In a beautiful San Francisco neighborhood stands a brick warehouse containing something unusual and inspiring – a startup that uses lean manufacturing and sustainable business principals to make products in the US. Relying on local vendors, an honest culture, and talented people, Rickshaw Bagworks produces bags that people love.
I recently had the great privilege of interviewing Mark Dwight, Founder and CEO of Rickshaw. Mark shared his experiences and the lessons he’s learned with lean manufacturing, domestic sourcing, sustainability, and much more.
Below is the first half of the transcript from our phone conversation. I learned quite a few things that I later shared with my team. I hope to use his experiences as trail markers in forging my company’s own growing supply chain.
Q: Mark, can you tell me your background and how you started manufacturing bags in California?
I founded Rickshaw Bagworks 6 ½ years ago after running another bag company here in San Francisco called Timbuk2. I became involved with Timbuk2 in 2002. They were a small company on the verge of bankruptcy and had been around for 13 years. They had a great reputation, great brand, but were struggling a little bit. So I became the CEO and an investor in the company. We were very fortunate to get it turned around, and then we sold it three years later to a private equity firm. Eight months after that, I got fired. So, I said, “Well, I’ll go start my own company.”
Before all of this, I had spent 20 years in Silicon Valley, so I’m a high tech guy. I also have spent some time in manufacturing. I started out as a manufacturing engineer in the semiconductor equipment business, so I’m a manufacturing man at heart.
Q: I know you do a lot with lean manufacturing and one-piece flow. Where did you pick that up? How does that make Rickshaw different?
I picked up one-piece flow at Timbuk2. The founder of Timbuk2, Rob Honeycutt, is a real student of lean manufacturing. He had implemented those techniques at Timbuk2 for their custom messenger bags. They get orders in from their website, and they’re all individual orders. The practice of single-piece flow is something I inherited from Timbuk2, and I liked it, so I continued it at Rickshaw.
I think what makes Rickshaw different is that we make our own product in our own factory here in the states. Now, I’m no stranger to outsourcing. I don’t have any problem with it. I’ve done plenty of work in China myself, and I still buy a few things from there. However, I’ve really focused on trying to do it in my own factory – not as a protest, but as a celebration that we can still do it.
Q: I imagine there’s some kind of learning and experience from when you do it yourself that you miss out on when you outsource.
Oh, absolutely. It’s one thing to go into a room in a factory, say in China, and sit down with a product person and work through your prototype. You can show up with a really cool tech pack or just a sketch – which is what I do – and then you have a prototype made by the sample maker. Then you tweak it until finally, you get to a product your happy with. The rest is behind the scenes – they make the patterns, they sew the product. You never know what’s going on in the factory, and there’s a lot of implications to that. For example, you don’t know where the difficulty points are. When I’m working in my own factory, my people come and tell me, “Hey, this is really hard to do.” That’s either a design problem or a process problem. It’s not their fault – it’s the design or the process. Then we can say, “Well, do we need a different machine? What’s really going on here?” You never know that when someone else is making your product and it all shows up in is your cost. If there’s lots of rework, that’s in your cost. Then, if you go to your factory and say, “You need to sell this to us cheaper,” the following conversation takes place:
“Do you know how much rework goes into this?! No we can’t make it cheaper, this design is a disaster.”
“Why didn’t someone tell me?”
“Well, we’re just making what you told us to make. You didn’t tell us how to make it, you just told us to make it.”
I’ve learned that outsourcing often brings unintended consequences. For example, remember the debacle, years ago, with Mattel toys, when they imported toys with lead-tainted paint. Everyone was freaking out, asking “how could that happen?! Mattel is an upstanding company. Their factories have been making them for years without this problem, and all of the sudden, lead-tainted paint.” Well, it came out that the way they operated their supply chain management was that every time they placed a new order they took a couple percent off the price. Mattel would say, “Here’s an order, now you will make them cheaper.” At some point the factory said, “Hmm, we’ve taken out cost everywhere we conceivably can. Hey, go find some cheaper paint.” And so the purchasing department dutifully marches off and returns, “We found some cheaper paint. Let’s use this.”
“Well, why was it cheaper?”
“Oh, well, it’s a little lower quality than what we normally use.”
