Shoes have been around for a long time and the basic manufacturing technique is pretty much fixed. Pieces of material — whether leather, cotton, or whatever — are cut out and sewn together form the upper body of the shoe and that upper is then attached to a sole. All pretty straightforward, but that may be about to change, at least for fancy running shoes (Is Nike’s Flyknit the Swoosh of the Future?, BusinessWeek, Mar 15).
The shoe in question is Nike’s Flyknit, an ultra-lightweight running shoe that is meant to feel like wearing a sock. To make it feel like a sock, they knit the upper like it was a sock — except it’s a real high-tech sock.
In a process Nike calls “micro-level precision engineering,” proprietary software instructs the machine to minutely alter a shoe’s stability and aesthetics. If the toe needs more stretch, the design can be digitally altered instantly to add Lycra-infused thread. For added strength in the heel, the software uses multiple layers of yarn of varying thickness. Nike plans to patent the process.
Because the upper is made in one piece, the Flyknit has 35 fewer pieces to assemble than the popular Air Pegasus+ 28 runner. That makes production quicker with less labor and larger profit margins, Parker says, though the company won’t give precise figures for either. The Flyknit process also fits into Nike’s sustainability push because the amount of material wasted manufacturing each pair weighs only as much as a sheet of paper, or about one-100th of a pound. Nike says the Flyknit produces 66 percent less waste than the Air Pegasus+ 28.
The process reduces fabricating the components of the upper into making just two pieces — basically the tongue and everything else.
That greatly reduces the amount of labor required to assemble the shoe and calls into question just where these shoes should be made. That’s right: Knitting would have supply chain implications.
Let that sink in for a moment.
Nike makes 96 percent of its shoes in Vietnam, China, and Indonesia, where labor costs are low. The downside is the time it takes for shoes to reach markets such as the U.S., says SportsOneSource analyst Matt Powell. “One of the critical issues our industry hasn’t figured out is how to get products to market more quickly,” he says. “The biggest time in the life cycle of getting a shoe to the U.S. is the time it spends on a boat coming from Asia. If you could eliminate that, that’s a huge chunk out of the time line.”
The article reports that manufacturing the shoes domestically would still cost more but less inventory, quicker response, and (presumably) more full price sales could go a long way to offsetting those costs. The article also suggests that local production and the process itself could allow for much more customization of shoes — either in terms of fit or in colors.
This a neat example of how process innovation can open up a myriad of possibilities for how to run the supply chain. Nike is certainly in a position to exploit this technology with both the marketing muscle and retail network to make it happen. One thing is clear though. This will not be a real re-birth of the US shoe industry, at least in terms of employment. Even if Nike deploys this technology in a wide range of products, the number of jobs it will create is small. Indeed, the need for minimal labor is the whole reason one could think of making these sneakers here.
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Marty,
Great article. You struck a particular nerve with me when you mentioned the opportunity for rethinking the supply chain. Manufacturing domestically is something I have been championing for a couple of years. This means that shoes, or any product, should be made in or as close to the consumer market to which it is delivered as possible. Shoes manufactured in Asia should be delivered to an Asian consumer market. Shoes manufactured in the US could more easily support the US consumer market.
The challenges of a 12K mile long supply chain can be improved, however, in the mean time. One shoe manufacturer/retailer that has addressed this challenge is Bakers FootWear. They manufacture women’s shoes in Asia for consumption in their 250 stores as well as the stores of other high-end retailers.
While you can’t shrink the size of the ocean or the time it takes to traverse to the US, they have proven you can reduce the time and cost associated with ‘old school’ approaches. Their solution appears to be widely applicable to many industries with a similar reach. First, let’s look at the process in place:
Manufacturing plants are contracted to make X pair of shoes. There is a PO issued with a shipping date by which the product needs to be on the water in an effort to meet the time requirement for the product to be on the shelf. This time frame was typically 6 – 8 weeks. The typical process is the manufacturing plant makes the shoes and notifies a consolidator/3PL that it is available for pick up. The 3PL then schedules an ocean container from a shipping company to be delivered. Product is picked up & arrives at the 3PL facility where it is loaded onto the ocean container and shipped. Transit times from port to port typically run 2 – 3 weeks. Then it is unloaded, sent to another 3PL in the States where it is broken down and shipped, most often, to the Distrubtion Center. Once received at the DC it is then stored, ordered and picked for subsequent transport to the Store.
This model takes 6 – 8 weeks and can cost approximately $24.69 per carton from Asia to the back room of the store. Bakers has shattered this performance by employing a revolutionary strategy. As a result they have the transit time from Asia to the backroom of the store down to 4 weeks and the cost down to $9.67. They reduced transit times by 1/3rd and the cost of transit by 2/3rds.
To achieve these results they eliminate the domestic 3PL, use 53 foot containers v. 40 foot containers, bypass their own DC and borrow the zone skipping strategy of mail order companies. So manufacturing plants still notify the foreign 3PL that product is ready for Booking. At this point, Bakers generates serialized carton labels that they provide to the manufacturing plant which are affixed to the cartons. Then the foreign 3PL Picks Up the cartons and Receives them at their facility. Once Received, Bakers then Allocates the cartons to their stores.
Now that the cartons are Allocated, the 3PL scans the serialized Carton ID’s in Asia and a FedEx label is printed on demand for each carton. On the FedEx label (or any carrier for that matter), is a ‘sort’ code that groups the cartons based upon a skip zone to which it is being shipped. As an example, all of the cartons destined for stores in the Atlanta area are grouped into an ocean container that is destined for that region.
Cartons are then scanned as they are loaded onto the container for the region and ‘shipped’ upon departure from the port. The transit time on the water doesn’t change, obviously. But because they loaded onto 53 foot containers, they are the last loaded and the first off. Instead of heading to a domestic 3PL the container is then shipped directly to the parcel carriers facility in the region. From there, the parcel carrier delivers the product directly to the store.
By applying this strategy to their supply chain and allowing their vendors to use their Collaborative Supply Chain software; Bakers is able to have 100% visibility, accuracy and efficiency in their global supply chain. Saving nearly $15 per carton in labor and transportation costs while shrinking the amount of time to get the product on the shelf for the consumer to purchase is a tremendous competitive advantage. Even if a company can’t move their production to the market in which they sell they can still achieve significant savings with innovative strategies such as Bakers has applied.
[...] no texto “Knitting shoes” de Martin A. Lariviere, publicado no blog The Operations Room. Tradução e adaptação feitas por Leandro Callegari Coelho e autorizadas pelos autores [...]
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