"E-commerce is crushing your supply chain," SoftWear Automation chairman and CEO Rajan Palaniswamy told delegates. Photo credit: Andreas Gebert

"E-commerce is crushing your supply chain," SoftWear Automation chairman and CEO Rajan Palaniswamy told delegates. Photo credit: Andreas Gebert

Faced with a paradigm shift in everything from the way products are sold to the tools and technologies that make them, sporting goods brands, retailers and manufacturers are still trying to work out the best way to navigate this rapidly-changing landscape.

The key message from the fifth World Manufacturers Forum organised by the World Federation of the Sporting Goods Industry (WFSGI) was that a host of new technologies and disruptions are coming at the sportswear industry, and that businesses should not underestimate their impact. In other words, disrupt – don't be disrupted.

Robotics, artificial intelligence (AI), system automation, machine learning, big data, digitalisation and on-demand manufacturing were among topics discussed during the event held in Munich, Germany last week, which took as its theme 'Moving on to a digital and automated business of the future.'

Much of the talk centred on the challenge of incorporating such systems and processes into apparel and footwear manufacturing, given the flexible and unpredictable nature of the materials used, the vast range of styles and sizes, the lack of standardisation across designs, and ever-faster product cycles.

Automated factory floors, the use of real-time data to drive efficiency and responsiveness, and the simulation of fabric flexibility and drape all sound great in theory – but are more difficult to put into practice.

Even Prof Dr-Ing Sami Haddadin, director of the Institute of Automatic Control at Leibniz University Hannover, admits that flexible products like clothing remain a major challenge for robotic automation. Robotic systems have crossed major milestones he explains – including the addition of an all-important sense of touch that enables them to tackle new manufacturing assembly tasks – but they are still unable to replicate the dexterity of the human hand.

Likewise Heinz Eisenbeiss, head of marketing factory automation at technology giant Siemens, demonstrated how the virtual and real production worlds can be linked by simulating machines and plants using 'Digital Twins' – but was unable to find an example to share from the world of sportswear.

That said, he claims material and equipment libraries are available that can be combined to create a workflow for an individual product or company where "you can add your own knowledge for your products."

It is easy to see the benefits that could come from modelling the entire process from design to consumer, such as carrying out trial runs, exploring material flows, and identifying potential problems or bottlenecks before production gets underway for real. It could also mean fewer prototypes, and generate data used to influence the design of the next generation of that product. But the jury still seems to be out on its application in clothing and footwear.

Redesigning the apparel supply chain

One company whose vision is moving closer to reality is SoftWear Automation. Its 'Sewbot' driven worklines and workcells are designed to bring manufacturing closer to the consumer – what chairman and CEO Rajan Palaniswamy calls 'SewLocal' – reducing production cycles from 12 weeks to just a few days. Its first fully automated T-shirt line is set to go into production in the US in 2019.

"You want shorter lead-times, you want zero inventory – but your supply chain is not geared for this"

The need for agility is being fuelled by e-commerce, which is "crushing your supply chain," Palaniswamy told delegates. "That's because you want shorter lead-times, you want zero inventory – but your supply chain is not geared for this."

Instead, the reality is that in 200 years, lead times have got longer, thanks to offshoring for cheaper costs. And "automating Asia" will not shorten lead times in the West "because you've still got to ship it across the world."

SoftWear Automation's patented technology tackles the cost issue by automating the sewing operation, and means the most labour-intensive part of the production process can now sit near US cotton farms, mills and retailers in North America. "Some folks are actually planning to have this in the same city where they can deliver on the same day," Palaniswamy says.

The company is focusing on T-shirts because consumers buy 11.5bn worldwide each year and in the US, the product's largest market, 97% of T-shirts sold are imported. The digital T-shirt workline has the potential to produce a T-shirt every 26 seconds using a combination of Sewbots, SewTables and Budgers to move and manipulate the fabric and garment pieces, with one operator carrying out the work currently done by 10 in a traditional production line.

