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Why Amazon’s Patents are Evidence of the Case for On-Demand Manufacturing

Though on-demand manufacturing accounts for just 1 percent of all apparel production today, it could reach to between 20 percent and 25 percent of the market in the next few years if brands break from the mold and seize the opportunity to differentiate their collections while increasing profitability.

Hal Watts, chief executive of fashion technology firm Unmade that specializes in on-demand garment manufacturing, said one of the company’s clients is planning for demand-based production for close to 25 percent of its products by 2021. While that goal might seem “aggressive,” it’s not “unrealistic,” Watts said at PI Apparel in New York City.

Fashion brands hesitant to step away from “the way it’s always been done” might want to test the on-demand waters by starting small. The beauty of demand-based manufacturing, Watts said, is that the new production line can operate in parallel with existing supply chains—it doesn’t require ripping and replacing established systems.

Where brands might encounter changes, however, would be how they tackle product design. André Wolper, founder and CEO of product virtualization firm Embodee that helps execute scarcity-based short runs for the likes of luxury e-commerce destination MyTheresa.com, said that some brands thinking strategically about on-demand will opt for a modular approach to design, conceptualizing a “core silhouette” that can accommodate an ensuing cadence of tweaks and variations so that designs can be updated without having to rewind all the way back to the Adobe Illustrator phase.

“It helps to have a configurable design,” he said.

It might be easy to assume that the low minimums associated with on-demand manufacturing are best left to smaller upstart brands that can’t afford the volumes major Asian manufacturers require, but Watts said this approach to production is actually better suited to large brands than emerging ones.

“All of the brands we work for are billion-dollar brands,” he explained, adding that aggregating on-demand orders can drive increased efficiencies. “If you have similar products and you have lots of variability in that product, you can amalgamate all that and have one production line that’s capable of producing all those different products.”

Demand-based production might cost more but that’s not the full dollars-and-cents picture. With this manufacturing model, apparel brands can make up for minimums by charging higher end-unit prices that are justified because they don’t come with the typical inventory costs and the other usual built-in markups.

“You can tend to sustain the full price because you’re not discounting and trying to liquidate inventory,” Wolper noted. “You sell before you make, so you get the money before you spend it.”

Unmade’s focus on production optimization is one of the key ways it helps brands keep costs as low as possible. “We get to efficiencies that are very close to mass production,” Watts added. “Even if your production cost is slightly higher, your profitability is probably better than any of your main line products.”

And that optimization is the result of significant investments in technology and automation, Watts explained. “There’s a huge amount of work to be done around automatically generating the files that operate all of the machines within the factory, which is key,” he said. “If you can’t automate the operation of the hardware, and every time a product has to be made you have to program a whole bunch of stuff to operate the machine and get someone to run samples, get it right, then reprogram—that’s obviously impossible.

“It’s key that you can automate the generation of the control files for whatever industrial process is being used,” Watts added.

With a team whose backgrounds include experience in the gaming industry and neuroscience fields, Unmade is built on complicated algorithms that do much of the heavy lifting to ensure that a customer’s design concept is executed just as expected. “We do about 8 million calculations per panel of the garment, so with front, back and sleeves, you’re looking at 32 million calculations in a product and that enables us to generate a manufacturing file that we can guarantee will manufacture that product to the correct dimensions the first time,” Watts said. What’s more, the manufacturing plan is tailored “to the machine level.”

“We already know which factory it’s going to be made in…we know which machines are there, we’ll push the file to a specific machine, we know the yarn that’s going to be used,” Watts continued. “It’s quite a complicated process but it’s fully automated.”

There can be many reasons why fashion brands might want to produce some items on demand. Marleen Vogelaar, founder and CEO on on-demand manufacturer Ziel, said as brands increasingly partner with social media influencers to reach millennial and Gen Z consumers, they need to walk a fine line between risk and opportunity. With Instagram “celebrities” and their ilk poised to wield an outsize influence on purchases in the coming years, brands must be prepared for what that means for segmentation. Plus, today’s hot young star could just as quickly become tomorrow’s has-been, Vogelaar noted.

“Today, someone might be super hip and the latest, and can sell a lot of product, but maybe three years from now they’ve done something on Instagram or YouTube and you might not want to associate yourself with them anymore,” Vogelaar said. “So you don’t want to have a 6-, 10-, 21-month product development pipeline when you work with [influencers].”

On-demand production is the only option for made-to-measure brands like Knot Standard, whose founder and president Matthew Mueller was inspired to start the men’s wear firm after receiving a gift voucher from his wife for a custom suit while they were based in Dubai. Surprised at both the quality and cost for a tailored suit in the Middle Eastern capital, he and co-founder and CEO John Ballay leveraged their respective backgrounds in information technology and investment banking to bring the affordable made-to-measure concept to the United States, riding the resurgence of men’s interest in style and dressing well inspired in part by the popularity of TV programs like “Mad Men.”

Eight years and “six million lines of code later, we’re one of the fastest growing brands overall in the country,” Mueller said. “The only way we can keep it all together is building the supply chain from scratch.”

For Knot Standard, there’s little to no margin for error when consumers are paying up front for not just a high-quality, highly tailored garment but for a deeply personalized experience, too. “When you’re making 100 decisions per garment, three garments per order, that’s 300 chances to screw up, and you need to get it right every single time,” Mueller said.

Shifting to an on-demand mindset might seem intimidating but brands that want to stand out will have to get on board. “There’s going to be stuff that you need to keep in stock, and there’s going to be stuff that you can make on demand,” Mueller explained. “There’s going to be a ton of reasons from an economic perspective to make things on the fly but the main reason is going to be you can beat somebody else if you aren’t stuck selling something you already have. Period.”

“Build your company any way you want but at the end of the day you need to think about it in terms of N of 1 because that’s how your client decides to buy. They look at what you have versus somebody else, and if somebody else is five days faster than you then [you’re out of luck],” Mueller said.

In fact, Mueller believes the opportunity for on demand is higher than the 20 percent to 25 percent quoted by Watts and others “because it’s going to feed on itself,” he said. Those percentages focus just on current manufacturing capabilities, he explained, but if all apparel brands begin adopting on-demand production, “the economies of scale get quite a bit bigger,” Mueller noted, adding that demand-driven fabric generation presents a “huge opportunity.”

And for the doubters who don’t believe on-demand manufacturing will live up to predictions, Mueller had some advice.

“Wait five years,” he said. “I don’t think Amazon made [the Echo Look] camera for no good reason or filed a bunch of patents to do this for no good reason. It will get there.”

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