Mike Shearwood, Clarks chief executive, is hoping to cut lead times to "teens of weeks"

Mike Shearwood, Clarks chief executive, is hoping to cut lead times to "teens of weeks"

With a history in shoemaking that goes back almost 200 years, footwear giant Clarks is about to take a step into the future with a new model to bring innovative shoe manufacturing back to the UK. CEO Mike Shearwood and sourcing director Antony Perillo spoke to just-style about the company's multi-million pound investment to slash lead times and bring more agility to its sourcing portfolio.

A decade after Clarks shuttered its last manufacturing facility in the UK, the company is once again preparing to begin footwear production at its headquarters in Street, Somerset.

But this time it is rolling out a new and re-imagined model based on regional high-tech production units in order to slash lead times and enable a faster response to changing trends and consumer demand.

"It will improve our speed to market, improve our vertical integration, and it gives us the opportunity to put down manufacturing units anywhere in the world, which can help mitigate tariffs. It is also building an agile organisation," explains Shearwood.

"The new technology means we can cut the cost of entry for a new product into the market. It also enables us to turn the product around within weeks, and it give us the flexibility of doing collaborations with other people, smaller product runs, and working to almost be a bespoke product."

Ultimately, Clarks is building an agile supply chain that will enable it to produce shoes anywhere in the world, starting with the UK where it will place design and manufacture at the same site.

The aim is to cut lead times to "teens of weeks," down from 56 weeks for wholesale and 46 weeks for retail, and a global network of hubs is being planned to complement Clarks' current sourcing network. Up to ten similar production units are set to be rolled out at other locations close to key consumer markets across the US, Europe and Asia over the next 3-5 years – the location depending on demand.

Once operational, which is expected to be early next year, the company says its first unit will be able to produce trans-seasonal collections, leading the way to a 'seasonless' approach to its ranges.

"The 21st century craftsmanship we are introducing will lead to and encourage innovation in shoe design. It will be transformative to the process of how we design and develop shoes," Shearwood explains.

Investing for speed

Clarks is one of the world's biggest everyday footwear firms, designing and selling more than 50m pairs of shoes every year, with a turnover of GBP1.75bn (US$2.25bn) and retail, wholesale, franchise and online channels in over 100 markets through 22,000 distribution points.

The new approach has been devised to help tackle the "tremendous pressure" the brown shoe industry has faced from innovation in the sporting and athleisure sectors, as well as an increasing number of closures among traditional shoe shops.

"One of the issues in the brown shoe industry is that lead times are just too long for the consumer, and from a cash conversion perspective money is tied up too long to make the business model viable," explains Shearwood.

"For shoe manufacturing to work with the traditional methods it needs to be really large scale because you're making knives to cut the leather, which is really quite expensive."

He continues: "If you think about it, footwear has a complicated supply chain with a lot of componentry. The skins come from all over the world. So we're using tanned and un-tanned hides from around the world. Interestingly, the desert boot that we're going to be making here in the UK uses Dents leather. We've had a partnership with Dents since the early 50s, and they're based in Leeds, so it will really become vertically integrated in our business model in the UK."

Sourcing portfolio

Perillo emphasises the new production model "is a new piece to my sourcing portfolio," and should not take production away from the existing supply base. Clarks sources primarily from Vietnam, with other suppliers including Cambodia, India, and Europe – mostly Italy and Romania. Some production also comes from the UK, although very small amounts.

"The key to these [new hubs] is they have got to be commercial, they've got to be profitable, they've got to be realistic…and hopefully build more demand.

"We can pick these things up and move them or we can build new ones. I've modelled that in Europe, in the US, in Asia – they will be wherever the demand is and where it is financially sensible to do so to get product to market very quickly. We are being very flexible about it."

The new multi-million pound investment announced last week will initially create up to 80 jobs for specially trained employees, and use cutting-edge robot-assisted technology to produce around 300,000 of its iconic desert boots annually – around half of the capacity of desert boots produced for the company globally each year.

But the units have also been engineered so that they will be able to produce women's, children's and men's shoes, Perillo says.

"And the facility has the ability to flex up and down with the demand of other [styles] too. So we can produce more than 300,000 and you can take it on multiple shifts."

