Introducing the Future Factory Models of Demand Sourcing 4.0

Choosing A Digital Factory Footprint

Digital factories have one common mission… they transform a digital virtual inventory of SKUs into physical product. It doesn’t matter if the factory is making furniture parts with CNC cutters or assembling cars using robots the mission is the same.  However, the concept of a Micro-Factory as a stand alone structure is misleading at best and doomed to fail at worst.

Integrated demand sourcing digital factories can be tasked an unlimited array of dedicated factory footprints organized for specific profit and sustainability goals. How the symphony of different technologies is integrated to efficiently complete each individual quality product and deliver it on time, at a profit, environmentally and economically sustainable is a highly complex orchestration.

Digital apparel factories tend to fit in four different general structures.  Each of these generic types is based on production segment of the market or the supply chain.  Each factory is specifically tuned to support an individual business plan.  The experience gained by building each of the factory types and their variations since 1996 has provided a wealth of lessons that are available at AM4U.com or through direct contact with AM4U consulting at bgrier@am4u.com.

The demonstration of different factory configurations at SOURCING at MAGIC created a substantial buzz and sales for the exhibitors. Demonstrating the integration of the role of Digital Manufacturing and the impact of real time sourcing on the financial well-being and future global sustainability is a mission of SOURCING at MAGIC. Joining these factory types together with the 3D of visual design, the Augmented Reality (AR), retail/online merchandising, social marketing software and Virtual Inventory (VI) is the next step in online and retail consumer marketing.

The Direct-2-Garment (DTG) Demand Factory

This factory custom prints, imprints and/or embroiders decoration directly on athletic and leisure finished apparel.

It can be placed almost anywhere and provides outputs from 100 to 600 units per eight-hour shift depending on the printer output. The thousands of small to large DTG T-shirt factories reside in garages and small and large factories throughout the country.

Some of the key characteristics of the DTG production sites are:

• The small factories require no special power or air service, they operate at normal house power and a small commercial compressor can handle any air requirements.
• Most DTG operations do not require sewing capability because they are normally operating with blank pre-sewn garments.
• These facilities also can operate using either direct to garment printers or images applied to the garment through sublimation or transfer.
•  In most states DTG operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers used do not require dangerous chemicals or significant post-operational cleaning or garment washouts.

The downside of the DTG opportunity is oddly a byproduct of the low cost of entry and easy operation. Since there is very little barrier to entry the nationwide proliferation of DTG sources has created overwhelming competition and price pressure for small operations. Focusing on very short run custom printing has provided some relief but eventually DTT factories will have to expand from printed T-shirt blanks to additional cuts of athleisure apparel and accessories.

Because of the high level of competition DTG providers need to find a space in the sourcing path for local boutiques and small specialty retailers this opportunity will come as a result of the expansion of the product line beyond T-shirts.

 As stated, these factories are used to produce the initial stocking order for large multi-location retail chains and brands. This technology allows sourcing systems to become extremely lean because there is no requirement for time-consuming prepress or multi-location transportation of product. These factories also allow buyers to take full advantage of the digital design systems that can provide virtual inventories with wide ranges of choice and the ability to create multiple SKUs dedicated to various locations and fast-changing Internet trends.

Some of the key characteristics of the Digital Production factory sites are:

• The DP factories require special power or air service, including a minimum of 800 amp electrical service, numerous transformers and a complex compressed air delivery system.
• Most DP operations can require significant sewing capability based on their structured capacity.
• These facilities also can operate using either direct to fabric printers or images applied through sublimation.
• With the proper additional equipment DP’s are capable of permanently spot color dyeing fabric using change-on-the-fly technology without the use of any water.
• In most locations DP operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers and dying technology used do not require dangerous chemicals or significant post-operational cleaning or garment washouts.

 Unfortunately the downside of the adoption of digital production has been an industry that has a legendary resistance to change. This resistance coupled with significant requirement for capital investment and a microscopic supply of technically trained interdisciplinary workers and management will cause this necessary change to be roughly the equivalent pushing a brick in the mud.  Currently, the lack of integration between the digital technologies of merchandising, design, coloration, cutting and sewing are making the seamless vertical combination of these multiple technologies extremely difficult.

