Apparel suppliers face risk of being phased out of the market due to resistance to technology investment

When Houman Salem, founder and CEO of Argyle Haus of Apparel, places a fabric order, his Los Angeles-based supplier still requires it via fax—and Salem says the company doesn't even have a fax machine. To comply with this process, Salem's team has to go through the hassle of printing, scanning, and then sending the order.

"We're talking about a very old and low-tech industry," Salem says. "Young people don't aspire to this industry. It's not as fun and cool as tech."

According to Salem, garment manufacturing factories are mostly family-owned, but the younger generation shows little interest in taking over, while current owners resist change.

"They're preparing to retire, and overhauling the system isn't worth it, so they just maintain the status quo," he says.

The consequences of lacking successors are becoming apparent. Salem predicts these factories will eventually shut down, leaving a few giants that will force brands to move production overseas.

Salem notes that California once had about 9,000 garment factories, but now that number hasshrunk to about 2,000, and it continues to decline.

Inherent manufacturing costs hinder technology investment

Cost is another barrier to technology adoption. Salem says the average cost of manufacturing in the U.S. ishigher than overseas, especially inCalifornia and New York, the largest manufacturing hubs.

According to the California Fashion Association, Los Angeles's fashion and apparel industry—covering textile mills, cut-and-sew facilities, wholesalers, and distributors—is a$15 billion-a-year industry. The Los Angeles-basedGarment Worker Centerpoints out that Los Angeles has the largest cut-and-sew garment center in the U.S. Reports show that over 45,000 garment makers work in the city's apparel manufacturing sector, sewing clothes for some of America's biggest brands like T.J. Maxx, Revolve, Ross, and Fashion Nova.

However, Salem notes that the biggest cost drivers for the state's apparel and manufacturing facilities are wages, insurance, and taxes. "For example, I have to pay the highest workers' compensation rates for manufacturing employees," he says. "For every $100 in wages, we pay $18 in workers' comp." Meanwhile, according to insurerThe Hartforddata, the national average in 2023 was 93 cents per $100.

Salem also says that California's numerous regulations and inspections for manufacturing facilities—especially AB5's provisions for gig workers—make compliance more difficult than in other less restrictive states and lead to hefty fines. Salem explains that fines range from thousands to millions of dollars, undermining companies' ability to invest in technology and automation.

But for manufacturing companies, operating facilities in these hubs is crucial because that's where the workforce is concentrated.

Salem says these excess costs are then passed on to brands, which turn to overseas factories with lower labor costs, fewer regulations, but more manual systems and processes. According to a 2020 report from the University of Delaware, the U.S. offers one of the highest minimum wages for garment workers globally, at about $1,160 per month. In comparison, the minimum wage for garment workers in Indonesia is $181 per month.

"What holds companies back could be a lack of skills or insufficient funding," says Inna Kuznetsova, CEO of ToolsGroup, a supply chain planning and optimization company. "They often get stuck in a chicken-and-egg dilemma—you need to invest in technology to reduce inventory costs, but inventory costs are so high that you can't afford to invest in technology."

This also applies to companies looking to bring production back to the U.S. "If brands are going to invest in reshoring manufacturing processes, they'll invest in modern warehouses and manufacturers," says Matt Jackson, vice president of digital innovation services at Insight.

Targeting the supply chain

Jackson says that despite high costs, U.S. apparel manufacturers have been forced to increase technology investment over the past three years because the COVID-19 pandemic exposed issues in demand management and supply chains.

According to Kuznetsova, the pandemic disrupted retailers' monthly inventory forecasts, especially as shipping times for goods from Asia began stretching to eight months or longer, compared to four to six months pre-pandemic.

"Before the pandemic, everything was about cost control, pursuing the absolute lowest cost and cheapest supply chain," Jackson says. Kuznetsova says supply chains were relatively stable then, and retailers could manage inventory with basic tools or Excel. However, these technologies were of little help in optimizing what goods and quantities were needed.

Now, Jackson observes that most technology investment is flowing into AI and data analytics, solving some problems by improving efficiency—which boosts both profitability and sustainability. Jackson says this is because AI doesn't replace a brand's core business but still enables it to respond faster to customer demand and trends.

"We're seeing new investment around demand modeling," Jackson says. "Understanding when demand peaks will occur, what market dynamics are, what fashion trends are, and what other fashion companies are experiencing."

Brands like Abercrombie & Fitch, one of Jackson's clients, have beenallocating fundsfor AI and data analytics to get products to customers faster and meet demand.

Another area in the supply chain process seeing the most innovation is showroom ordering, according to Whitney Cathcart, co-founder of 3DLook, an AI mobile body scanning solution, who previously worked as an automation process and digital innovation consultant.

In the past, retailers entered showrooms and filled out paper order forms, but now systems likeNuOrderandJoorhave digitized this process and are widely adopted. NuOrder'swebsite showsits fees start at $600 per month, while according toInc.reports, Joor's fees range from $5,000 to $20,000 per year.

"If anyone is still doing things manually, it's their own choice," Cathcart says. "Some people say, 'I've been doing this for 30 to 40 years, so I'm going to keep doing it.'"

Lack of innovation in apparel development

Another part of the manufacturing process that remains highly manual is apparel development—which, unlike some aspects of supply chain management, is extremely costly to automate.

Apparel development has three stages: pattern making, cutting, and sewing. Salem says the industry has made significant progress in automated cutting and using software for pattern making.

Although cutting technology exists, automated machines are not widely adopted due to high costs—Salem says they cost over $500,000. The machine also doesn't completely eliminate human labor: workers need to place fabric into the machine, which unrolls and cuts it, and then someone must remove the cut pieces and deliver them to sewers.

On the other hand, the sewing process is nearly impossible to automate, and most manufacturers still use traditional methods like hand sewing or sewing machines. The cut-and-sew process is one of the biggest expenses in apparel manufacturing because it's highly labor-intensive, accounting for about 35% to 40% of total costs.

Cathcart says it's relatively easy to use robots to make car or airplane parts because they're rigid, but apparel is different. Fabric is flexible, and making garments requires layering fabrics of different weights and stretch. "Automating the entire process is extremely complex," she says.

That doesn't mean there haven't been attempts to find solutions.Sewbo launched in 2016, a machine that chemically stiffens fabric so robots can sew garments. According to itswebsite, the chemical used is polyvinyl alcohol—a polymer already widely used in textile production.

Sewbo founder Jon Zornow told Fashion Dive via email that the company is developing the technology with a group of industry partners, including Saitex (one of Levi's denim producers), Bluewater Defense (a uniform manufacturer for the U.S. Department of Defense), and the Industry Sewing and Innovation Center. However, its tools are still in development and evaluation stages and are not yet in production.

Softwear Automationhas also found a way to automate sewing, but only for T-shirts. The company created a robotic system called Sewbots Workline that uses cameras to map fabric while robots guide sewing needles. In 2017, Softwear was selected by Adidas to produce 800,000 T-shirts daily—a volume that couldn't be achieved with human labor.

"The fashion industry as a whole, from concept to creation to sales, has been a very slow area for innovation," Cathcart says.

But these emerging technologies show change is happening. "There's already been a lot of innovation and progress, and the pace is accelerating because consumers have enormous power," Cathcart says.