A 60% increase in output is claimed, as is a 10% reduction in CO2 emissions per T-shirt. It also supports the zero inventory goal by enabling a manufacturer to start making a finished product only when an order is received.

"To be truly uncrushable you need a balanced supply chain catering to your different customer needs," Palaniswamy explains, adding: "It's not all local or all global: you need both. You're still going to have a lot of business that still operates the traditional way."

Digitalisation: the next stop for apparel-sourcing

Shifting sourcing to lower cost countries is unlikely to help when it comes to meeting demand for shorter lead times and smaller order quantities, agrees Karl-Hendrik Magnus, partner at McKinsey & Company.

Instead, the solution is more likely to come from digitalisation of the entire end-to-end product creation and sourcing process – a move confirmed by responses to the the consultancy group's latest biennial survey of chief purchasing officers (CPOs).

Sourcing executives see digitalisation as key to improving their flexibility, transparency, cost and lead times

The sourcing executives see digitalisation as key to improving their flexibility, transparency, cost and lead times, with goals including a reduction of FOB costs by up to 5% and lead-times by 2-8 weeks while achieving higher on-time delivery and planning activity.

In the core sourcing operations, digitalisation is expected to have the greatest impact on end-to-end process management, especially as Excel is still widespread in the industry – with speed and error reduction the biggest benefits. Next comes more agile capacity planning.

However, executives currently rate the apparel industry at the early stages of digitalisation – and of those who have already made some investments here, an alarmingly small number have delivered fully on expectations. The biggest frustrations include existing system architecture, the interface to suppliers, and data quality.

Beyond the core sourcing process, digitalisation is seen having the highest impact through the use of predictive analytics in planning and forecasting. "The tools are out there, but it's a mindset change, a process change to plan your assortment and your supply chain," Magnus explains.

The current digitalisation maturity of suppliers was also rated low due to missing data interfaces and a lack of traceability in upstream supply. But by country, China is seen as the clear leader in the eyes of sourcing executives.

What's the path forward? Looking to the future, the executives want to use digitalisation to enhance productivity, improve forecasting, reduce lead times and increase accuracy in apparel sourcing. But more than half also believe there will be a significant reduction in the number of suppliers they will work with, partly through a more strategic approach but also because many suppliers will simply not reach the digitalisation bar.

His advice for getting started on digitalisation? Start small, scale up, and collaborate internally within your company as well as with the wider supply chain.

Specifically, five "required foundations to digitise apparel sourcing" are: talent (getting the right people into the system), collaboration (not trying to do it entirely on your own), the IT infrastructure (building two-speed IT to be more agile in certain areas), advanced analytics (creating success cases that can be scaled up quickly), and creating a test-bed environment to digitalise one product or category.

However, Magnus cautions: "Digitalisation is not a solution in itself; it is one element in the transformation that most apparel and sporting goods companies have to go through to meet the requirements of the future."

Disruption at retail

Consumer demand for personalisation is driving much of the disruption being faced at retail, according to Kurt Cavano, president at GT Nexus, who also hosted the Future Workshop at the WFSGI World Manufacturers Forum.

"Today's consumers have voice, they have reach, they want it exactly the way that they want it – and that is changing the market completely"

"Today's consumers have voice, they have reach, they want it exactly the way that they want it – and that is changing the market completely. And all the companies out there are struggling to deal with this, because it's a tectonic change that hasn't happened in a long, long, time." One consequence of shoppers going digital: 8,600 stores are expected to close in the US in 2017.

Another shift has seen companies like Uber, Facebook, Alibaba and Airbnb become market leaders without owning any of the assets they're selling. Disruptor 'minions' also include the likes of Bonobos, Rent the Runway, Zalando and Warby Parker. "What's coming together is cheap capital, something we call 'Uberisation' (the sharing of stuff), technology; it's all merging at the same time to allow new companies to come along very quickly and disrupt the sleeping giants above them."

