Thursday, April 12, 2018

econlife - The One Thing We Should Know About Making Sneakers by Elaine Schwartz

Like an iPhone, your sneaker is really a bunch of components that wind up in one factory.

Now though, all of that is changing.

The Old and New Way to Make a Sneaker

The Old Sneaker Supply Chain

Starting with design and ending with the manufactured shoe, we have an 18-month supply chain. A new shoe needs a design, a pattern and prototype testing. From there factories need specs, tooling and sample production. Once ready, the shoe moves through a manufacturing process and shipping that can take 120 days.

Take the “outsole.” It begins as some rubber that comes from one place and is shaped somewhere else. Add to that some stitching and gluing and a midsole in still another factory.  The process at that point is pretty labor intensive and remains that way until we have a sneaker, a cargo ship, and a 60-day journey to a U.S. retail destination.

After design, this is the four-month supply chain:


The New Sneaker Supply Chain

Knowing that consumers expect speedy fashion cycles, sneaker planners are trying to accelerate their supply chain.

At the design stage, the need for sample testing is being replaced by a virtual reality. Here, Nike working with NOVA (DreamWorks animation) has created virtual prototypes. Here also, 3-D printing is a time saver when it eliminates the need for factory-made samples.

Meanwhile, Adidas has been experimenting with a state-of-the-art “Speedfactory.” Shifting from labor intensive procedures to a capital intensive process, Adidas not only combined the old links but also took them closer to the consumer:


The goal is to compress the old supply chain down to four months:


Our Bottom Line: Structural Change

A speedy sneaker supply chain is about much more than one industry. Called structural change, that new supply chain affects landlabor and capital. It means that labor could need different skills and upgraded capital might boost productivity. Together, they jumpstart economic growth and upset the status quo.

The moving assembly line at Ford Motor was one of many reasons we’ve had structural change in the past. With the moving assembly line, chassis assembly time decreased by a whopping 9.7 hours per car. Combine that with consumers clamoring for the Model T during the 1920s and you get the perfect economic synergy between demand and supply.

Structural change that fuels economic growth could be shown through the following production possibilities graph. The arrow points to a new maximum potential output:

So, when you think about making sneakers, the one thing to remember is structural change.

My sources and more: H/T to the Marketplace podcast for alerting me to Quartz’s sneaker articles, here and here.

Hazlegrove-6763_6bIdeal for the classroom, reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.