Putting the Boots to Outsourcing

Here's a good news story about insourcing, Kodiak boots are now being made in Canada. Again. After being outsourced to Asia.

KODIAK COMES HOME It's been quite a hike for an iconic boot to Asia and back, and Kodiak Group Holdings Inc. is out to prove manufacturing can still survive and prosper in the Great White North

And here is why, Candaian productivity. That is variable capital; technology and labour. Which is called in modern economic parlance; value added production.

But before we begin cheering, its a speciality high priced boot that will be made in Canada, to sell to the branded market, which wants Made In Canada and will pay more for it. While their main low cost commercial boots will continue to be made in labour intensive low waged Asia. Until the workers in those countries form unions in the shoe industry.

But Mr. Huckle would not be making Kodiaks in Markdale, located two hours northwest of Toronto, without the confluence of special circumstances. For one thing, he was able to acquire two highly automated shoe plants from the takeover of rival Terra Footwear, a Canadian company famous for fast production turnarounds.

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.

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.

Mr. Huckle, who was on a five-country tour of Asia last week, says the developing world is still best for making products with high labour content. Wages in his Asian contract plants are a fraction of the average $15.50 an hour earned at Markdale, which has an in-house union.

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