The following is an opinion piece written by Adrián Hernández, founder and CEO of Simplicity Works. Opinions are the author's own.
In the wake of the failure of Adidas Speedfactories in Ansbach, Germany and Atlanta, many footwear manufacturers wonder what’s next in the global trend of repatriating mass production — something that should, in theory, make the industry more profitable and more sustainable.
In case you missed it, the Speedfactories were part of Adidas’ global strategy to decentralize manufacturing and distribute operations in the midst of recurring supply chain shortages. Like other sportswear brands, Adidas has traditionally relied on cheap manufacturing in Asia to keep production costs low. The Speedfactories, both of which opened in the past three years, were meant to replace cheap offshore labor with on-shore robotic manufacturing to cut costs. This would reduce the mileage final goods had to travel to reach Western consumers, making production cycles more efficient and environmentally-friendly.
But with both Speedfactories scheduled to close in the next six months, footwear manufacturers might be cautiously retreating when it comes to repatriating production. That would be a major mistake, as repatriation is one of the best ways brands can reduce costs and boost sustainability at the same time. I’ll explain why, and offer some other ways corporations can save money and operate more sustainably in 2020 and beyond:
Modernize manufacturing methods: Less is more
Automation was central to making the Speedfactories work, as robots took the place of human laborers to boost savings and efficiency. What Adidas overlooked however, is that labor costs are more closely tied to the number of steps needed to make an article of clothing — not the number of people behind those steps.
As noted in a recent Techcrunch article Adidas became too bogged down in the process of reconfiguring the robotic arms and computer vision technologies in its factories to cater to the multiple steps required in shoe manufacturing, limiting production to only certain types of running shoes with a knit upper.
Even with the help of robots, manufacturing shoes requires anywhere from 60 to 80 steps. In fact, as many as three different machines can be needed just to attach the toe and heel of a shoe with the sole. Too many steps keep production costs sky-high.
By transitioning to advanced engineering techniques, such as 3D printing, to cut the manufacturing process down to a few steps, apparel companies could save on labor costs and reduce energy needs and waste along the chain.
At the moment, companies are worried that moving factories away from off-shore locations and closer to their consumers would blow up their overhead costs unsustainably. However, the funds they could save using new tech would help balance out those costs. The entire production cycle would be faster, cheaper and far less ecologically damaging.
Other efficient and sustainable manufacturing methods are within reach thanks to the work being done by innovators like Jeanologia. The company uses laser and other eco-friendly technologies to improve productivity, reduce water and energy consumption and remove damaging emissions and waste. In fact, the company, which operates in 60 countries and has a hand in producing more than a third of the 5 billion pairs of jeans produced every year, guarantees zero contamination in its manufacturing process.
Using these emerging manufacturing technologies allows manufacturers to be eco-efficient and scalable, according to a Sourcing Journal report, while saving firms money or at least allowing them to break even.
Shipping sustainably: When the right thing makes economic sense
Whether a company is moving products around the world or just down the road, shipping is always going to play a central role in the business of apparel manufacturing. It’s a bit sobering to consider that the fashion industry is responsible for about 8% of all greenhouse gas emissions, while transportation is responsible for about 14%. No wonder it has become a target of climate change activists.
Fortunately, some companies believe doing what’s best for the planet is also best for their bottom lines. Zalando, the largest online fashion retailer in Europe, recently announced its push to become more sustainable, particularly through reducing carbon emissions.
"We see a clear link between acting sustainably and continued commercial success," Co-CEO Rubin Ritter told Reuters. "We believe that it will be a competitive advantage in the future."
The company admits that paying to offset carbon emissions could hurt its business in the short term. Yet, as consumers are looking more and more like activists these days, one could easily argue that not taking steps to be more sustainable is the more risky play.
Other brands, like Hugo Boss and Patagonia are turning to less carbon-intensive modes of transportation, such as ships and trains for transporting raw materials and moving products around the world. While shipping by sea or rail may take longer, the carbon footprint is much lower than shipping via air freight.
Some help from lawmakers?
Unfortunately, companies can be reluctant to do what’s best for the planet and for the economies in which they operate. This is understandable when a change constitutes lower profits in the short term. And yet, far too often companies are oblivious to the fact that with their resistance and inaction they are also hurting themselves.
This is where governments have the power to step in. Politicians in Europe and North America have a storied history of lamenting the way the production of goods has moved to other places, especially around election season. But far too often, it seems as though the bold proclamations about "bringing jobs back home" die on the campaign trail.
Legislators around the world can find inspiration in India, where the government recently announced companies that choose to manufacture their goods within the country’s borders will only pay 17% in taxes.
While the trade war between the U.S. and China has been seen as the main catalyst behind this move, experts predict it will nonetheless lead to more Indian companies manufacturing their goods domestically.
The Indian government believes this policy shift will greatly benefit the economy — not just in terms of the revenue it creates, but in terms of sustainability by shortening supply chains and reducing transportation emissions.
Governments in Europe and North America have the power to enact similar laws. With the right incentives and partnership, legislation like this might be seen by companies as an opportunity for more profitability by better connecting with consumers — and not just an onerous mandate to follow.
Adidas was not completely off the mark when it opened its Speedfactories in 2016 and 2017. The intentions were there, as the sportswear behemoth has had an eye towards revolutionizing the clothing industry for years. The effort was a failure not because of the intention behind it, but rather for a lack of attention to the manufacturing process itself.
It’s a lesson to the rest of the manufacturing industry — not to abandon manufacturing repatriation, but rather to think about the process itself first and foremost. By modernizing manufacturing operations, as well as moving goods more sustainably, and perhaps even getting some help from legislators, the apparel manufacturing industry is poised to take bold steps into a more modern and sustainable paradigm in 2020.