What CEOs Of Footwear Brands Should Consider Before Investing In 3-D Printing
Creating industrial manufacturing processes takes a lot of time. In most cases, it takes decades for companies to get to a point where the engine is so oiled, that it just runs. One of those oiled industries is footwear. You may see brands like Nike, Adidas or Under Armour in the billboards, but the ones who have mastered the manufacturing are the Asians. In the same way, as Apple is the poster boy for their products, Foxxcon and a bunch of other companies in Asia are the silent masters of the trade. Without them, the brands would not exist.
Making America great again and dreaming of bringing back manufacturing jobs, which never really even existed in this country in scale, takes a bit more effort than creating a new buzzword “onshoring” and seeing if it will stick. When you dissect manufacturing industries, for example, footwear, you have hidden pockets of expertise, which most do not even realize exist. The Asians are not just the masters in manufacturing, but also everything which goes into creating the products; from textiles to eyelets and beyond. In short, their access to all the variety of low-cost bits and pieces for making shoes far surpasses what the western world could ever dream of. The expertise runs very deep.
How does all of this impact the profits for the shoe brands? First, there are the long lead times for making molds that require several months of back and forth communication between the brand and the factories, with translation challenges and snail mail delivery times, it creates a lot of unnecessary costs. In addition, the steps in the shoemaking process still require a lot of manual labor. Because offshoring has become mainstream, the tables have turned in terms of these labor costs. What used to be considered “cheap labor” is not necessarily the case anymore.
The Asian manufacturers have become smart with their costing strategies, leaving footwear companies searching for new manufacturing locations (e.g. Vietnam) or being handcuffed to manufacture sneakers for an average of $20-25 per pair, so that they can hit acceptable retail prices of $150. Lastly, there are excessive costs of creating a mold. Which leaves many shoe brands, especially smaller ones, designing off existing molds to save costs and play in the game. There is also the issue of mold ownership once it is developed. Even though the brands are the ones who design the mold, in some cases the manufacturers will end up with legal ownership, causing brands to create new molds if they switch manufacturers.
How can 3-D printing claim to solve these challenges? Let’s expand on the term “additive manufacturing.” Like in many other applications, 3-D printing has promised to be able to make low volume runs, be faster to market, produce locally, make custom fit products etc. Is it really happening? Practically all shoe brands have used “3-D printing” in their marketing but where is the profit and how do the investments really make a difference to the issue for loss of sales and fit concerns?
Why do companies buy into the 3-D printing claims if there is no real added value? The main reason that these 3-D printing marketing claims are attractive is due to the major pain point in the footwear industry that not many people even realize: “fit”. The footwear industry generates about $400 billion annually and it is estimated that 20% of that is lost revenue due to returned goods. We all know that we have unique feet, but still, we are only offered a certain number of sizes and most people don’t even realize they walk in shoes which could fit them much better. When people hear 3-D printing, they automatically assume that this will solve the customization issue. The reality is somewhat different.
So what is the root cause of all this and how can companies generate better profit utilizing 3-D printing in their manufacturing process? Clayton Christensen explains this struggle very well in his best-selling book titled “Innovators Dilemma”. Christensen goes through how the process works in big companies and why they struggle with innovation. The new product which comes from the innovation department normally doesn’t support the existing corporate margin structure. So the big companies are stuck with a choice between selling the product with a fat loss, taking the first movers advantage and hoping for the best or sitting on the passenger seat and waiting for the others to first fall on their faces before taking any risk themselves. Most blue sky innovations are picked up by the marketing department, they throw some magic dust on the ideas, launch them and come up with another concept for the next year. The innovation team gets frustrated and the cycle repeats itself. The companies who have been able to setup skunkworks (separate entities within the organization that have the power to create new processes, sales channels, value chains etc.) have been proven to work more effectively with innovation.
In terms of 3-D printing and manufacturing, it is technically possible to make a custom midsole for every consumer via 3-D printing and come close to the function of injection molded EVA or TPU. But what has been missing to date, is how to connect the technology to the value chain when it comes to manufacturing footwear in scale. Few people understand the effort it takes to create 3-D printable materials, hence why the prices remain high. If you compare the amount of injection molded plastics being produced each year to 3-D printing, those materials are not even a drop in an ocean of the amount of injection molded plastics being produced. The second issue is something, which most companies either fail to understand or they don’t want to talk about it. A “last” has been utilized in the manufacturing of footwear for the last couple hundred years and it is still the component which sits in the center of it all.
If you wish to manufacture a custom sneaker through the existing value chain or manufacturing process, it means you also need a custom last to go with it. The cost of 3-D printing materials and the requirement for making a custom last each time puts us lightyears away from creating commercially viable sneakers for each individual. If you really want to add value via 3-D printing, the answer is about totally rethinking how to manufacture shoes in the first place and not just trying to help horses run faster in an archaic system. For the ones, who have not designed footwear before, a last may seem like a tool which “they’ll somehow figure out” in the course of things. The reality is far more complex. In order for you to manufacture sneakers without a last, you would also need to reimagine the entire process when it comes to jobs. Every single job, supplier or janitor is tied into the existing value chain. All these people will fight until the bitter end in order to keep the status quo.
Change is hard. The promise of additive manufacturing is great, but people also need to understand how much effort it takes to change systems, which have been in place for decades, in order to generate real profit. If 3-D printing is only incrementally better, it makes little sense for companies to adapt. Even if you are exponentially better and it makes all the sense on paper, it is still difficult for the companies to integrate it with their existing industrial processes. Incremental improvements won’t give 3-D printing the platform it desires unless it can address every touch point in the new value chain effectively.