The Forecast Based High Volume Digital Production (DP) Factory

This high-volume factory design is used primarily for Retail and Brand initial stocking orders it included overhead sewing delivery systems, multi-ply digital cutting and high volume printing. This design requires at least 400-800 amp service and compressed air distribution and multiple transformer power supplies.  These factories can output 3000- 6000 m² per hour of fabric with no minimums or pollution.

High-volume digital production is the likely replacement for current coloring, printing and cutting technology. DP factories are still likely to be overseas or at least in areas with lower labor costs. This type of factory still demands huge sewing facilities with hundreds if not thousands of product handlers, sewers and other support individuals. Until sewing is sufficiently automated high-volume factories are likely to remain offshore.

 As stated, these factories are used to produce the initial stocking order for large multi-location retail chains and brands. This technology allows sourcing systems to become extremely lean because there is no requirement for time-consuming prepress or multi-location transportation of product. These factories also allow buyers to take full advantage of the digital design systems that can provide virtual inventories with wide ranges of choice and the ability to create multiple SKUs dedicated to various locations and fast-changing Internet trends.

Some of the key characteristics of the Digital Production factory sites are:

• The DP factories require special power or air service, including a minimum of 800 amp electrical service, numerous transformers and a complex compressed air delivery system.
• Most DP operations can require significant sewing capability based on their structured capacity.
• These facilities also can operate using either direct to fabric printers or images applied through sublimation.
• With the proper additional equipment DP’s are capable of permanently spot color dyeing fabric using change-on-the-fly technology without the use of any water.
• In most locations DP operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers and dying technology used do not require dangerous chemicals or significant post-operational cleaning or garment washouts.

 Unfortunately the downside of the adoption of digital production has been an industry that has a legendary resistance to change. This resistance coupled with significant requirement for capital investment and a microscopic supply of technically trained interdisciplinary workers and management will cause this necessary change to be roughly the equivalent pushing a brick in the mud.  Currently, the lack of integration between the digital technologies of merchandising, design, coloration, cutting and sewing are making the seamless vertical combination of these multiple technologies extremely difficult.

The Demand Based Integrated Micro-Factory

This factory design works directly with the point-of-sale information from retail and online clients to replenish only what is sold or required to maintain proper shelf stock. The Integrated Micro-Factory (IMF) represents the most significant change in the traditional sourcing structure.  The IMF is a substitute for the projected on-hand inventory of product in excess of the initial stocking order.  The IMF allows merchandisers/buyers to replenish in-store or online sales as they occur rather than purchasing the entire forecast and holding finished product awaiting sales.  The IMF’s mission is to increase product offering while removing inventory risk. The IMF is best placed in or near the distribution center and can operate on 3 to 5 day delivery directly from consolidated POS data.

Some of the key characteristics of the Integrated Micro-Factory sites are:

• This factory requires a minimum of 5,000 sq. ft. in a dedicated space with compressed air distribution and 400amp service.  An IMF can output 300—1500 units per 8-hour shift depending on sewing capacity.
• IMF’s can operate using either direct to fabric printers or images applied through sublimation.
• With the proper additional equipment IMF’s are capable of permanently spot color dyeing fabric using change-on-the-fly technology without the use of any water.
• The IMF with the proper additional equipment is capable of full dye and print in the same pass as well as art composite placement and piece drop dying production technology.
• The IMF configuration is also the best suited for higher volume (more than 200 units per day) Purchase Activated Manufacturing (PAM) or custom one off production.
• In most locations IMF operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the coloration technology used does not require dangerous chemicals or significant post-operational cleaning or garment washouts.

The Mobile Project/Event Micro-Factory

 The Mobile Micro-Factory (MMF) design is specifically built to fit on a single truck and be installed in a 200amp facility within 3 to 5 days. Its purpose is to provide provisional production for license products and other apparel and accessories, which may have a specific lifespan. It is also used to support events like concerts and fairs. It can produce up to 1000 units per eight-hour shift depending on configuration.

