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Keen: Here’s How to Make US Footwear Sourcing Cheaper Than China

If done right, it could be cheaper to make a shoe in America than to make that same shoe in China.

The idea may sound dubious, but Keen Footwear is already proving the concept.

Speaking at the Footwear Sourcing Intelligence Summit put on by the Footwear Distributors and Retailers of America (FDRA) in New York Tuesday, the American shoe company painted a clear picture of the possibilities for U.S. footwear manufacturing.

The 14-year-old company opened a factory in Portland, Oregon in 2009 with the hope of bringing shoe-making knowledge back to the USA among its many goals. The factory has a capacity of 750,000 units and has come to serve as an innovation center for the company—especially where developing products faster is concerned.

With 3-D printing capabilities reaching right through to the mold, Keen Footwear VP of global technical operations, Hari Perumal said, “Somebody can walk into the factory with just an idea and walk out with a completely finished shoe in their hand. We have that capability in the factory.”

In a world where quick is expected and faster is even better, brands looking to cater to the American market have had to turn at least a little bit away from their far-flung foreign lands for sourcing for reasons quite like Keen’s.

“We wanted to stay closer to the customer and be nimble in turnaround time for shoes,” Perumal said.

That fact has been Made in USA’s biggest draw, but its biggest setback has simply been price. It’s just too expensive to make in the USA, according to most brands—but they may not be thinking far enough outside the shoebox.

“Labor and overhead is 39 percent higher [in the U.S.] compared to China-made, but retail price is 20 percent higher so higher margin values, and on top of that it’s zero duties,” Perumal said.

Duty considerations play a major role in driving price as duties for footwear reach as high as 37.5%, though the average duty on consumer goods hovers right around 2 percent.

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Global manufacturing costs are the next price factor to consider, according to Perumal, who provided a breakdown of cost per hour for major footwear producing countries: U.S. – $19.16, China – $2.90, Mexico – $2.09, Thailand – $1.70, Vietnam – $1.69, Cambodia – $1.39, India – $1.32.

With that, Perumal said somewhat facetiously, the question for Keen has been: “How do you know all this and why the hell did you open a factory in the U.S.?”

The short answer, he said, is that those manufacturing costs can’t be taken only at face value, there are other factors to consider.

It’s unreasonable to expect all—or even a large majority of—footwear to be made in the U.S.; the capability and the capacity isn’t here, and neither is the labor, both in terms of actual human availability and labor rates that will work. However, shoes with high retail price points, those with high duty rates from overseas, products that have high added value and those that are important for U.S. customers (the way U.S.-made work boots are) might be worthwhile to make domestically.

And footwear made using automation will make domestic manufacturing even more worthwhile.

Currently, Keen has robots in Japan making its Uneek shoe. The innovative two-cord construction upper and free-moving cord junction adapt to the wearer’s feet for a perfect fit, according to the company.

[Read more about robot use in production: Chinese Factories Ramp Up Spending on Robotics Amid Major Automation Push]

Here’s where things could be cheaper in the U.S. than in Asia.

If you make a shoe like the Uneek in China, say, using humans instead of bots, it would take 96.76 minutes to make. The cost per minute in China is $0.048, which brings the total labor cost to $4.67, plus 37.5% import duty, which equals $5.00. So the total cost of labor and duty to produce the shoe would be $9.67.

Take the same shoe being made by bots in the U.S., and the time to make it comes down to 27 minutes. The cost per minute is $0.32, which brings the total labor cost to $8.64 and there’s no duty, which brings the shoe’s production cost to $8.64.

The non-math version of this explanation is: it would be cheaper to make the shoe in American than in China.

For this scenario to play out in any major way, companies would need to expand their automation capabilities to reduce direct labor costs, Keen U.S. plant manager Don Wicks explained. And beyond that, they’ll need to improve on production planning, flexibility in production and streamlining product flow through the factory, to name just a few things.

Keen is currently working on Phase II of its Portland footwear factory evolution, which is to create special styles designed for U.S. manufacturing with robots, like the Uneek.

Phase III, which the company hopes to reach by the end of next year, will be to achieve end-to-end manufacturing with zero reliability on overseas components and realize a three- to four-week turnaround from order to X-factory out of its Portland facility.