I heard an Easter joke in Canada last week that goes something like this:

Three complete idiots found their way to the pearly gates of heaven and St. Peter told them that if they could tell him what Easter was all about they could enter. The first idiot said, “Well, on Easter Eve Santa Claus comes down the chimney and we all get presents.”

“Not it at all,” said St. Peter and off idiot #1 was sent.

The second said, “Easter is when we all sit around and eat turkey and be thankful.”

“Nope,” said the good saint and he shooed #2 away.

Finally, it was #3’s turn and he said, ‘Easter celebrates how Jesus was born a man and spent his life preaching and teaching us how to be good. The Romans didn’t like it and they had him arrested. They tortured him and Jesus died for us when the crucified him.”

“That’s wonderful my son,” said St. Peter. “You really do seem to understand. So tell me what happens on Easter.”

“Well,” said the idiot, “Every Easter we go to the tomb where Jesus was buried and wait for him to come out. When he does, if he sees his shadow we have six more weeks of winter.”

And, of course, idiot #3 joined his two friends elsewhere.

The fast fashion fad in the apparel industry reminds me of that joke. They had it 90% right – then blew it in the end. But in the apparel business it isn’t a joke. Their failure to get it right perpetuates the sweatshops in Bangladesh and other backwater places, heaps misery and even death on apparel workers, and keeps the massive waste in the apparel sector alive.

I received an email from a lean thinker in the apparel industry asking for my take on a piece in Sourcing Journal titled, “Onshoring Creates New Textile Jobs, but What About Apparel?” The article was written by a guy who runs a company that scurries around the world finding folks to be exploited by the big retailers – folks with little choice but to work for nothing. So it should come as little surprise that, as a result, the article rationalizes the need to keep the Bangladesh sweat shop model rolling.

The waste in the apparel industry is staggering; and by waste I mean the lean definition – the spending that takes place which adds no value whatsoever for customers. If you pay $20 for something at Gap, for instance, at best $2-3 of that went to the factory in the far reaches of nowhere that made the item. The rest is all the cost of management and administration, shipping and logistics, warehousing and distribution centers, brick and mortar retailing, advertising and marketing and the cost of massive data processing to keep track of all of the rest of the waste. The cost of such waste at Gap alone is in the billions, and they are just one player of many.

Yet the industry as a whole can’t see any of that waste. All it can see is the portion of the $2-3 that direct labor represents.

The biggest cost in the apparel industry is the cost of time. It is the cost of having to order the clothing months and months ahead of the season in which it will be sold and worn. That is the inevitable consequence of sourcing stuff in the far reaches where labor is cheap. Lead times are absurd. Fast fashion was pioneered by Zara, a Spanish outfit; and it was built around the idea that time – not labor cost – was the enemy of the apparel industry. Manufacturing close to their Spanish customers allowed them to be extremely responsive, incur far less waste, have to discount far less due to forecast errors, and generally do a much better job of responding to customer tastes and needs without all of the inventory and associated management bloat.

Like idiot #3 they came right up to the edge of getting it right. But they blew the punch line.

Zara, it seems, thought the solution was manufacturing in Spain. Great for their Spanish market but completely off the mark for their customers elsewhere. They should have figured out that the key wasn’t being close to the brain trust at Zara headquarters, but being close to customers … but they didn’t and ended up with all of the long distance waste everyone else has.

And the rest of the apparel industry was predictably very, very stupid. It looked at Zara and learned the wrong lessons. It realized speed is good but couldn’t shake its focus on labor cost no matter how trivial it is …. So it began bludgeoning the backwater manufacturers for shorter lead times. Incredibly ignorant of the critical importance of capacity on cost and flow, it did nothing but compel the sweat shops to find even sweatier shops that the outsourced companies could outsource to in order to meet demand. The result is an even more abusive supply chain and little reduction in all of the massive waste in those abusive supply chains.

To the question whether lean is applicable in the apparel industry, the answer is a resounding yes. In fact, given the fact that speed is right at the core of success in the apparel industry, lean has even more potential there than anywhere. Lean is centered on cycle time compression. Ohno said that all Toyota was doing was to shorten the cycle time by eliminating the waste. Before the Wall Street worshiping crowd hijacked Six Sigma and turned it into a multi-colored belt fashion show it was understood to be driven by the principle that the shortest cycle time producer is always the best cost producer. Focusing on cycle time speed drives out the non-value adding waste; and in the apparel industry is has the added bonus of driving sales higher more than in any other sector because so much of apparel is short term fad driven.

Someday someone will figure out that the apparel industry can be profitable beyond anything the MBA’s with all of their old school accounting beliefs, marketing worship and manufacturing ignorance can imagine. Given the insular nature of that business and its incredible lack of managerial creativity, however, don’t hold your breath.