Recent global events have put extreme pressures on Asia-heavy supply chains of top American footwear brands, but it’s unlikely the majority will follow the example of New Balance and pursue U.S. manufacturing, says Matt Priest, CEO and president of Footwear Distributors and Retailers of America (FDRA).
New Balance, a privately held business whose worldwide sales totaled $4.4 billion last year, announced in March that it had opened a manufacturing facility in Methuen, Massachusetts. The development builds on its current production capabilities in the U.S. — five manufacturing facilities across Maine and Massachusetts that together employ about 1,000 workers.
But it’s a mistake to think this is an indication of an overall shift in manufacturing and supply chain strategies in the footwear industry in response to recent challenges presented by the COVID-19 pandemic and changing trade relationships, Priest says.
“A significant increase of U.S. manufacturing of footwear is entirely unrealistic,” Priest says. “We’re grateful to New Balance and what they’re doing. They occupy a different lane in our industry than other companies.” Priest points out that New Balance distinguishes itself by emphasizing domestic production, including its line of “New Balance Made” sneakers, which are at least 70% domestically manufactured and make up a limited portion of U.S. sales. “I have great respect for New Balance for its commitment to domestic jobs in the U.S., but what’s good for New Balance is not necessarily good for everyone.”
Priest emphasizes footwear companies are always rethinking their supply chains, and have had to deal with geopolitical and tariff policy pressures for decades. He acknowledges that the current environment involves a multitude of once-in-a-lifetime factors, and companies are being hit with many challenging variables. “But the question is: Are they going to make a paradigm shift that we haven’t seen when they faced other challenges?” He thinks not.
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While companies need to constantly increase their agility, the footwear business has some irreducible factors that make rapid change in sourcing and manufacturing strategies tricky.
“It’s capital-intensive and labor-intensive. In spite of all the technological developments, it still takes a lot of people to make that product, so it’s difficult to move around. If I make t-shirts all day long, I can move in the middle of the night. Footwear is so much more difficult to do that with.”
In fact, the irony is that the recent disruptions in world trade actually caused many of FDRA’s members to return to options in China. Many manufacturers shifted away from factories in China in the last decade because a rising middle class meant costs went up too, and they migrated manufacturing to Vietnam, for example. But when that country shut down during the pandemic, many footwear companies switched back to China. “We saw growth in China we hadn’t seen in a decade,” Priest observes. “People go back to what they know in a crisis.”
At the root, it’s hard to beat manufacturing in China because it represents a “one-stop shop, with amazing productivity,” Priest argues, adding that most footwear companies are looking for a “China plus one” strategy. “Some are kicking the tires in Bangladesh or India, and that’s culturally interesting because it’s a democracy. But it’s been difficult from a business perspective when there’s just not the laser-like focus on delivery and quality, and the ability to make all types of products at a certain price,” Priest says. “India has a lot of strengths on paper, but it can’t compete with China.” Other options high on the list are Vietnam and Indonesia, as well as other previously proven manufacturing nations such as Brazil, Mexico and the Philippines.
“But they’re not going to move substantially back to the U.S.,” Priest says. “It would take a geopolitical calamity for that to happen. I’m talking bread lines! We just don’t have the service industry and the supply chain infrastructure here to make 2.5 billion pairs of shoes a year. You think inflation is bad now, just wait until you source sneakers from home and see how bad inflation is.”
There’s room for all approaches to the ongoing challenges of footwear supply chains, Priest says, but it’s impossible to ignore the fact that the U.S. has consistently applied some of its highest import tariffs on footwear since the 1930s. “And manufacturing still left,” he says. “That tells you what you need to know.”
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