonds shoes is that they're hand-stitched," Herman said. "It's a definite selling point and it costs them more to do that."
The Dominican Republic is one of few countries outside the U.S. where local laws allow American manufacturers to own a factory, Herman said. The shoe-making industry in the Dominican Republic is rebounding because of the ease of trade under the Dominican Republic-Central America Free Trade Agreement, commonly known as DR-CAFTA.
Quick turnaround
The dearth of younger shoemakers results from the fact that many American shoe industry workers are either older or have moved on to other industries as the industry receded here, Herman said.
John Florsheim, president of Weyco Group Inc., a Glendale men's shoe manufacturer that relies entirely on offshore production, said an Allen-Edmonds operation in the Dominican Republic will provide relative proximity to both South American leather suppliers and the Maine plant.
"The proximity is really good for somebody like Allen-Edmonds from a quick-turnaround standpoint," Florsheim said.
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