Mattel’s operations team was so removed from the actual process of making their products – they probably had never even been in that factory before. When you’re not intimate with your own supply chain, problems happen. Now I’m not saying Mattel should open its own factories – that’s not practical right now – but they do need to be intimate with the factories that make their products. Ultimately, nobody looks through them to the supplier to say it’s the supplier’s problem. They look at Mattel and say, “It’s your product, your brand, your fault.”
So even when I’ve subcontracted, I’ve always spent lots of time with my factories. For one, it’s a partnership. I’m not just shopping for the lowest prices. I’m looking for someone to make my product the way I want it made – someone I trust. Someone that when I’m not there, I trust them; and when I go there, I’m a partner. I think a lot of people just say, “Let’s outsource. That’s cheap. Let’s just go have someone else do it.” But there should be a lot more that goes on to make that happen. They have to be good factories, or your product suffers.
Q: For those of us who are interested in doing more domestic sourcing, what’s been your experience and how have you been able to make that transition?
To answer that, let me back up a bit to the beginning of Rickshaw. I came up with a product design concept that is similar to how Ford builds cars. You design a platform, or chassis, and you invest in that chassis because you expect to use that chassis for a decade. On that chassis, you expect to build multiple models. In the case of General Motors, you can have multiple brands sharing the same chassis. So my thought was, “For a complicated computer bag, what if I develop the chassis, and I have that made over in China. Then, I bring it over in pieces and do the final assembly here. I’ll put on some colorful elements to give it its personality. “The idea was I’m going to outsource 90% of the labor and complicated stuff, and I’m going to insource 90% of the personality – I’m going to do all the customization here. That is a Harvard Business Review manufacturing strategy. Great story for an ops guy, an ops geek like me.
I thought, “Wow, that makes total sense,” and the idea had lots of advantages. I pay 7.8% duty on subassemblies instead of the 17.5% that I have to pay on finished bags. The subassemblies nest in a way that bags don’t, so I get a 5-to-1 shipping volume efficiency. The chassis are all black, and there’s only two sizes, so I effectually have zero inventory risk. Operationally, it’s great. That’s how I got into the custom bag business. I designed a custom chassis, started importing them, and then I was custom making these computer bags and people really liked them.
Well, as time went on, we had to buy sewing machines to do the customization part. One day, we were sitting around and said, “Well hey, let’s make a messenger bag.” So we had an idea for a messenger bag that we could make in our own factory here. We started making it, and it became really popular. As we met more and more people, and said, “Here’s our computer bag, we make parts of it in China and do the final assembly here. And here’s our messenger bag, we make this whole thing here.”
“Oh wow, I want to know more about that messenger bag.”
People were really jazzed about that fact that we were making something from scratch in our own factory. As time went on, that really became our narrative. People really liked that story. And when we said, “Oh, we make this part in China.” They’d say,
“Oh, well that’s too bad. You should make that here”
And I thought, “Yeah, your right, I should.”
We’ve had to adopt a design philosophy that is sort of counter to the way bags are designed, or the evolution of bag design today. With cheap labor, designers get a little lazy. When they need to change their design, switch up their design season to season, they just add another pocket, zipper, or feature because labor’s cheap. It’s alright; it’s not a lot of material, just throw a little more labor at it. After years and years of doing that, you get fabulously complicated bags. For example, if you go down to your local outdoor supply store and look at a new camping backpack, they’re like a tour de force with so many pockets, zippers, and features. When you see them, you’re like “Wow, this is fantastic.” Now think about all the labor that goes into that. At $0.50 an hour, that’s no big deal. But at $20 an hour, big deal.
If we were going to make our products in our own factory here in San Francisco at an effective burden rate of $20 per hour, we had to rethink the whole design process. We design for simplicity, which in operation terms means we design to drive the labor out. We don’t want a bunch of labor; it’s too expensive. So we follow a minimalist philosophy of design, which in designer speak means we make elegantly simple products. We have gone the opposite direction of other bag companies.
The interesting phenomenon, though, is what happens when people who have been buying bags with lots of features for years buy a Rickshaw bag. Because I know Rickshaw and Timbuk2 intimately, people will come to me and say, “I’ve been wearing Tumbuk2 bags for 10 years, but oh man, I just love my Rickshaw bag. It’s the best bag I’ve ever had.”
Then I say, “If you and I sat down the Timbuk2 bag and the Rickshaw bag side by side I could show you the Timbuk2 bag has 10 times the features that the Rickshaw bag has.” But the people don’t need them.
