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Nike's attempt to automate the manufacturing of low-cost labor faces huge challenges
From: DONG GUANG NAN XIN CHEMICIAL CO., LTD Post date: 2017-11-23


As a professional marathoner, Knox Robinson wears dozens of different sneakers a year. But in the game, he had only one option, and that was Nike's Flyknit Racer.

  For many athletes, this particular design offers a seamless and comfortable experience that other brands don't have. Since Nike Flyknit Racer debuted in 2012, the sneaker has been seen as a technological breakthrough. It is manufactured with a special knitting machine that USES less labor and less material than most other sports shoes. Now, the technology has become a test lead to more "radical" manufacturing technology foundation, perhaps even subverting the sports and leisure apparel industry, as a means of accelerating globalization trend.

  Starting in 2015, Nike began with high-tech companies such as the Fitbit and lenovo, Flex OEM factory cooperation, hope to be able to used in the production of sports shoes this labor-intensive products more automation elements.

  Flex, Mexico has become the world's most important Nike factory, one of the factory is not only responsible for production, but also a series of innovative experiment for Nike, such as laser cutting and automatic bonding technology.

  For Nike, greater automation means two huge attractions, pushing down costs further and boosting margins significantly. It also allows companies to respond to fashion design changes more flexibly and quickly, offering new designs faster. For example, the Roshe sneaker, which doesn't use Flyknit technology, costs $75 and USES the Flyknit technology to raise the price to $130.

  "We are now to modernization of footwear industry, it is a long-term, need to cost billions of dollars in plan, not only have a few years or even decades can measure the results. The influence of" Chris Collier, Nike's chief financial officer.

  Working with Flex can also have a broader impact. In the past 20 years, Nike has always been a production task outsourcing is one of the factories in developing countries on behalf of the company, but also always be accused of using child labor or labor abuse problems.

  But now, many workers in these developing countries are starting to worry that robotic technology will deprive them of their jobs. If Nike is trying to automate more, it's going to get itself into another kind of argument.

  Nike says growing sales will allow it to use more automated technology while maintaining the number of existing employees. Nike is now one of the world's largest multinational companies, and footwear alone has employed more than 493,000 workers in 15 countries. In all of Nike's product-type production, it has already covered more than 1.02 million workers in 42 countries.

  Sridhar Tayur, professor of operational management at the Tepper school of business at Carnegie Mellon university, says Nike's use of automation will determine the course of the industry's development.

  "Unless you choose Africa or anywhere else, the cost of Labour in Asia is not as low as it used to be. For a long time, Nike will be under enormous pressure to move factories to places where labor costs are lower, or choose to adopt more automation elements. He said.

  Nike's sales of $34.4 billion in fiscal 2017, and the goal of completing $50 billion in sales by 2020, Nike needs to keep working. This is the goal set by CEO Mark Parker in 2015, and while the company is growing, it still faces stiff competition from Germany's adidas ag.

  For deeper automation, Nike has huge potential advantages. , said citigroup analyst Jim Suva and Kate McShane from Flex factories to produce Air Max shoes, can reduce labor costs by 50%, saving material cost 20%, which is equivalent to a 12.5% increase in gross margin, directly increase to 55.5%.

  To estimate, if the production of Flex factory can afford 30% of north American sales, so Nike can save $400 million a year of labor and raw materials costs, is equivalent to a 5% increase in earnings per share.

  "We think the entire clothing industry is keeping a close eye on the issue, and if Nike is successful, then more companies will start to change." Suva, said.

  More use of automation will not only reduce costs, but will also be more flexible to keep up with market changes. In the clothing industry, winners tend to be companies that have a steady stream of new products that quickly meet consumer tastes and shopping habits. But some companies are often slow to take action when they adapt to the fast-changing trends of the so-called fashion, mainly because the manufacturing process is too complex and slows down the response.

  Making a pair of sports shoes through traditional technology requires more than 200 components in 10 sizes, and it also needs to be done by hand to fit and glue. The Flex factory's new manufacturing process automates two processes: automatic bonding and laser cutting.

  It often takes months to design, develop and manufacture a pair of sneakers. With the help of the Flex factory, it takes only three to four weeks to complete the process of customizing a pair of trainers.

  According to the ILO statistics show that in Cambodia, Indonesia, the Philippines, Thailand and Vietnam and other countries, 56% of future employment will be 10 or 20 years later replaced by automation, including the impact of the clothing and footwear manufacturing industry is the most serious.

  But Nike says that if sales continue to grow, it won't let the workers in the supply chain lose their jobs, but it won't stop the innovation of more automation in product manufacturing. "We will not shy away from the impact of this change on the Labour market. On the basis of existing resources, we also need more manufacturing jobs." Nike executive vice President and chief operating officer Eric Sprunk said.

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