Some of the key characteristics of the MMF sites are:

• The MMF can operate from a truck, tent (with a 40kw generator) or a space with 200amp service.
• The mobile factory normally requires 3-5 days for installation and product testing.
• MMF’s are designed to convert a pre-established Virtual Inventory of multiple designs to finished product on demand.
• These facilities also can operate using either direct to fabric printers, images applied through sublimation or embroidered patches.
•  In most locations IMF operations do not require either regulatory labor permits or expenses to dispose of toxic waste chemicals or water. This is because the printers and decoration technology used does not require dangerous chemicals or significant post-operational cleaning or garment washouts.

Summary

Virtual inventories, digital manufacturing and real-time demand sourcing are here to stay.  Ten years ago 50m² was a top speed for printing fabric today inkjets can operate 100+ times faster and change images and colors on the fly.  Today, we can transform a digital file into a pair of shoes.  Today, a picture of the Internet can shift a fashion trend 180° in just hours while a style forecasts still takes months of prep and conventional production.  Today, the World Bank says that 20% of the world’s water pollution comes from coloring and processing textiles while the digital manufacturing technology is available to dye and print using no w

INTEGRATED MICRO-FACTORIES, THE FORECAST GAP & DEMAND SOURCING

FINDING A HOME FOR YOUR MICRO-FACTORY

One of the questions that vexes anyone interested in building or using an apparel micro-factory is: “where exactly does it fit?”  Hundreds of millions of dollars have been spent perfecting the technologies that go into a micro-factory but very little money has been spent on the application of the micro-factory to the process of sourcing product. There are four current practical applications of the micro-factory. The first, is as a sampling site that allows brands to physically produce a product for fit, production modeling or real-time consumer testing. The second, application is a print for pay model that usually uses direct to garment printing on T-shirts or other casual wear. Third, there is one-off production for online customized apparel sales.

The fourth application the conversion of a virtual inventory to physical inventory is by far the most important application for returning domestic production of apparel to the US market. The use of micro-factory integrated technologies to replace risky print and licensed products reduces the losses from unsold inventory that plague the retail market and to some extent the online market. Having to make decisions for large inventory investments in print and licensed products in the age of the Internet, fashion influencers, instant trend promotion and tribal identification has caused huge unsold inventories and the resulting profits stealing clearances.

 The Forecast Gap

 Remarkable advances in the technology of design and visualization have allowed apparel designers, brands and product developers to reduce the time required to visualize and prepare a new apparel design or decoration. However, these advances even though they are portrayed as reducing time-to-market really only reduce time to production. Coloring/printing the fabric, the cutting, sewing and transportation/distribution of product still creates a huge time gap between the initial concept and the presentation of the product for consumer sale. Decisions about color and print that occur this far in advance represent the huge risk that a market shift will cause a volume stocking order to go mostly unsold at retail price. Unfortunately, that retail price is what planning and profits are often based on. This gap in time and money is what we call the “forecast gap”. Placing an integrated micro-factory directly in the supply chain as a replenishment source after a minimal initial stocking order can reduce risk and in fact guarantee both profits and appropriate product stocking. Using a micro-factory for direct point-of-sale replenishment allows each retailer or online site in the distribution system to match their product availability with local demand. This means that on hand inventory can be calibrated to avoid inventory clearances but still provide accurate product availability.

Merchandising Agility

 Placing the integrated micro-factory in position between the general production sources and the consumer creates a level of sourcing agility that allows merchandising to react to out of stock situations by size, gender or color and to avoid overstock clearances by location. For the highest efficient use of the integrated micro-factory in a replenishment role, the factory (which produces no pollution) should be placed in or near the appropriate distribution center. It is important to remember that the physical space taken up by the factory can be designed to match the space that was previously taken up by the physical inventory. As a rule of thumb, hundred thousand square foot of inventory storage equals about 1 TB of space in the virtual inventory. It is also important to remember that the cost of the micro-factory is probably less than the initial stocking cost and discount losses on product in a period of less than a year. So, if you’re going to employ and integrated micro-factory to fill the forecast gap the sourcing paradigm for some products may have to change from forecasting to demand sourcing.

