A Return to Canadian Manufacturing… Sort Of
globeandmail.com : KODIAK COMES HOME
At first glance, this looks like a heartwarming story of a Canadian manufacturer that “came home” after bouncing around different Asian countries most of the past decade.
“For the first time in six years, Kodiak boots are actually being made in Canada. It is a homecoming for a Canadian icon — a favourite of cool teenagers and burly construction workers — whose production was once lost entirely to China, Vietnam and Thailand.”
But, it's not “all” Kodiak boots that are once again being made in Canada, it's just some.
“At the end of the day, we're going to service customers a lot better through this core Canadian production,” says Kevin Huckle, president of Kodiak Group Holdings Inc., of Mississauga, which plans to do a third of its production in Canada.
Part of the reason behind the move is supply chain responsiveness.
Terra's 110-worker plant in Markdale makes only a few models of high-end Kodiaks with a retail price of more than $140. Even with these more expensive boots, Mr. Huckle is giving away 7 to 8 percentage points in margin compared with making the same boots in Asia — where he still sources the majority of his boots.
But he wants the domestic production to offer quick, efficient service for Canadian retailers, who may require only small numbers of boots, but need them in a hurry.
For one, I'm surprised it's only a 7 or 8% cost improvement being in China. If that's all you're getting from a move to China, it might make you re-think the disruption and the fixed cost involved in setting up China operations. I wonder if they are really accounting for their supply chain inventory and lack of responsiveness properly?
With Asian production, he has to contract for long production runs — more than 1,200 pairs — and has to carry a lot of inventory. With domestic manufacturing, the plant keeps enough materials around for relatively short runs. Because of automation and location, it can turn around Canadian production orders in 21 days, compared with 90 days for orders from Asia.
So here is the tradeoff: large batches (mass production thinking), slow response, and 90 days of inventory and a long boat ride from China to the customer. It sounds like the Canadian factory is “more lean”, at least in being able to do shorter production runs. 21 days sounds like a very long lead time for boots though, it doesn't sound like a very lean operation. How long is the actual “touch time” to make a pair of boots? I'll guess that it's not measured in days.
It sounds like, though, that marketing and MBA thinking is really behind the move:
Also, its core market includes blue-collar workers, often unionized, who like to see a made-in-Canada label. It was simply good marketing to bring some production home — which further nudged Kodiak to buy the well-regarded Terra operations. Now, “the Canadian production proves our brand's authenticity,” Mr. Huckle says.
It always scares me when I hear a manufacturer talking about its “brand” as opposed to its products. Our brand's “authenticity” means they want the good PR of being “Canadian made” without going all the way there.
As I said, they haven't given up on Asia, they are still chasing cheap labor around.
When anti-dumping duties on Chinese work boots recently expired, he said it would not alter his plans for Canada, but it would likely mean moving some production to China from Vietnam.
The well-travelled Mr. Huckle is sounding a little weary from all these sourcing shifts. “We're like Gypsies — we keep moving on to the next place.”
WHY then? If they are so “weary” (reporter's words), why don't they stay put and focus on eliminating waste instead of just chasing labor costs?
Now he feels Mr. Huckle can succeed in Canada with a higher-end boot sold on its local content. “The one thing he has to do is say, ‘We're now being made in Canada.'
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