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Is a New Model for Manufacturing Finally Here?

Ethical denim-maker Saitex’s automated facility in California is a sign that localised, just-in-time manufacturing may be poised for widespread adoption.
Ethical denim-maker Saitex is employing several new technologies at its first US factory.
Ethical denim-maker Saitex is employing several new technologies at its first US factory. (Saitex)

LOS ANGELES, United StatesDenim manufacturer Saitex, a B-Corp known for setting new sustainability standards for jeans production in Asia, has seen demand for its services soar as brands face increased pressure from investors, consumers and regulators to clean up their supply chains. Headquartered in Vietnam, where even generous salaries remain low compared with the West, Saitex could have continued expanding its footprint in Asia to keep up with orders. But instead, the company has recently opened a new-fangled facility in Vernon, Calif., a manufacturing town just south of Downtown Los Angeles.

The area remains the largest producer of apparel in the US, with particular expertise in denim and T-shirts. The apparel manufacturing industry here shrunk dramatically after the North American Free Trade Agreement (NAFTA) eliminated most barriers on products and services passing between the United States, Canada and Mexico in 1994. But it wasn’t wiped out like in other parts of in the country, mostly because LA dealt in two product categories that were still worth making locally: premium denim, which required the specialised skills found in the area and could absorb higher relative costs, and blank T-shirts, which the local entertainment and tech sectors snapped up for “merch.”

And yet, LA’s prominence in these categories has waned in recent years as manufacturers move their operations overseas, faced with minimum-wage hikes.

Saitex says it can boost LA manufacturing in a way that benefits both brands and the local economy. Its new factory is highly automated, equipped with all the latest tech, from 3D cutting to auto-sewing to a “dancing box” that requires only 0.6L of recycled water to wash each garment. To get the operation up and running, Saitex chief executive Sanjeev Bahl hired Kathy Kweon, a denim industry veteran, as the factory’s president. Along with running the day-to-day operations, she’s responsible for recruiting the skilled workers and denim experts who are still needed to manage the machines and perform quality control. But while it takes 250 people to make 1,000 pairs of jeans in Vietnam, in Vernon it takes less than 100.


We’re creating a hybrid manufacturing model that could be a formula for the industry.

“There is always a point in time when technology is ready,” Bahl said. “We’re creating a hybrid manufacturing model that could be a formula for the industry.”

To begin with, the factory will make only about 500,000 pairs of jeans per year — ten times fewer than Saitex makes in Vietnam — for clients including Madewell, Everlane, Outerknown and Filson. However, this volume could grow on the back of a few key advantages.

For a start, making jeans at the facility will allow brand partners to burnish their ethical credentials and signal their support for American jobs. But it could also make smart commercial sense. With small-batch production options and proximity to American consumers, Saitex’s Vernon plant enables brands to quickly replenish inventory, responding to consumer interest for particular products rather than placing big bets upfront. That means better aligning supply and demand, with the hopes of significantly reducing excess inventory.

Plus, there’s a test-and-learn opportunity. For instance, a brand can send the factory a new denim design and have just 500 pairs produced for trying out with consumers. Based on hard data, the brand can then choose whether or not to scale up production. In traditional apparel manufacturing, it can take up to a year for a product to go from concept to sales floor. Working with the new Saitex facility, it could be as little as three weeks. For e-commerce orders, Saitex offers brands a service that also ships their products directly to the consumer, further speeding up the process.

“This factory will allow for real-time data and real-time ROI,” Bahl said. “Think 90 days versus 270 or 365.”

Some believe the launch of factories like this mark a tipping point in the way clothes are made.

“Retailers are beginning to look at the end-to-end performance of their value chains and further upstream, not just in process change but also in partnerships,” said John Thorbeck, chairman of supply chain analytics firm Chainge Capital. “[Brands] are investing to be more responsive.”

Madewell, which first contracted Saitex’s Vietnam factory in 2017 to launch fair-trade denim, is betting on the US operations to test out new techniques, fits and fabrics in Los Angeles, where the J.Crew Group-owned brand’s research and development team is based.


