Gildans two new facilities will grow its overall textile capacity by around 40%

Gildan's two new facilities will grow its overall textile capacity by around 40%

Apparel maker Gildan Activewear is adding new production capacity to support strong demand, streamlining its manufacturing, and adding more complexity to its products in the process. 

The company last week announced plans to add an additional textile plant at its Rio Nance complex in Honduras in order to support strong demand, bridge capacity requirements while it constructs a new facility in Costa Rica, and support its strategy to introduce more high-value products.

The two new facilities, when completed, will grow the company's overall textile capacity by around 40%. And quantifying that into potential sales, Gildan expects to generate an additional US$1bn in revenues from its new capacities. 

That said, the company estimates it lost around $15m to $20m is sales during its most recent third quarter due to out-of-stocks on capacity issues. 

The new Honduras plant will start production in time to support Gildan's sales growth in fiscal 2016. It is set to have similar production capacity as Rio Nance 1, but will be larger in size to accommodate equipment and technologies in order to produce more fashion, polo-type products and performance apparel there, according to CEO Glenn Chamandy.

Even though Gildan is adding more fashion and product categories to its portfolio, Chamandy believes the company is also reducing its complexity because "we're streamlining our manufacturing".

By consolidating production of its polos, fleece and underwear into the new Rio Nance 6 facility, Rio Nance 2 and Rio Nance 5, Gildan will be running much more efficiently than it is today.

"So we actually are going to benefit not only from adding capacity, but we're going to also benefit from an efficiency perspective," Chamandy told analysts on a conference call. In turn, continuing to streamline its manufacturing and become more efficient "allows us to have more complexity in our products."

The apparel maker has also separated its retail and wholesale packing activities into different plants. This, Chamandy said, will help Gildan "better capture all of our costs basically and make sure that we manage those two things separately".

"We have a very good effective supply chain. There is no limitations to what we can do...we think we're very comfortable with our supply chain," Chamandy added.

Investment in the Rio Nance 6 facility will also include technologies for performance and printed fabrics that are currently sourced in Asia.

"And this is allowing us to actually do what Gildan does best: to bring these product categories to this hemisphere, manufacture them in a very short cycle time and provide the best value quality relationship to our customers."

Costa Rica facility
Gildan's planned Costa Rica facility, meanwhile, is set to start production in fiscal 2017. According to Chamandy, the plant will not just make textiles, it will provide the company with enough space to put in additional sock facilities.

He also points out that it's not just a case of adding more space: "You need to get the yarns, you need to get the knitting equipment, you need to build all that labour and the infrastructure."

He continues: "There's always a learning curve any time you are adding capacity or starting a new facility."

"So, we can expand our capacity outside of what we're doing today just with the investment we just made," he said. "So if sales continue to grow, we don't have the limitations in capacity, but all the geographical distribution we have in our manufacturing right now."

"What we do in Rio Nance is a copy paste basically," he explained. "We have the staff, we have the trained people. We can start hiring people and run them in the factory next door and as the factory comes along, just drop them in and we've already got the personnel, staffing [and] management."

But this is not the same for Costa Rica because it is a new plant entirely, he said, adding: "We just want to mitigate exposure. Our business is very strong and we just feel that it's prudent for us to put something incremental before it comes on."

Systems investments
As for systems investments to better forecast demand and manage inventory flow, Chamandy said: "We're constantly investing in our IT systems and infrastructure, and that's an ongoing process.

"But we have all the systems in place from an IT perspective to support all of our product categories."

Gildan's other factories are already producing a lot of the products which will be made in Rio Nance 6. The benefit of this, Chamandy said, is being able to manage the complexity in one place.

"So as we take these products and streamline them, all the other plants will run more effectively and efficiently. So we feel very comfortable in terms of our ability to continue to add new products.