Cavano outlined four key drivers of change:

  • Utility: "You used to buy three separate things – a movie camera, a real camera, a phone. Now you buy one; and pretty much everything you do is on that phone, including shopping."
  • Digital over physical: Data spending (on cable/satellite TV, internet, cell phones, premium TV, internet TV) is competing with the spend on clothing and shoes. "It's a very different consumer out there; data is the most valuable resource."
  • Substitute of capital for labour: In the banking crisis (2008/9) the Federal Reserve had to pump $3.5 trillion into the US economy to prevent a depression; the European and Asian banks did the same thing. Over the last five years all this money has been forced into the economy. And where does that money go? Really low rates that lend into corporations – and they're investing a lot of the money in robotics ($98bn in 2017 and forecast to rise to $135bn in 2019): using capital over labour. "Supply chains were always 'Go long, go cheap' but now it's 'Go closer, go faster'. It might be more expensive, but the biggest cost in retail is markdowns on stuff that doesn't sell. So if I can make a sweater close by for $20 and sell every one for $60, that's better than going to some place far away and buying for $30 and only selling half of them at $50."
  • Technology "has hit a higher gear across everything that we do: we can make synthetic spider silk, light-as-air Graphene Aerogel. The other things that's happening is technology platforms continue to expand (Amazon, Shipify etc) and this is important because young, small companies can build technology really fast and really cheap. The young companies are leapfrogging over legacy technology with these new platforms, and they're much more nimble. Older companies should be thinking how to incorporate some of these platforms into their world."

The pace of innovation is accelerating, but it's not accelerating as fast in retail, Cavano says. "If you don't do anything, someone else will have the disruptive idea and disrupt you. It's a lot better to be disrupted by yourself than to be disrupted."

Workforce management in an on-demand economy

Many of these platforms are also driving a new on-demand economy and increasing the complexity of workforce management.

"We're moving from a supply economy to an on-demand economy where you rent instead of buy, and it's disrupting the way we work and live," explains Denis Pennel, CEO of the World Employment Confederation.

The on-demand economy is being propelled by consumer demand for convenience, efficiency, simplicity, instant gratification and mass-customisation, and enabled by improved connectivity, smartphones, apps and big data. Many core offline services are also moving online, including logistics and vendor management.

What does this mean for work? "It's the end of work as we know it," Pennel says, pointing to the rise of a dispersed and remote workforce, and a fragmentation of production processes." He notes that Boeing works with 28,000 suppliers, and 70% of the production of its Dreamliner jet is outsourced.

Indeed, for many people, work is no longer a place to go. Around 61% of workers worldwide already work in an informal way and only 26.4% have formal contracts.

There are numerous options for contracting an extended workforce: buy (permanent hires), borrow (time limited contract labour), rent (deliverable service or expertise on a contract basis), share (access talent in a collaborative way). And new IT technologies are helping facilitate this, such as job boards, social media, marketplaces and crowdsourcing.

In terms of management, companies will have to adapt their processes, since an extended workforce requires more collaboration. "In the future we may see a resurgence of 'Guilds' to take care of the workers, provide for development and a sense of community."

Future implications also include challenges such as how to recruit predictably and stability; data protection/data privacy; health and safety at work; how to create new communities to give a voice to dispersed and independent workers; and how to ensure a level playing field between different forms of work.

"We are at an inflection point," summarised Forum moderator Edwin Keh, CEO at the Hong Kong Research Institute of Textiles and Apparel (HKRITA). "Working harder at the same things we're doing today isn't going to make our businesses better or more profitable. Instead, we need to think about the opportunities."

"Ten years ago we bought a T-shirt, tomorrow we buy a T-shirt: it's the same T-shirt. Perhaps we're not keeping up with the lifestyles of our customers; what reason do we give our customers to consume more of our products? The challenge is to consider what we do and how we lead our teams to continue being useful and productive."