“The dream is to be able to test and learn, but testing needs to have the integrity of a bigger run of production,” said Libby Wadle, chief executive of the J.Crew Group, who praised Saitex for its ethics and high level of quality. She also noted Saitex’s willingness to share best practises with other manufacturers in the hopes of igniting broader change across the industry.

“For Sanjeev, it’s not proprietary,” she added.

Interest in responsive, or “just-in-time,” manufacturing — successfully deployed by Spain’s Inditex, parent of fast-fashion giant Zara, which famously moves product from concept to sales floor in two-to-three weeks — has gathered steam in the US over the past decade.

As a result, the US has experienced a small-but-steady uptick in local apparel and shoe production. In 2019, 98 percent of shoes and 97 percent of clothes bought by Americans were imported, but the number of these products manufactured locally increased by 72 percent over the previous 10 years, according to the American Apparel and Footwear Association (AAFA), a trade group.

These aren’t bringing back jobs that left decades ago,” said Stephen Lamar, president and chief executive of the AAFA. “Instead, it’s creating jobs that are driven by technology.”

Scaling these efforts has been challenging, however, in part because many retailers have a vested interest in the old way of doing things. For some, cheaply produced, large-inventory volumes can help to weave a growth narrative for investors, where retailers claim they are manufacturing more products in order to open more stores and fuel top-line sales. The success of the off-price channel has shown that this approach can work, allowing brands to increase sales for years while maintaining slim margins.

But now, brands have so much excess inventory — especially after 2020 hit consumer demand and forced many to shut down their physical stores — that prices often can’t go any lower, nor discounts any deeper, without resulting in losses.

“That growth has either disappeared or is highly uncertain,” Thorbeck said. “Without that engine of growth, the formula for cheap inventory is an unsustainable burden.”


Even so, convincing brands that produce en masse to implement on-demand manufacturing remains an uphill battle. For one, it requires upfront investment. It also costs more per item to manufacture in small batches, a hard hump to get over, even though items made this way are more likely to be sold at full price, resulting in increased profits.

Brands like Nike and Adidas, which have opened on-demand manufacturing facilities in recent years only to close them, often aren’t willing to take the risk, even if it means a leaner, more efficient business in the medium to long term.

Adidas, which opened two robotics-driven “Speedfactories” — one in Germany in 2016 and another in the US in 2017 — abruptly closed them in 2019, saying it would instead incorporate some of their technology into processes at factories in Asia, where it would be more “economic and flexible.”

Nike, which partnered with Silicon Valley speed-to-market manufacturer Flex in 2015, invested heavily in a project to manufacture customised goods in an on-demand factory, working with Flex to build out a 57,000 square-foot, $100 million-plus factory near Guadalajara, Mexico. But the deal fell through because the two companies were unable to get manufacturing costs at the Mexican factory close enough to those of producing in Asia.

“It became clear that the company would be unable to reach a commercially viable solution,” Flex said at the time.

In 2020, the brand also dropped plans to open a factory in Arizona, which it acquired for $70 million, although the dissolution of that deal was attributed to Covid-19 cost-cutting. But despite setbacks, Nike’s interest in local, speedy manufacturing has not waned. In December 2020, Nike shared more information regarding its intentions for supply-chain optimisation. Its “Express Lane” manufacturing process, which cuts down turnaround time to just a few weeks, was first introduced in 2017 and now represents almost 20 percent of the overall business. Last year, the company also opened a warehouse in Los Angeles that uses predictive analytics to determine what product customers will buy in order to shorten shipping times.

Thorbeck is convinced that the pandemic’s squeeze on margins is the push that retailers needed to modernise their operations.

The alternatives have been exhausted.

“I’m optimistic because honestly, the alternatives have been exhausted,” he said. “Companies have not dramatically improved retail performance, and their only growth channel, which online, is inherently more expensive.”

Related Articles:

The ‘Zero Inventory’ Solution

The Start-Ups That Want to Solve Fashion’s Packaging Problem

What to Do With All That Excess Inventory

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