Leaders in the sportswear industry are investing in a new production center

• Portland’s Made in Old Town project aims to become a manufacturing hub in the United States for sportswear manufacturers.
• Its backers, Hilos and the Oregon Technology Association hope to generate 6,000 jobs as soon as 2028.
• This article is part of “The Future of Supply-Chain Management,” a series on companies’ manufacturing and distribution strategies.

The Northeast is the ancestral home of US footwear manufacturing, where New Balance still assembles more than 4 million pairs of sneakers each year.

But much of the industry resides in Portland, Oregon and the surrounding suburbs, home to well-known brands such as Nike, Columbia Sportswear, Keen and the North American subsidiary of Adidas. At least a dozen apparel companies, including Lululemon and Allbirds, have some of their operations stationed in the city.

Despite Portland’s ties to the footwear and sportswear industry, it is not typically considered a manufacturing center. But that could soon change with a plan for a $125 million development campus called Made in Old Town. The project aims to bring footwear and apparel manufacturing to the industry’s largest design and product development center in the US, transforming four blocks into 323,000 square feet of office space, sample rooms, apparel production machinery, spaces commercial and residential.

Backers of the project — including startup Hilos and nonprofits like the Oregon Technology Association — envision millions being reinvested in vacant and underutilized properties in Portland’s Old Town neighborhood. The infrastructure would be available for lease to the region’s roughly 300 sportswear brands, which could pay a monthly fee to use the various spaces for their production needs, rather than relying on typical overseas collaborations with Asian manufacturers.

The hope is that if more manufacturing capacity is brought to the Portland region, brands can more quickly produce designs for footwear and apparel, according to project backers. And faster production means brands can stay on top of fast-changing trends in both fashion and functionality to drive higher profits in a highly competitive industry.

Relying on Asian manufacturing for footwear production has its challenges

Almost all shoes sold in the US are made overseas, mostly in Asian countries, including Vietnam and China. The shift to manufacturing primarily in Asia was largely driven by major brands looking to reduce their production costs. For example, Nike moved its production to China in the early 1980s.

Indeed, taking production overseas has lowered costs, but this decades-long shift has also led to a decline in overall US footwear manufacturing jobs. In 1990, there were about 76,000 domestic jobs, compared with just over 11,000 today, according to data from the Bureau of Labor Statistics.

“Factory owners and suppliers need to be globally competitive in manufacturing and they need to be able to be closer to brands,” Elias Stahl, CEO of Portland-based Hilos, told Business Insider.

With Hilos, a startup that sells software to make it easier for shoe brands to 3D print their gear, Stahl has become a major supporter of the Made in Old Town effort, including recruiting former Nike and Adidas executives to participate in the project. board.

In addition to creating jobs, Made in Old Town supporters hope to help speed up the manufacturing process for smaller brands. Apparel design teams are largely located in the US, so new designs for sneakers and shirts are usually created an ocean away from the plants where they are later produced. But if more manufacturing infrastructure were in the United States, it could help launch shoe designs, said Eric Liedtke, former Adidas executive and CEO and co-founder of Unless, which makes plant-based footwear and apparel.

According to Liedtke, who is a Made in Old Town board member, startups would benefit from Made in Old Town if the space could bring together designers, makers and material suppliers as intended. Today, many apparel brands’ US product designers, engineers and distributors must go through multiple rounds of product design development. He also has to make several trips to factories in Asia to complete personal prototyping, which involves making a physical model of a shoe to experiment with its design, shape and materials before settling on the final product.

To get around this back-and-forth, bigger brands like Nike and Adidas have already created their own sample rooms in the United States – spaces where prototypes of shoes and other sports equipment are made – to consider design selection and materials. They also invested in digital tools to streamline the flow of information between their US design teams and overseas manufacturing facilities.

Smaller brands could save a lot of time and money if the same resources, including 3D printing capabilities and more personal interface with material suppliers, were brought closer to home, Liedtke said.

The sportswear industry is facing turbulent times

Longtime sportswear players have struggled recently amid increased competition from upstarts like Alo Yoga, Vuori and Hoka. Nike posted weak sales and told investors a turnaround plan would take at least several quarters.

Earlier this year, Germany-based Adidas reported its first annual loss in more than 30 years as sales fell 16 percent in North America. And Under Armor has seen poor sales for several years, which has punished the company’s stock.

The revolution in the sportswear and footwear industry has hit the Portland region hard, where Nike is based and brands like Adidas, Lululemon, Deckers Brands and Under Armor have a big presence. Nike and Columbia Sportswear are among the area’s major employers to announce layoffs because of the changing industry landscape.

At the federal level, the US government has provided billions in subsidies to support manufacturing, mainly targeting the auto, semiconductor and solar industries. In recent years, this has helped add hundreds of thousands of manufacturing jobs.

That approach tends to focus on industries deemed vital to national security, but leaves industries like apparel to fall by the wayside, Stahl said. But with some funding from the state and private industry, the sportswear industry could be revitalized in Portland and beyond, Stahl added.

Through the Made in Old Town project, the goal is to generate approximately 6,000 full-time jobs in Portland by 2028.

Lessons learned from the Adidas Speedfactory flop

When Liedtke worked at Adidas, he led an effort to redirect footwear production to local markets and closer to the shoppers who buy the brand’s sneakers to drive innovation and sales.

Adidas opened two automated production facilities, called Speedfactories, in Atlanta and Germany, but both closed within just a few years. “We gave it our all. It just didn’t work,” Liedtke told BI.

He said the model was partly flawed because technology couldn’t account for rapidly changing fashion trends. Only one form of footwear could be created at a time, limiting production efforts.

Liedtke said the Adidas Speedfactory flop taught him the importance of getting support from material suppliers. For example, if material suppliers are incentivized to set up their sampling and prototyping equipment in Portland, brands there can move more quickly through the early stages of shoe design and production. That approach would make them similar to U.S. automakers, which can still make their cars and trucks in the United States because many auto parts suppliers have located in the Midwest.

Right now, the plan is to dedicate about half of the Made in Old Town space to sampling and prototyping machines and 3D printers. As for completely replacing manufacturing overseas: “That’s on the way down,” Liedtke said.

A long way to go

The Made in Old Town project is still in its early stages, having raised $15 million of its $125 million goal. Oregon lawmakers appropriated just $2 million to support Made in Old Town after Gov. Tina Kotek approved the funding in April.

No brands have publicly disclosed interest in joining the campus or made financial investments to support Made in Old Town, and supporters of the initiative say an additional $120 million will be needed from brands, suppliers and manufacturers to support investment in local talent and equipment. .

For 2024, the focus is on creating a system that can support startup-sized brands that want to accelerate their footwear design and manufacturing processes, Noel Kinder, former Nike sustainability director and Made board member in Old Town, he said.

“The vision is to accelerate the pace of innovation,” Kinder said. “The intention is not to replace the hundreds of millions of pairs of shoes that are made around the world.”