Automated factories Robots transforming Asian Adidas suppliers

Asian leisurewear suppliers Jia Hsin and Tung Mung International are investing millions to automate their factories, and feed Adidas’ and Puma’s insatiable appetites for shoes and clothes.
Humans: Who needs 'em?

High-tech factories complete with robots are replacing traditional Asian shoe and clothing plants, especially those supplying top sports brands, like Germany’s Adidas and Puma. It is an unavoidable shift that may slowly bring the era of low-paid workers in foreign countries, toiling in dark factories making garments by hand for Western markets, to an end.

Worker shortages, rising wages and more demanding clients are the main reasons suppliers are diving into automation. But above all, the need for speed and efficiency is pushing the Asian textile firms to pour millions into robots, changing the way these massive operations work.

“At the moment we still need workers to fit the shirts onto the machine,” says YY Chen, owner and manager of Tung Mung International, a Singapore-based clothing exporter whose vietnamese factories supply Adidas. He’s referring to a white robot capable of carrying two dozen polo shirts across the factory floor to a giant ironing machine. “But we’ll change that too,” Mr. Chen says.

A whopping 97 percent of Adidas' 360 million shoes produced in 2017 came from Asian factories.

Increased wages for human workers are making them too expensive. “Wage costs are increasing everywhere,” says Jürgen Wormser, the lead shoe purchaser at Adidas rival Puma. Suppliers and brands say robots aren’t there just to lower costs, but that it’s about innovation. “Puma isn’t buying our products because we’re cheap, but because we’re good,” says Jerry Huang, managing director of the footwear supplier Jia Hsin. The robots are also more efficient, making fewer mistakes than human workers. “Automation is leading to improved quality,” Mr. Wormser says.

Workers at Tung Mung's factory outside Ho Chi Minh City will soon have their tablets replaced by computerized glasses, which guide them to rolls of fabric needed for production. The rolls are equipped with radio frequency identification chips. Mr. Chen’s machines already use lasers to cut out patterns for football jerseys, minimizing waste, i.e. lost fabric, before they are passed on to seamstresses.

Factory robots can also produce products faster, which is critical now that brands no longer order new products a year in advance, but need shoes and t-shirts within a matter of days to keep up with their young customers’ flighty tastes. This demand, in turn, pressures factories to invest in new machinery and streamline their production processes, meaning that textiles are increasingly glued or welded together rather than sewn.

11 p21 Asia dominates production at Adidas-01

Jia Hsin, which supplies Puma plastic sandals that retail at €100 or more, invested $16 million in a new factory in Ho Chi Minh City, complete with huge molding machines that will churn out 21 million pairs of sandals in 2018. In three years, it will be 30 million.

In 2017, a whopping 97 percent of Adidas' 360 million shoes produced came from Asian factories. Michael Bennett, a Puma exec in charge of sustainability, insists that the “volume of output produced to the standard of quality we need definitely could not be produced in exploitative factories.”

As living standards in Indonesia and Vietnam, currently the main supply locations after production moved first to South Korea, then Taiwan and on to China, improve, so are workers’ demands for acceptable working conditions. This makes it harder for factories to find workers, especially in mega cities like Ho Chi Minh City and Hanoi. Parts of their upgrades, including the modernizing of production processes, extend to creating comfortable, worker-friendly factories, with insulated roofs and air conditioning.

But even so, many firms still look to move their operations to lower cost locations, such as Cambodia, Myanmar and Ethiopia. It is an approach that experts say won’t work in the long term. Factories need an ecosystem of suppliers and engineers to service machines, and reliable shipping routes are an essential component. Not to mention the high costs associated with rebuilding this infrastructure in a new country.

As a result, Adidas even started experimenting with highly automated factories at home in Germany and in the US. Adidas CEO Kaspar Rorsted says the factories are a test and that currently their output is too low and production costs too high. Meaning there is little chance they will replace Asian plants in the foreseeable future.

Joachim Hofer covers the sports and leisure sectors for Handelsblatt. To contact the author: [email protected]