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.

Saving U.S. Apparel Jobs: Automation or Integration???

Today's Solution is Integrated Virtual Inventory

Almost every day we see articles, releases and product features about the automated future of the apparel and textile manufacturing.  Magazines and PR articles regale the industry with breakthroughs and future technology announcing the “digital revolution”.  Meanwhile, retailers and brands disappear at record rates, labor abuses migrate from country to country and the deadly pollution of streams and rivers continues.  As an industry innovator and holder of a number of technology patents I can say without any equivocation, “There is no single magic bullet technology solution”. There is however a strategic business solution.

Millions of dollars are spent every year on everything from digital design platforms to robotic sewing but nothing really changes.  Sure automation, 3D printing, sew bots and AI may be in the future, but what can we do today to rebuild jobs and manufacturing. We are inundated by propaganda about the growth of American manufacturing and other patriotic come-ons while reality is that off shore apparel purchases increase every year.  Retailer, brands and manufacturers so terrified of change that they cling to the belief that third world mass manufacturing labor costs will create profits at home.  August 2017 imports of $42.6 billion were up 1.7% year on year according to OTEXA at the U.S. Dept. of Commerce.  Meanwhile, the country lost over 5,000 retail outlets and tens of thousands of jobs, while billions of dollars in new imports flooded the system.  Even though retail unit sales are increasing monthly (according to AcceleratedAnalytics, September Update) the clearance sale discounts required to move this growing surplus are destroying the profits needed to operate stores.  The consumers will soon fill their closets with these bargains and the inventory backup will reach an intolerable level of constipation that will cripple brands and manufacturers that will loose more retail selling outlets every day.  Online sales will relieve the glut ache for a while, but it can’t solve the overall problem of dependence on the out dated “industrial revolution” philosophy of leveraged volume efficiency.  Waiting for politicians or automation to solve today’s pain is a fool’s errand.  The question is what can we do TODAY!

Why Can’t the Apparel Industry Catch-Up to Reality?

It can, and here’s how!  Take the technology we have today and concentrate our efforts and money on integration.  Over the past 18 years our team has built and rebuilt demand factories in attempt to create the efficient ability to convert inventory data directly into physical apparel.  We found that building bridges of integration between the technology “silos” was the most efficient and immediate path to returning sustainable profit to the apparel industry.  The integrated focus of all the available technology clearly was to connect the risky physical inventory directly to sales at both the retail and online level.  This pursuit of the “Virtual Inventory” that literally guarantees profit on every sale represents the key to individual customization and thousands of localized apparel manufacturing jobs. 

The goal is now attainable and here are the technology integration steps required to start bringing back jobs and profits product by product:

1. Technology Integration: Adopt Modern Coloration Technology

The single most important technology requirement is shifting the sampling and production coloration of fabric from traditional mass production spot color to modern digital process color.  Mass production requires the man hours and cost of color separations, custom color mix, dip approval, screen making, registration, and production printing and drying, which, cannot match the change-on-the-fly instant capability to change the print and colors on a digital printing unit. 

The textile industry and its research organizations are focused on tuning old technology. The time and money they have wasted on mass spot coloration has blocked much of the integration required for change-on-the-fly coloration.  If they had spent one percent of those resources on process color we would be changing colors and prints on the fly just like the color printer on your desk.  Digital process color printers, like the printing units that businesses’ use every day, operate with four or six fixed colors and create visual colors by adjusting the density of the dots of each color.  The variations in density allow your eyes to process different colors from the reflections of light from the different concentrations of dots.  This is how everything from magazines to labels are printed today it is even how your television and smart phone send you images. The problem is, this is not how 99% of apparel is colored today, that process hasn’t changed in hundreds of years.  Digital process color can remove the pre press costs and press preparation labor as well as the post-printing cleanup that drives minimum inventory purchase requirements.

Example:  The critical criteria for matching colors and

 multi location output using digital Active Tunnel Infusion 

permanent dye and print coloration.

The transition isn’t easy it requires a detail understanding of the basic colors and their distribution and dot density as well as how the colorant reacts to each fiber type and construction.  Unfortunately the “help” landscape is not populated with many experienced practitioners.  The color experts are generally ink makers or printer makers and neither have experience with the multitude of fabric and fiber combinations or the multitude of care and wash tests required.  The fabric and industry experts have little experience with RIP’s and dot placement so they often have little hope of color matching.  This lack of integrated end-to-end knowledge can be a real bump in the road. But then, learning how to use process color is not any more difficult than learning how to use e-mail or a smart phone.  Skills most of us have conquered over the last few years.