Technologies

As for the technologies used, the company says it intends to support "an innovative, unique volume production method applying robot-assisted technology."

Exactly what does this mean? "I can't go into too much detail for obvious reasons," says Perillo, "but there will be laser cutting, utilised for different materials and leather; there will be automated machining, so the stitching will be computer automated; there will be tracks, or what we call track lines, which have been designed by our engineers. These will have IP protection on them, so we're doing a lot of engineering work we can protect, and on the process itself, and we will be utilising a fair degree of robotic systems on the line."

To understand and study the benefits of the robots on the line, "we've gone outside of the industry to the automotive and the aeronautical [sectors]."

Sportswear giants Nike, Adidas and Under Armour are the most high profile examples of companies rethinking conventional production processes and moving to automated modular production cells that combine fast response with the flexibility to offer products that are uniquely customised for individual consumers.

Yet Perillo suggests there are just a few parallels with the route Clarks will be taking.

"What Adidas do is very interesting; it's very particular to their sector of the market. We will be taking a slightly different approach but the similarities will be there in the sense that we are both going to use new technology coming into the market, and we want to service consumers much faster. Those are the two common threads. Other than that, the units themselves and how we do it will be quite different."

Skills retention

The executives are also keen to emphasise that the traditional craft of shoe making will still be present in Clarks' process, since "every single pair of shoes starts off with a handmade wooden last that we make here on the premises in Street." Another example is grading leather as it comes in to ensure the cutting process is optimal for quality.

But there will also be opportunities to bring new skills into the business too, "in coding and digital or in robotics…and you can start to mix the two together and make something quite powerful," Perillo says.

"We have also trained a lot. As a large shoe company we were very conscious of this 15 years ago, and we've managed to retain a lot of those core shoe skills in our organisation over that period."

Perillo says the move is not a precursor to Clarks bringing all of its manufacturing back to the UK – which would be "not realistic" and "not good business sense."

"We're a global company and we're spread out very effectively with a sales network around the globe. The same trends that are affecting the UK and Europe are affecting Asia and the US. You want to get close to your consumers – if you're a global company you want to make your shoes close to those people."

Some have also questioned whether Clarks' decision to set up manufacturing in the UK again is a reaction to Brexit. It is not, Shearwood is at pains to point out. Instead, he says, it's in response to the one challenge putting pressure on the footwear industry the most – lead times.

He does concede, however, that Brexit is a concern for business, most notably due to the uncertainty surrounding the trading terms of Britain's exit from the European Union (EU) and currency.

"How can you plan when you don't know? And currency is having a massive impact on people who source, particularly out of the Far East, because everything is paid in US dollars. So from a currency perspective it's having a huge impact. From a tariff perspective, undoubtedly there will be more complexity but we don't know what form that will take at the moment."

Building a stronger position

The disruption and subsequent devaluation of the sterling as a result of Brexit, combined with the US election and a general slowing down of Chinese economic growth, weighed heavily on Clarks' last fiscal year, which saw earnings fall a near 50%.

Clarks FY profit plunges on sterling weakness

The company, however, says it finished the year in a much stronger position thanks to a review and reorganisation of the business implemented by Shearwood earlier this year, which saw the retailer cut around 50 jobs at its headquarters in April.

Clarks to cut jobs at UK head office

"Over a period of time there has been a disconnect between the financial performance and the physical performance of the business and we're trying to realign that," he explains. "We see huge opportunity in the business going forward, and you'll see some really amazing product and some great collaborations coming up."

Ultimately, Shearwood and Perillo are working to reposition Clarks as an agile, innovative, global brand.

"We're trading in over 100 countries globally but the perception of Clarks as a brand is very different in its markets around the world.

"There is a huge opportunity in that we under-index significantly in different markets on different products. The perception of Clarks in our domestic market is very much about children's school shoes and comfortable shoes for the more mature consumer.

"But actually our range is really extensive, and in other markets around the world we have some really cool products and we're in the top boutiques.

"We need to work on the perception of the brand in certain markets, but the one thing people will say is we do comfortable shoes, we do great quality shoes, people trust us, and there is an individuality to our product that is absolutely Clarks."