Nike Automation: Threat to the Asian 'Sweatshop'?

♠ Posted by Emmanuel in , at 11/05/2017 06:58:00 PM
Will automation cause labor's share of production costs to diminish ever further?
I have a whole @#$%load of books I've been trying to find time to read concerning the threat of automation to the future of human work. All the same, I must point out that many of the concerns cited in this literature may be of lesser importance to those of us from developing countries since the perspective most of these authors are coming from is white collar work in the developed world. So, their relevance may be limited.

Still, that's not to say more relevant stuff is unavailable. The International Labor Organization (ILO) has a fairly alarming study noting that up to 56% of all work in populous Southeast Asian countries is at threat of disappearing due to automation. As Western multinationals improve their manufacturing processes to eliminate the need for workers, they can move operations back to their home countries via "reshoring":
Yet, when it comes to implementing new technologies in the workplace, ASEAN enterprises tend to not stand at the forefront. They are perceived as followers of technology adoption rather than innovators. In developed economies, recent improvements in automation is leading to reshoring, in which production is brought “back home” for labour-intensive manufacturing sectors, such as garment and footwear, electronics, and automotive, among others. ASEAN Member States are lagging in their responses to this trend. As aforementioned, the costs of these technologies are rapidly falling and their application is becoming more commonplace. Consequently, ASEAN could experience huge setbacks in development and growth if increased reshoring is not countered.
Footwear manufacture is especially vulnerable. As it so happens, the FT has a new article detailing how one corporation is attempting to, well, just do it. Nike's focus on robotics may render unnecessary all the gluing and stitching work currently being done in making sneakers:
Since its debut in 2012, the Flyknit Racer has been considered a technological breakthrough. Produced with a special knitting machine, it uses less labour and fewer materials than most running shoes. But now the same material has become the basis for an even more radical experiment that has the potential to both upend the sports and leisurewear industry and accelerate an important trend in globalisation...
Since 2015, Nike has been working with Flex, the high-tech manufacturing company better known for producing Fitbit activity trackers and Lenovo servers, to introduce greater automation into the otherwise labour-intensive process of making a shoe. Flex’s facility in Mexico has become one of Nike’s most important factories, responsible not just for a growing slice of the company’s production but also for a string of innovations to be rolled out across Nike’s supplier base, such as laser-cutting and automated gluing.

For Nike, the shift to greater automation has two huge attractions. By driving down costs, it could lead to a dramatic improvement in profit margins. It would also allow the company to deliver new designs more quickly to fickle, fashion-conscious customers at a premium. A pair of Nike Roshe shoes costs $75 without Flyknit uppers, compared to as much as $130 with Flyknit.
Remember when spoiled Westerners complained about working conditions at Asian "sweatshops" under contract to Nike? Would it be any better for Asian development if Nike stopped employing Asians altogether? I guess we may be finding the answers to those quite soon:
The tie-up with Flex also has a much broader resonance. Over the past two decades, Nike has been one of the pioneers in outsourcing production to the developing world, where it has been the subject of accusations of using child labour and other workforce abuses. Yet many of those countries now fear that robots will deprive them of their shot at industrialisation. If Nike pushes through with a move to greater automation and ends up cutting production in Asia, the company could find itself at the forefront of a different political controversy.
Time marches on. Innovation may cause Asian countries moving up the development ladder to adjust their strategies. Still, I believe that production is only half the picture since these populous developing countries are increasingly lucrative consumption markets themselves with growing middle classes able to afford brand-name sneakers. So, not all manufacturing will probably be headed back for America--or Europe for that matter in the case of Adidas, Puma, etc.