Is Automation The Need Of The Hour In The Apparel Manufacturing Industry?

by Trefis Team
Gap Inc.
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The apparel industry seems to have shied away from the technology revolution hitting just about every other industry. Despite substantial engineering advances, this industry is as labor-intensive today as it was a century ago. As the demand for inexpensive, high-quality goods has increased, the industry has responded by shifting its manufacturing base to developing countries, where the labor costs are much lower. However, in recent times, even this strategy is becoming difficult to sustain as the wages in these countries grow. Such a scenario may finally compel the retail industry to jump on the automation bandwagon.

Robots To Reshape Fashion?

It is common knowledge that the US imports nearly all of its clothes and shoes purchased in the country. However, the stats are pretty damning: the domestic manufacturing has fallen from 50% in 1994 to 3% currently, as per the American Apparel & Footwear association, which reported that 97% of all apparel and 98% of all shoes sold in the US are imported. The primary factor driving this has been the rising labor cost, forcing US retail companies to move their manufacturing to the other side of the world, in order to meet the demand for inexpensive products. As per a study by the United States Fashion Industry Association, the greatest or second greatest challenge faced by American fashion companies is the burgeoning production or sourcing costs, cited by 43% of the respondents. While it is hardly possible that the US will be a net exporter of clothing in the future, given the opportunity associated with automation, a return to domestic manufacturing is a possibility for at least some of the companies.

Global Industrial Robots

The automation industry continues to grow robustly, as companies invest in such technology to increase their productivity and competitiveness. In 2015, global robot sales underwent a 15% rise to 253,748 units. The main industries which drove this escalation were the electronics, metal, chemical, plastics, and rubber industry. Even in North America, the robotics companies recently posted their strongest ever first quarter results, according to the Robotics Industries Association, as a result of a growth in the automotive related industries. However, despite these impressive figures, the adoption in the textiles, leather, and apparel sector continues to remain abysmal, accounting for 0.1%  of the global sales of industrial robots.

In the automobile and electronics industry, where the usage of robots is rampant, the inputs are largely hard parts, making it easy to assemble. In the apparel industry, on the other hand, the fabrics are pliable and elastic, a technical challenge, making the process hard to automate. Many robotics companies have now found a fix for this problem, and have started to build their robots to comply with such a task. Hence, as the pace of automation continues, the apparel industry will eventually be compelled to automate almost every job that is routine. Such a thought is consistent with the findings of a January 2017 McKinsey report, which stated that 51% of the work tasks today in the US, which account for $2.7 trillion in wages, would be automated by 2055, and the industries most likely to be affected are manufacturing and retail.

NA Industrial Robots

Adidas, Nike, And Amazon At The Forefront

Morgan Stanley has forecast that nearly 20% of the Nike and Adidas shoes would be manufactured in more automated factories by 2023. This is being forced upon as a result of the rise of the “buy now/wear now” environment, a by-product of the shift to e-commerce. With this, the companies would not need to lean on outside manufacturers, giving the companies a potential competitive edge. As a result of an efficient, in-house production, a faster supply chain would keep up with the trend for fast fashion. Moreover, Adidas estimates that it will generate half of its sales from products made using technology that increases manufacturing speed by 2020. In this regard, it has already opened a ‘Speedfactory’ in Germany that employs robotic technology to manufacture shoes. In April, the company also announced that it will manufacture 5,000 of its Futurecraft 4D shoes with a 3D-printed midsole, available by fall/winter 2017.

E-commerce giant Amazon (NASDAQ:AMZN), which is well on its way to being the largest apparel seller in the US, and has been making its own clothing line, has been granted a patent for “an on-demand apparel-manufacturing system that would let it make clothes only once orders have been placed.” Amazon explains it in the patent, “By aggregating orders from various geographic locations and coordinating apparel assembly processes on a large scale, the networked environment provides new ways to increase efficiency in apparel manufacturing.” Based on the orders, an automated system would manufacture the clothes, a textile printer would create the fabrics needed, and the fabrics would be automatically sent to a textile cutter that would cut out the pieces to be assembled into finished goods. While it is unclear if Amazon is effectively working towards building such a system, if it is implemented in the future, it could enable the company to be an apparel dynamo.

With such a big step taken by these powerhouses, companies such as Lululemon Athletica (NASDAQ:LULU), Under Armour (NYSE: UA), and Gap Inc. (NYSE:GPS) should not be far behind.

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