Adidas, the German maker of sportswear who employs more than one million human people to make its products, has announced it will start marketing its first series of shoes manufactured by robots in Germany from 2017.
More than 20 years after Adidas ceased production activities in its home country and moved them to Asia, the company unveiled the group’s new prototype “Speedfactory” in Germany.
The factory will soon begin large-scale production, manufacturing 500 pairs of Adidas running shoes in early 2017, including only 10 people in the pilot process of the factory. What’s more, Adidas will also open a second Speedfactory in the U.S. in 2017, followed by more in Western Europe. According to the company, the German and American plants will in the “mid-term” each scale up to producing half a million pair of shoes per year.
This definitely poses a threat to Adidas’s traditional manufacturing base in China, Indonesia and Vietnam. After all, labor in the region is becoming less cheap these days, and manufacturers are increasingly turning to robots.
In the longer term Adidas could even produce the shirts of Germany’s national football team in its home country. The shoes made in Germany would sell at a similar price to those produced in Asia, where Adidas employs around one million workers.
Adidas’s reasoning for the Speedfactory lies in its name: speed. “Our consumers become more challenging and demanding,” Gerd Manz, head of technology innovation at Adidas, said to journalists. “Customization to markets and individuals will become the norm.” According to Manz, 74% of Adidas sales are for footwear that is less than a year old, incentivizing the company to invest more in faster production to keep up with the ever-changing demand.
Manz said the company is experimenting with new technologies to color its shoes and bind the materials. In October, Adidas unveiled the Futurecraft 3D containing a midsole 3D printed to be customized for someone’s specific foot dimensions.
Also Adidas’ rival Nike is developing its robot-operated factory. This development in the shoe area is just the beginning and will be leveraged to the apparel industry as well.
After displacing western manufacturing workers, robots are poised to do the same in developing economies, too. It took 50 years for the world to install the first million industrial robots. The next million will take only eight. Importantly, much of the recent growth happened in particular in China, which has an aging population and where wages have risen.
China is installing more industrial robots than any other country in the world
In some respects, that’s a good thing, of course. Working on a production line is monotonous, and sometimes dangerous. However, building a large manufacturing sector has traditionally been the path emerging economies have taken to raise living standards. Now, robots and other types of automation are a threat to that development model. The United Nations warned two-third of jobs in developing countries are at risk.
In the past, factory automation was very expensive. Robots were limited to only a few sectors – mainly the auto industry – and workers weren’t completely made redundant by the machines.
But today’s robots are far more capable, are being deployed in a wider range of industries, and are cheaper too. That leaves less room for wages to rise before humans are priced out of the labor market. More low-cost automation also means manufacturing can be re-shored to developed economies.
German robot maker Kuka, acquired last year by China’s Midea, estimates a typical industrial robot costs about 5 euros an hour. Manufacturers spend 50 euros an hour to employ someone in Germany and about 10 euros an hour in China. Rather than seek out an even cheaper source of labor elsewhere, Chinese manufacturers are choosing to install more robots, especially for more complex tasks. China isn’t getting rid of the work, just the workers.
That could be one reason manufacturing employment has already peaked in many emerging economies, and it’s been happening at a quite a low percentage of total employment and at an earlier stage of economic development. We’ll have to deal with the consequences: few manufacturing jobs are coming back to western countries and not many will be created elsewhere. And of course the fashion industry will be affected by this development hugely as well.