A yearslong effort by Nike to shift part of its manufacturing from China, Indonesia and Vietnam to North America illustrates how tough it is for U.S. brands to wean themselves off the flexible, low-cost contract manufacturers.
In 2015, Nike poured millions into an ambitious effort to partly automate what has always been a highly labor-intensive industry. At the time, rising labor costs in China and advances in manufacturing techniques opened the possibility of finding a new way to make shoes that would rely on fewer workers. The goal: Make tens of millions of sneakers at a new high-tech manufacturing site in Mexico, by 2023.
The plant would still include thousands of workers, but far fewer than are needed in Asia to make the same number of sneakers. Nike’s competitors also sensed an opportunity to rethink a manufacturing model built around hand stitched fabrics and glued soles. The same year, Under Armour announced “Project Glory” using automation to make shoes in Baltimore. And Adidas launched “speedfactories” in Atlanta and Germany, with high-tech machinery to quickly spit out shoes, which we blogged about then.
Nike aimed for large-scale automated production in under a decade, which would save on labor costs and allow it to deliver new models of shoes to Americans faster. It established new production lines that used machines commonly seen in electronics manufacturing. The machines were supposed to build the upper part of a shoe, knit fabric, add logos and glue the sole.
The effort quickly ran into trouble, reports The Wall Street Journal (April 22, 2025). The robots struggled to handle the soft, squishy and stretchy parts that are integral to shoemaking. Another problem was the huge variety of shoes Nike produces. As a result, factory production never became as automated as envisioned. As shoe production increased, the factory personnel swelled to 5,000, twice as many as originally planned and costing more than a similar workforce in Vietnam.
All three firms surrendered in 2019 and stuck with their original Asian locations.
Classroom discussion questions:
- Will the threat of new tariffs mean they will ultimately have to bring shoe production back to the U.S.?
- Why the failure for all three firms?