{"id":23711,"date":"2017-11-15T15:25:33","date_gmt":"2017-11-15T20:25:33","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/3d-printing-and-robotsfor-your-running-shoes\/"},"modified":"2017-11-15T15:25:33","modified_gmt":"2017-11-15T20:25:33","slug":"3d-printing-and-robotsfor-your-running-shoes","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/3d-printing-and-robotsfor-your-running-shoes\/","title":{"rendered":"3D Printing and Robots\u2026for your Running Shoes?"},"content":{"rendered":"

That\u2019s precisely what Nike is aiming to do.\u00a0 Through digitizing its supply chain, Nike is recognizing how supply chain can increasingly becoming a source of competitive advantage1<\/sup>.\u00a0 The timing couldn\u2019t be more ripe, as competitors are applying pressure: Adidas opened its first \u201cSpeedfactory\u201d in October 2017, with robots making a complete pair of shoes in just 5 hours; Under Armour has already gone to market with its 3D printed \u201cArchiTect Futurist\u201d shoe.<\/p>\n

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With aggressive goals to reach $50B in sales by 2020 and expected shipping of 1.3B shoes in 2018 alone, Nike\u2019s speed from manufacturing to market is critical.<\/p>\n

While existing efforts to optimize its supply chain have revolved around moving to low-cost labor and rationalizing its factory footprint, Nike\u2019s focus is now on shifting from its historic \u201cfutures order\u201d approach requiring 6 months of lead time, to a direct-to-consumer model.\u00a0 Critical to this model is digitizing the supply chain to enable shorter lead times.\u00a0 So how are they doing this?<\/p>\n

How Nike is digitizing the supply chain<\/strong><\/p>\n

In the short term, Nike has invested in a multi-year partnership with global manufacturer Flex to innovate ways to enable products to reach consumers more quickly.\u00a0 Two demonstrated improvements are automating gluing and using lasers to cut materials, contributing to Nike\u2019s ability to cut end-to-end lead times from 60 days to 10 days or less2<\/sup>.\u00a0 Nike also plans to install 1,200 automated machines at its Asian factories for cutting, cementing, shoe assembly, and making soles.<\/p>\n

In addition, in 2015 Nike opened its Advanced Product Creation Center, through which the team has identified ways to reduce labor for footwear uppers by as much as 50%33<\/sup>.\u00a0 The center also houses development efforts for knitting machines, 3D printing, and automation technologies.<\/p>\n

Most recently, in August 2017 the first facilities using robots to assemble footwear uppers began operations through Nike\u2019s partnership with Grabit, a robotics startup backed by Nike.\u00a0 These robots take what would be a 10-20 minute task to arrange upper pieces into a 50-75 second task, reducing assembly time by over 90%4<\/sup>.<\/p>\n

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In the medium term, Nike plans to grow its manufacturing abilities to produce tens of millions of shoes through Flex, with 25%+ of these shoes delivered through Nike\u2019s short lead-time responsive model.<\/p>\n

The benefits<\/strong><\/p>\n

The benefits of Nike\u2019s efforts are two-fold: an improvement in profit margins, and quicker design delivery.<\/p>\n

From a financial perspective, Nike\u2019s labor cost is expected to decrease by 50%, and material costs by 20%, generating a 12.5% lift in gross margin5<\/sup>.\u00a0 If Flex reached production of 30% of North American footwear sales, this translates to a $400M savings and a 5% EPS bump5<\/sup>.<\/p>\n

From a product development and consumer lens, lead times can be reduced from 3-4 weeks to 10 days or less, creating a competitive advantage through lowering both go-to-market time for new products and time consumers must wait for their customized shoes.<\/p>\n

What else can Nike do?<\/strong><\/p>\n

In the short term, Nike should consider the following:<\/p>\n