Under Armour (NYSE:UAA) is looking to change the way it makes products buy innovating the manufacturing process. In the most recent quarterly conference call, Under Armour CEO Kevin Plank told investors more about this coming manufacturing innovation, which the company is calling "Project Glory."
Manufacturing hasn't caught up
Plank explained during the call that footwear and apparel manufacturing facilities have yet to modernize like other industries have. The picture he paints harks back to the days of the industrial revolution with what he says requires upward of 150 people to build a single shoe end to end. How can this still be the case? From the ease of manufacturing abroad in recent decades it seems that there has been little need for companies innovate manufacturing as labor costs have been low enough to still keep margins high on footwear and other apparel.
Project Glory's ambitious goal
Plank and his team know that this needs to change, and say it's time to focus on "local for local" again. Under Armour has already been innovating its manufacturing approach and Plank says that it has already reduced the number of "human touches" by up to 30% from when it first started, but he says there is plenty of room to run. Therefore, Under Armour is preparing to open a new facility in Baltimore in 2016 called "Lighthouse," a 133,000-square-foot renovated city garage that will be the start to Under Armour's new "Project Glory" manufacturing process improvement.
"So we see an opportunity to innovate the process, increasing our speed to market by introducing local for local manufacturing that will produce better product globally, products as great as our brand, in the most efficient way possible," Plank said during the conference call. The Baltimore Sun reported that as of last year, UA apparel and footwear were made by 29 primary manufacturers in 14 countries, with nearly two-thirds of products made in China, Jordan, Vietnam, and Indonesia.
According to what Plank said during the call, Project Glory will be an "advanced manufacturing innovation hub" that will allow new technologies to be tested and commercialized, then integrated into the company's existing supply chain. This means that Under Armour will be able to roll the technology out and, as Plank says, change the "dynamics of speed to market, pricing, costing and labor."
Plank says that these advancements will help to localize labor again so that products will be made in the U.S. for the U.S market, made in Brazil for the Brazilian market, etc. Investors are waiting to learn more about what the Lighthouse hub or the Project Glory process look like and for a more specific timeline of when these will be implemented further into Under Armour's supply chain. Long term, this project could have incredible impacts not only on the actual products manufactured but for the company's labor practices, PR, taxes, shipping costs, and so much more.
Focused on long term growth
Under Armour's stock has been hammered lately on short-term retail concerns. In an interview on CNBC, Plank said you'll never quite know what the stock will do day to day, but that's why you have to be focused on innovation and long-term growth. The company started 20 years ago by innovating away from heavy cotton t-shirts with moisture-wicking fabric. It continues that entrepreneurial theme today in everything it does, from its products, to its use of technology -- like its digital Connected Fitness community -- and now to its manufacturing process where it's focused less on short-term cost goals and more on long-term growth.