Demand Sourcing

 The key ingredients of demand sourcing are: product profit index, risk assessment, real-time POS replenishment and negotiating a flexible style contract. Positive real-time control of on-hand inventory by linking it directly to the demand driven Micro-Factory is the fundamental feature of demand sourcing. In order to construct and demand sourcing infrastructure the selling entity whether it is retail or e-tail needs to complete three basic pre-activation tasks.

Establish real time profit risk analysis tools

ü  Profit velocity index (PVI): point score based on gross profit times turns per week

ü  Profit Lifecycle track:  Average selling price per unit sold vs total units contracted plotted by week.

Establish period sales production for high-risk silhouettes

ü  Build or source an Integrated Micro-Factory that can provide no minimum replenishment of targeted silhouettes with variable decoration on demand.

ü  Negotiate a “Style Contract” for the on demand delivery of the total period volume of the targeted silhouette based on SKU’s from the Virtual Inventory. Establish a Virtual Inventory (VI)

ü  Using high definition visual design software build a silhouette construction and decoration TekPak inventory for the choices available in store and online for the SKU’s. (Note: 10,000 different decoration VI SKU’s will consume less than a TB of digital storage vs over 100,000 sq. ft. of physical SKU inventory warehouse space.)

ü  Test the selected greige fabric fit pattern construction of the offered sizes and/or shapes of the physical production silhouette.

ü  Install the software, communication and transportation links to facilitate POS based product lifecycle replenishment. Profit Velocity Index (PVI)

Profit Velocity Index (PVI)

Two of the newest elements in creating a demand-sourcing paradigm are the Profit Velocity Index (PVI) and the flexible Style Contract. The PVI is a competitive point index between products, which determines both the replenishment level, and ultimately SKU stocking life. In merchandising whether online or in-store the velocity of product movement is the key ingredient in determining on-hand inventory, product lifecycle and ultimately product profitability. The PVI is calculated by simply multiplying the concurrent percentage of gross profit times the turns of on-hand inventory over the period of the week. Comparing the PVI to the scores of other like product or products in a particular size or lifestyle area will determine the risk and ultimately the level of replenishment required to realize the highest possible profit levels from that particular SKU. When the PVI for a particular product dips below a predetermined minimum score the product is replaced or discontinued.

Style Contract

 The flexible Style Contract works directly with a progression of products that are driven by the replenishment lifecycle described by the PVI. The flexible Style Contract depends on digital coloration or printing which allows the integrated micro-factory to change color and/or decoration without any additional cost. In its simplest form the flexible style contract is a total volume of a particular silhouette, regardless of color or print, the brand, the retailer or the e-tailer is contracting for over a specific period of time. Once the contract is in place the buyer can determine a progression of decorations based on a real time evaluation of current trends. Whenever a product is determined by the PVI to be ready for replacement, the micro-factory moves to the next decoration or colors in the progressive list and replaces the product in the store that requires the new product. This allows the buyer and the merchandisers to work together to offer the appropriate product with the maximum PVI store by store within the distribution area. In the case of online since the product may not be made in the micro factory until after it is been purchased all of the products in the priority list of decorations can be displayed for sale since they only reside in the virtual inventory.

Where can brands and retailers learn more?

All of these applications technologies and merchandising tools will be on display and detailed in the Fashion Technology section of SOURCING at MAGIC in the unified MAGIG show August 11-14 in Las Vegas.

Rebuilding the Profit Structure of Apparel Sourcing

Reprint of an interview of Bill Grier written by Tansy Fall of WTIN for the new journal Textile 4.0 available at: http://textile40magazine.wtin.com/

Merchandisers can drive on-demand manufacturing

By Tansy Fall 26 February 2019

Moving from a traditional supply chain model to an on-demand workflow is not as easy as flicking a switch. But AM4U CEO Bill Grier believes there is a place in the supply chain for microfactories to make this transition easier. Tansy Fall reports.