 

 

2. Financial Integration: Understanding Physical Inventory Risk and Virtual Inventory Opportunity

A Virtual Inventory (VI) is a digital warehouse of SKU’s that exists in binary form and is ready to convert to physical product on demand.  In VI form a hundred thousand square foot physical warehouse of products in all sizes and prints fits in one TB of storage on a standard computer.  A fully complete VI contains all images needed for retail merchandising and online presentation of the product in 3D/360° and all 2D nests and TekPak data needed to print/dye, sew, label and finish the product on demand.  The savings in inventory management, reduced shrinkage loss, and storage space costs are obvious but minor compared to the savings from avoiding over production.  Over production and the resulting surplus inventory is the largest single contributor to the profit erosion plaguing retailers, brands and producers today. According to “AcceleratedAnalytics.com” retailers are selling less than 25% of products at retail price in the first 8 weeks on display and less than 30% after 13 weeks.  As a result of clearance discounts unit sales are up but gross profits are down.  Closing locations may improve corporate G&A but it does nothing for individual store operating costs, in fact it increases the inventory pressure by reducing selling outlets. 

The inventory glut of off-shore mass manufacturing is eroding

 profits used to operate stores and pay employees.

This systemic glut of inventory and the accompanying financial risk spreads up the supply chain to the brands and manufacturers, who order or produce volume to leverage cost, then have to absorb charge-backs and shipping order cancellations. At this level no amount of “Brand Outlet Stores” will provide anything but temporary relief for this unsustainable economic system of “Over Produce-Discount-Dump” apparel marketing.

3. Communication Integration: Adopt Real-time Sales and Ordering Data, Analysis and Communication

Since there is no demand manufacturing without demand, it is critical for manufacturing to have direct access to consolidated POS data.  This data needs to include distribution path protocols and transit times as well as status of retail on hand sales inventory.  One of the biggest problems with demand manufacturing becoming a reliable source for retail replenishment is POS systems that do not consolidate and order in real time.  The speed and accuracy of inventory movement data is a basic component of building an effective and efficient virtual inventory.  Knowing the characteristics and trends of a products movement is critical to establishing a safe and appropriate on hand inventory and a consolidated Days-of-Supply (DOS) for production scheduling.  Product movement mapping is critical for manufacturing and distribution scheduling, as well as establishing on-hand DOS inventory safety levels at every product movement stop between raw materials sourcing and final customer fulfillment.

Technologies like RFID and enhanced PAM and ERP software are available but must be expanded to process and order product on a much more timely basis to support demand manufacturing and weekly store replenishments store by store and SKU by SKU.

4. Process Integration: Embrace Fully Integrated Solutions Connecting; Merchandising to Inventory to Production to Fulfillment

The apparel and textile industry was historically built as an interrelated system of independent companies or cottages and for the most part that system remains.  The industrial revolution only increased the size and production volume of the cottages, but not the structure of the independent stations along the supply track.  The connections between the farm, factory, brand and store stations were working until the train was required to travel at a much faster speed than the tracks could sustain.

Now that the technology is available to sustain the demanded processing speed at each station we need to fix the tracks and bridges to sustain the new digital system.

One bridge must be built between digital design platforms and consumer product 3D/360° display devices that provide customization and fitting both on the Internet and in-store.  The same software must produce a corresponding 2D pattern and TekPak suitable for storage, search and printing.  Another bridge that needs to be built is between consolidated POS data and the Virtual Inventory to provide scheduling and logistics input for all the stations down the line to the store or online transaction.  Until all the stations are connected and the supply and sale are linked a light speed the system will be as efficient as its slowest link.  The biggest opportunity however is that brands and retailers can set up a test mini-factory to focus on a small decoration sensitive product group like leggings or children’s pajamas and profit from demand manufacturing immediately.

Summary

There are specific differences between a demand manufacturing plant and a traditional assembly line mass manufacturing plant. The primary profit approaches are very different. A demand plant is built to deliver product from a virtual inventory and to assure a profit by replacing product that has been sold at retail price, preventing clearance dumping. In mass manufacturing the buyer produces profit by leveraging the cost through volume and manufacturing efficiency.  The basic personnel organization of the demand plant is in integrated independent modules that move variable product traffic through a series of control and quality check points. The mass manufacturing plant, on the other hand, produces a continuous line of fixed identical production ending in the final inspection of the product.  In demand manufacturing the emphasis is on individually addressable customer value instead of cost leverage of volume efficiency of mass manufacturing.