UA CEO Kevin Plank:
Chasing the Cheap is Being Lazy
On a recent visit to Taiwan, Under Armour (UA) CEO Kevin Plank warned Taiwan’s contract manufacturers: Cost cutting no longer results in any meaningful competitive advantage, as rapid innovation disrupts existing business models and revolutionizes manufacturing.
Chasing the Cheap is Being LazyBy Kai-yuan Teng
From CommonWealth Magazine (vol. 606 )
Kevin Plank, founder and CEO of U.S. sportswear maker UA, recently visited Taiwan together with NBA star Stephen Curry. In an interview with CommonWealth Magazine, Plank pointed out that an old-line, static approach to business is a recipe for disaster in an innovation-driven economy. Companies today need to be smart and naïve enough to bravely tackle challenges with a "why not” attitude.
Plank pointed out that UA is working to disrupt traditional textile and shoe manufacturing techniques by introducing 3D printing and robots into the industry. When entrepreneurs are open to innovation, even bra makers can manufacture shoes.
This means that UA’s contract manufacturers in Taiwan, who used to compete on cost, will have to change their old-line mindset and business model.
In late June, UA launched a new manufacturing and design center in Baltimore called Lighthouse. The center features full-body scanners that measure athletes for tailor-made outfits, 3D printers, robotic arms and a small-scale production line. UA aims to replace the global supply chain model by manufacturing its sports goods locally in the markets where they are sold. Lighthouse endeavors to develop new materials and new production processes for localized and customized products. That’s the first big change that UA envisages.
Plank points out that in traditional manufacturing it takes 18 months from conceiving a product to bringing it to market. “If we were doing consumer electronics, we would be dead if it took us that long,” he remarks. This means that product development and manufacturing lead time must become shorter so that products can be released into the market faster.
The second change on the horizon is that brand manufacturers from other industries than shoemaking will become competitors. On this trip to Asia, Plank also visited the company that produces the Curry Two basketball shoe. The company originally manufactured bras for American lingerie brand Victoria’s Secret. The company’s dynamic owner looked at the molding that goes into a padded bra and asked Plank, “I’ve got this expertise making the molds for these comfortable bras; what if I could translate that into making the most comfortable shoes?” Consequently, UA asked the bra maker to make seamless heel cups for the Curry signature sneakers.
Plank’s leadership maxims are spelled out on a huge whiteboard at UA headquarters: "We as a company we have always been smart enough to be naïve enough and not know what we cannot accomplish." According to Plank, only one type of person at UA will be fired: those who keep saying “That’s the way we’ve always done it.”
The third big change is the introduction of new engineering methods and technologies in conventional industries. Plank points to past technological progress. “Why is it that in consumer electronics, the technology, the innovation that 25 years ago took a large box size mainframe computer and it wouldn’t play music or take a photograph, today it fits in my back pocket in a smartphone?“ asks Plank in denouncing the lack of innovation in his industry. “And then I think about my industry, where frankly a shirt or a shoe is still made effectively the exact same way that it was over 100 years ago, so no innovation has happened. Our industry has been lazy looking over the world for cheap labor,” Plank says, adding that this is why UA established the new R&D center in the United States.
This March, UA outdid its biggest rival Nike by first releasing an athletic shoe with a printed mid-sole. A first batch of 96 pairs of the printed Architech shoes sold out online in just 19 minutes. “Everyone has wanted to do this, but no one thought that we would be the first to make it,” notes Plank with obvious pride.
Industry 4.0 Essential for Survival
How should the Taiwanese supply chain deal with disruptive innovation?
Cheng Kou-pin, professor at the Department of Fiber and Composite Materials at Feng Chia University, believes that the shoe and textile industries must move up the value chain and target marketing. At the same time, manufacturing will have to move from Southeast Asia closer to the American and European markets.
Syang-peng Rwei, professor at the Department of Molecular Science and Engineering at National Taipei University of Technology, observes that the originally very close and collaborative relationship between Taiwanese contract manufacturers and their international brand customers has become awkward because some have decided to launch their own brands. As a result, they are now "both friend and foe.”
Rwei estimates that half of the workforce on the production line in the footwear industry will become redundant in the coming five years due to new highly automated manufacturing processes.
The replacement of workers will be somewhat slower in the textile industry due to technical challenges. “As it looks now, only these very cheap shoes will be made in Vietnam; this is very frightening,” the professor says.
Chase Wong, executive vice president of Taiwanese fabric maker Chia Her Industrial Co. Ltd., notes that most brands keep demanding that companies along the supply chain invest in new equipment. In recent years, Chia Her has therefore bought semi-automatic equipment for dyeing and finishing as well as spinning in a bid to march toward industry 4.0. “If Taiwanese manufacturers want to survive, they must go in this direction,” says Wong.
The textile and apparel makers, however, are complaining that while their brand customers demand that they invest in new equipment, they are not ready to guarantee future orders, and the manufacturers will have to shoulder the investment costs themselves.
Plank’s visit to Taiwan underlines his appreciation for the Taiwanese market and the local supply chain. But the revolutionary changes that Plank envisages for the manufacturing processes in the footwear and apparel industry also constitute a threat for those who believe they can stem the wave of automation and disruptive innovation. “Anyone who is standing still, who has a static approach to what the future will look like, will certainly be passed by quickly,” Planck predicts.
Translated from the Chinese by Susanne Ganz