Among the biggest challenges facing apparel manufacturers today is shortening time-to-market whilst simultaneously reducing inventory. This issue has risen to prominence thanks to both ecommerce and the changing demands of consumers, which has left the traditional textile and apparel supply chain in a quandary over how to keep up with demand.

On-demand manufacturing has the potential to solve both inventory and time-to-market issues. However, the lack of data sharing in the industry is seen to be stifling brands’ and retailers’ ability to connect orders with production. If businesses could better connect to the rest of the supply chain, brands and retailers would undoubtedly see dramatic improvements in sell-through (the percentage of a product that is sold by a retailer after being shipped by its supplier) and ultimately in-store and online profits.

This is where US-based AM4U (Apparel Made For You) comes in. The company is aiming to position itself as a leading consultant and supplier of microfactories and CEO Bill Grier is confident that there is a way to change the make-up of the supply chain, though admits it will be a gradual process. Grier has long worked in the digital printing space but has also been employed as a technical adviser to American apparel businesses. In 2012, Grier launched AM4U with the goal of demonstrating the capabilities of a demand-based integrated microfactory, for deployment in the apparel sector.

The company has since struggled to on-board the concept with brands and retailers and Grier says this is largely due to the mindset of the industry and its historic structure. “We are still mired in the industrial revolution,” he explains. “The mentality of investment, the mentality of purchase, and the mentality of stocking and inventory. We build factories for capacity […] and capacity is the antithesis of demand. […] The brands were not ready. Everyone visited us but nobody bought because they had no deployment plan.

“We do have three manufacturers right now where we have installed equipment and they have demand-based opportunities. [However] we have to balance the money involved between the manufacturer, the brand and the retailer. Because of the focus on cost, the manufacturer has been left in a position where they can’t make the kind of money they need. […] Once you focus on cost then you focus on labour, and you end up moving production.”

Most recently, the difficulties associated with working in an industry very much set in its ways has led AM4U to partner with event organisers UBM Fashion, to build three integrated microfactories on the show floor of Sourcing at Magic, which took place in February 2019. The company is endeavouring to showcase the customisation possibilities of a digital microfactory and encourage those in sourcing departments to think outside the box.

Away from the exhibition floor, Grier says he has also spent millions of dollars trying to develop a new way of making apparel, with each on-demand factory requiring an average investment of US$650,000 for set-up. From this, he has learnt that there are two key elements for success, which are now driving his business forward: integration across the supply chain and deployment planning.

Driving change

Considering supply chain integration and deployment together, Grier is of the opinion that digital manufacturing processes and microfactories will find their sweet spot if they are remote from traditional sourcing practices. He explains: “Buyers aren’t going to change. Their job description instructs them to find the lowest cost. [However] whilst buyers are responsible for cost, merchandisers are responsible for profit.”

The role of the merchandiser at a brand or retailer is to predict up-and-coming sales trends, and therefore to ensure maximum profitability. Merchandisers make certain that products appear in the right store, or online, at the appropriate time and in the correct quantities. Moreover, the merchandiser directly liaises with the distribution centre and often has access to data from the POS and the supply chain. This enables them to identify production and supply difficulties and deal with any problems or delays as they arise. As a result of this, the merchandiser is also well placed to make decisions about product quantities, however they are often bound by pre-ordered stock and are therefore also responsible for monitoring slow sellers and therefore price reductions.

“There are items where you need to have inventory, so buyers have a role there,” Grier continues. “But merchandisers deal with the distribution centres, not the manufacturers. And, you can drop a pollution-free microfactory into the distribution centre.”

Adding a microfactory to the supply chain at the distribution stage in the process is a relatively new concept for the industry. It is something that ecommerce marketplaces, such as Amazon, are implementing, however, as Grier notes: “Amazon is trying to put things in at their distribution point but it’s direct-to-garment. […] The problem is that Amazon is doing what we used to call just-in-time. This killed American manufacturing because it just moved inventory to the next level down.”