As a matter of a fact, people say, “Yeah, it has too many pockets. I lose things in it.” So we’ve found that taking things away doesn’t necessarily mean our product is less. It just makes it different, and differentiation is important. We’ve differentiated ourselves by making elegantly simple products by focusing on customization. If you go to REI, you’re going to see everything’s in five different colors. If you come to us, you can have any color you want. We’ve really honed in on being the maker of custom bags.
Q: Piggybacking on that, a major, emerging trend is mass customization, which you’re set up to do and thrive on. What’s been your experience with mass customization? What challenges have you faced as you offer a mass customization model?
There’s no question that customization costs you in terms of time and complexity. It just does. I don’t care how much anyone tells you how brilliant his or her mass customization program is. When our factory’s making an order of 2000 for a corporate customer, and they’re all the same, we are rockin’. We’re working at probably 1.5 to 2 times the speed that day than if every single one of those was a unique order off our website. It just is. Just to think, “Ok, the lining is this color, the inside is this color, the outside is this color, the label is this color,” those split-second decisions cost you time. They just do. There’s a level of complexity in the factory to do that. Nevertheless, we’ve set up our factory to do that.
We know customization takes a little extra time, so we have to factor that into our cost mode, but we accept that. We don’t complain about it, because that’s the business we want to run. We’re not the only guys that do it, there’s a few other people that do it. However, we do it on a scale that is larger than many. I’m not one guy sitting in my garage saying, “Oh, I got another custom bag order,” and then sending five emails to and from my customer telling me what to make. No, we built the customizer online.
Honestly, it’s not really customization, it’s personalization. You can’t walk in my door and say, “I have an idea for a bag. It has to have a pocket here and a pocket there.”
No, we say, “Here’s our design, choose your colors, and maybe choose a couple features,” but they’re modular. In our design process, we’ve designed for modularity; we designed for customization. We know what’s easy to customize and what’s not. If it’s not easy to customize, then we don’t make it an option because it will be too complicated for us. We look for some things that are easy to do, and then we try to make those signature design elements. Our binding, for example, is made out of the same fabric that we make the body of the bag, called self-binding. We have 50 colors of binding, because we have 50 colors of fabric. Not everyone offers that kind of thing. That color binding has become a signature of our product. In my business, you look for the smallest differentiators you can. We’re not rocket scientists here, we’re just making bags.
Q: I want to touch on sustainability, a hallmark of your company. How did you make sustainability a core value? For others that want to incorporate more sustainability principals into their business, what advice would you give?
I wouldn’t call myself a social responsibility entrepreneur or sustainability entrepreneur, because on one level, sustainability means “don’t waste stuff”. That stuff is material, and that material is stuff I paid for. So if it’s ending up in the garbage, that’s money out the door. The way that translates into a business philosophy is designing to minimize waste. Our zero messenger bag’s design criteria was to create as little waste as possible in the factory. The result of that is a bag made from four rectangles of fabric. Those rectangles can be sized to optimize material use off the roll, which means we don’t waste very much fabric when we make those bags. It’s a very simple idea, and since it wasn’t my idea, I can call it brilliant. It’s actually an idea that Rob Honeycutt, the founder of Timbuk2, came up with. He’s a friend of mine, and when I started my factory, I asked him to help buy my machines. One day he said, “I have this idea for this bag,” and I said, “Great, let’s make it,” and that became our zero messenger bag.
Some of these business principals are just my own personal values. I don’t like to waste things. I like to operate my business in a transparent way with great integrity. Those are personal values, and because it’s my company, those values have translated into the company’s brand value. Frankly, it’s just a good way to live: “Don’t waste things. Tell the truth. Be transparent.” It’s an easier way to live, actually.
Q: In terms of focusing on sustainability, you’re designing your product not just to take out labor, but also to take out waste.
Exactly, we’re designing our product to minimize waste. Minimize waste of material, minimize waste of labor. That becomes a philosophy of our design. There’s a design philosophy called minimalism – and so we’ve embraced minimalism as both a design philosophy and an operational philosophy. When you simplify, you make things faster. You make things more frugally, and you’re more flexible. I talk about the “three fs” of sustainable design – form, function, and footprint – but being fast, frugal and flexible are the “three fs” of sustainable operations.
The second half of the interview will be posted next Monday. Share your thoughts in a comment below.