Those that have been to an apparel show or textile technology show recently will know that it seems like every show is enthralled with the concept of the ‘Micro-Factory’, the industry’s shiny new object. It is exciting to finally see significant technology changes in the way we design product, colour fabric and cut the pieces of apparel and home products. However, all of these wonderful demonstrations still beg the question: Where does the Micro-Factory fit?
Hundreds of millions of US dollars have been spent over the last 20 years to perfect digital printing, visual design, robotic cutting and new technologies for sewing. Yet with all these investments the question of where the micro-factory fits and its ultimate purpose is still shrouded in mystery. Is this new paradigm the forerunner of mass customisation or is it just a little production site for samples? Now is the time to clear up that mystery and look at the purpose and goal of the integrated micro-factory.
Purpose of the integrated micro-factory
The primary function of the integrated micro-factory is to convert a digital virtual inventory into a physical inventory on-demand. That reality allows a direct connection between the production of product and the demand of the market. This function gives sellers the ability to switch sourcing away from the risk of supply searching for demand to a real-time relationship between consumer demand and timely product production. In the simplest of terms, the purpose of the integrated micro-factory is to create a selling environment that is, “never out of stock, or never overstocked” by removing on-hand inventory risk and cost.
Goal of the integrated micro-factory
The goal of the integrated micro-factory is profit. The big difference is where the profit comes from. In the traditional sourcing models the profit is determined, to a great extent, by the cost of goods. The problem with forecasting cost in today’s real time world of instant trends and saturating news is ordering inventory months in advance of sale. Ultimately this time gap leads to high risk of trend shifts and unanticipated over stocked ‘duds’ or under stocked ‘hot SKUs’ (stock keeping units). These common conditions can change the cost-to-profit ratio dramatically after the product is on hand. Since most manufacturers offer lower per unit price based on volume, pursuing traditional volume discounts increases the probability of overstocking and the resulting clearance discounts and profit loss. Pressing for lower cost also drives lower labour costs and poor labour conditions that can result in lower quality, environmental disasters and bad press or worse.
The integrated micro-factory deals with each of these profit losses. First, the virtual inventory can be converted to physical product and restocked based on actual sales, which eliminates profit stealing clearance discounts. Second, higher profits based on better sales velocity and sustained retail price can support better labour conditions. Thirdly, the cost of product digitally coloured and produced on-demand in an integrated micro-factory is always fixed regardless of decoration or colour allowing for extraordinary decoration agility and digitally exact quality. In addition, most micro-factories operate with no emissions, no use of water or emission of toxic waste. Another amazing side benefit is that in some multicoloured apparel designs digital printing can reduce sewing labour up to 35%.
A demand-based virtual inventory converted by an integrated micro-factory allows the retailer, e-tailer or brand to produce exactly the required amount to initially stock the shelf and then only replenish what is sold. This positive control of the real-time product lifecycle and the ability to replace a non-selling SKU without a loss from dumping the held inventory usually results in a dramatic multiplication of profit regardless of a slightly higher per unit cost.
Demand sourcing
Positive real-time control of on-hand inventory by linking it directly to the demand driven integrated 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
- Product velocity index: point score based on gross profit times SKU turns per week
- Profit lifecycle track: Average selling price per unit sold vs total units contracted plotted by week
- Establish period sales forecast for high-risk silhouettes
- Build or source an integrated micro-factory that can provide no minimum replenishment of targeted silhouettes with variable decoration on demand
- Negotiate a ‘style contract’ for the on-demand delivery of the total period volume of the targeted silhouette based on SKUs from the virtual inventory
- Establish a virtual inventory
- Using high definition visual design software build a silhouette construction and decoration TekPak inventory for the choices available in store and online for the SKUs (Note: 10,000 different SKUs will consume less than a TB of digital storage vs over 100,000 sq ft of physical inventory warehouse space)
- Test the selected greige fabric fit pattern construction of the offered sizes and/or shapes of the physical production silhouette
- Install the software and communication links to facilitate POS based product lifecycle replenishment
Micro-merchandising
The next step is to establish the product in-store and/or online. Using the product information from the TekPaks and the high-resolution images from the visual design software an Augmented Reality (AR) tool needed to portray the product both in-store and online in 3D/360° visualisation can be built. It’s likely that risk analysis tools will lead to the conclusion that printed designs represent the highest risk.
These are the products that will eventually have to be put on deep clearance because of sold-out sizes or unpopular decoration. It is important to remember, that integrated micro-factory demand production does not fit for all apparel products, therefore; it is important to use the profit risk analysis tools to select just those silhouettes/SKUs that fit in a demand sourcing profile.
Micro-merchandising is shorthand for integrating the advantages of the virtual inventory and demand production to focus on niches that can represent high velocity inventory sales focused on short trends or localised opportunities. This is because production can match the velocity of sales trends without the risk of volume buying and long production lead times. Buyers and merchandisers can turn on a dime to take advantage of hot events or subjects that drive the market through today’s instant communication. An additional value of micro-merchandising is that retailers can focus on a timelier entry of fashion decorations that match local seasons and events. In this time of wild climate changes spring season and spring fashion do not arrive at every locale right on schedule.
Where to learn about the technology of real-time demand sourcing
In summary, finding the proper role and location for micro-manufacturing is ultimately as important as finding and adopting this new technology. Integrated micro-manufacturing depends on building an understanding of virtual inventory and the tools that are used to build the appropriate and efficient demand to support the factory.
Many of the vendors who provide the technology for micro-factories are beginning to understand that integrating their technology for demand production with the techniques and software that support demand sourcing is critical to the continued pursuit of domestic production and apparel profitability.
In addition, some of the shows and conferences in 2019 are recognising the importance of demand sourcing along with demand manufacturing. WTiN's Innovate Textile & Apparel Americas 2019 (ITAA) at NC State in Raleigh, North Carolina from 1-3 May will feature information both on the micro-factory and the supporting integration technology. This August, Informa’s SOURCING at MAGIC in Las Vegas will feature both micro-factories and training in the tools for micro-merchandising and demand sourcing. Attendees will have the opportunity to learn the details of risk assessment methods, style contact structures and AR product visualisations.
Also, support is always available from AM4U Inc., a leader in integrated micro-factory and real-time demand sourcing development. Contact bgrier@am4u.com or check out the ‘Principles of Demand Manufacturing’ and related videos at AM4U.com.