Moving inventory along the supply chain is not a solution. However, adding microfactories to distribution centres, well placed to leverage POS data, could be the appropriate first step towards digitalisation of the industry.

Mitigating risk

This is particularly applicable for high-risk products such as prints. White or black garments still lend themselves to being manufactured in bulk, responsibility for which remains with the buyer. But for those products that are more experimental, be that in colour or design, on-demand production can allow for garments to be bought before they are made; limiting the risk the brand or retailer takes in producing them. If they are successful, manufacturing capacity can then be increased.

AM4U currently has microfactories that are being tested by a handful of brands in the US. The results of this will be first realised in August and this testing will then go on for another year. “It has a direct connection with 2375 stores,” Grier adds. “They are at risk, and they have a huge pain at the moment, so they have to change. They’re therefore willing to try this. Retailers need to develop new technology to evaluate how they calculate product risk.”

This test is an extension of another AM4U project. Grier continues: “We ran 100 of a major retailer’s stores on a test basis. The question was, how many [products] do we have to make to cover their entire licenced design children’s pyjamas? How many did we have to make a day? […] The most we ever had to make in one day was 174.”

This assessment highlights the validity of the microfactory concept, provided retailers and brands can be moved towards an on-demand sourcing structure. “We began to realise that the biggest issue was that nobody was ready to give us [the manufacturer] POS data. […] The manufacturers can’t change until the point where the money enters the system changes.” Therefore, the microfactory needs to be close to the end consumer, where the money enters the value chain.

One AM4U customer based in Los Angeles, US, has embraced this microfactory concept and has successfully set up partnerships with brands. The business is a leggings manufacturer, and the owner is able to pay its workers US$20/hr, Grier says, selling a pair of leggings for US$32. Grier explains that the business has ‘silhouette discipline’ meaning that the design of the leggings can be varied and easily changed whilst the tried and tested shape of the leggings remains the same.

Moreover, Grier highlights the kind of contract the microfactory has with the brands. He says that whilst the brand the microfactory works with commits to buying X number of leggings a year, they do not specify the design at the point of order. The design can therefore be changed at any time, using digital technologies, and the microfactory is given access to the brand’s POS data in order to guide its manufacturing decisions. Grier says that the mircrofactory’s “sell-through rate is 80%, compared to the average sell-through rate for women’s apparel, which is only about 23% at retail.” 

Regarding the importance of the supply chain having access to POS data, Grier draws on experience from his family’s involvement in food company General Foods, which was bought by Kraft in 1990. Grier references the impact the barcode had on the grocery industry, providing the ability to track buying patterns and apply this directly to stock quantities and production needs. He says that this same approach could be applied in the apparel industry if the retailers would release the POS data upstream and that the ‘sell-by dates’ formula that informs inventory in the food sector, should be applied to sourcing and inventory control in the clothing sector. Due to trends in the fashion industry, garments also have a sell-by date and, whilst brands and retailers are aware of this, which often results in them discounting items, they are not currently managing their inventory and supply chains in order to ensure the right number of garments are produced that can be sold by the ‘sell-by date’. Grier adds: “Sales should be based on promotion and not on clearance.”

The future of the factory

In the creation of microfactories, two areas of the supply chain that have been very separate for the majority of the industry’s history are united: “Colouration has been separated from cutting and sewing for so long that they don’t have an understanding of it,” Grier comments.

This poses a big challenge to manufacturers or brands that implement microfactories as processes are being connected that haven’t had to interact with one another before. And, connection between the textile manufacturing element of the supply chain and the apparel manufacturing element is not the only communication problem. The design process needs to better involve information from the manufacturing process as well. Grier says: “Up until the middle of last year, not one design software available could see directly into a RIP [raster image processor, which interprets and renders a design into a pattern of dots for digital printing].”

Technology also clearly needs to advance to achieve the seamless production processes that the implementation of microfactories require to be successful. With the concept of microfactories at the distribution centre, responsibility for investment could finally be brought to the table of those that hold the most capital for investment, the brands.