Entrepreneur's Journal November 20, 2009, 1:50PM EST

Why Brooklyn Industries Manufactures in China

Founders Lexy Funk and Vahap Avsar were better at retailing than manufacturing. So they researched and tested Chinese plants and decided to outsource

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Entrepreneur: Lexy Funk, 39

Background: New York City native Funk met her partner, Turkish-born Vahap Avsar, at an artists-in-residence program in upstate New York. A year after moving to New York City in 1996 the pair launched Two Tsunami Productions to produce TV commercials and documentary films. But the spark for their current business didn't come till three years later, when Avsar made a messenger bag out of a vinyl billboard he found in a dumpster. Shortly thereafter the duo decided to switch gears and manufacture messenger bags out of recycled materials full time.

The Company: In 1996, Funk and Avsar (now married) rented an old factory building in Williamsburg, Brooklyn, and began manufacturing their bags and establishing their brand, Brooklyn Industries. By 2001 they had opened their first retail store near their factory and expanded their product line to include clothing for men, women, and children. Today the company has 12 stores in New York City, Chicago, and Portland.

Revenue: $12 million in 2008; more than $13 million estimated in 2009

Her Journal: I have a different approach and attitude to Made in China than many of our customers and perhaps many Americans might have these days. About a third of our clothing at Brooklyn Industries is made in China by four factories run by families whom we have done business with for more than half a decade.

I didn't, however, jump in. Before I decided to outsource our manufacturing, I did my homework on China. I read the reporting on labor disputes, exchange-rate inequities, and human rights abuses. But in the end what really formed my opinion was running my own factory in Brooklyn.

When we started, my husband and I had made a couple of prototypes of our bags. We took them to a trade show and ended up with more orders than we could make on our one sewing machine in our nice Chelsea office. So we left Manhattan and rented an old sheet-metal factory in Brooklyn to store and clean the billboards and then sew the bags. To make ends meet, we also gave up our Lower East Side apartment and lived above the factory in a single room that was unheated.

The challenge was not just the lack of heat, but how to find legal and competent sewers while running a production line that was efficient and economical. Our first sewers were Turkish. They were followed by many Tibetans, then Colombians, and finally a group of Ecuadorians. Each group had a different approach to work, efficiency, and business. Many workers came with fake green cards, no identification, and spoke very little English. It was hard to maintain quality.

My husband worked the line, fixed the sewing machines, and cut the fabric. I was the office clerk. I got the orders, called stores for payments, and did the marketing. We had a really hard time making ends meet. One week we had no money as we were waiting for a check to clear and we couldn't afford our next meal. However, we always made sure to make payroll.

In our third year of running the factory, external factors started hurting us. The government raided other factories in South Brooklyn to ensure that workers were legal. One factory owner we knew went out of business after paying enormous fines for hiring illegal workers. We were nervous. We knew we couldn't grow our business without being able to find good, legal sewers—a situation that was already proving to be difficult. Several of our suppliers went out of business—first our webbing supplier, then our fabric supplier. Plus, we still didn't have heat and couldn't afford to move out and get an apartment. Manufacturing was beginning to lose its appeal.

Simultaneously, our customers wanted bags that were more complicated and technical than we could manufacture in Brooklyn. We decided to place an order of 1,200 backpacks and messengers bags with a Chinese factory in order to continue to compete in our market.