ASQ Influential Voices: Sports Industry Manufacturing

Posted on March 4, 2014 | in ASQ Influential Voices, Baseball, Defects, Football, Golf, Inventory, Lean Wastes, Quality, Scrap, Small Business, Sponsorships, Sports, Transportation | by
ASQ influential voices blog

The ASQ Influential Voices is a global network of bloggers reinforcing the importance of quality from multiple perspectives.

In a recent post in his blog A View From The Q, soon-to-be-retiring American Society for Quality (ASQ) CEO Paul Borawski gave a quick evaluation of the results from this past year’s ASQ Manufacturing Outlook Survey. He cited 65% of surveyed manufacturers expecting revenue growth and saw the current state of the United States economy as being a significant challenge to that growth (along with a lack of skilled workers). Sports industry manufacturing, however, has a series of much different types of challenges.

Manufacturing for the sports industry exists within a small group of categories that tend to cross over one another: sports merchandise, sporting equipment, licensed products, and other smaller items related to sponsors, advertising, and promotion.

The sports industry itself comes with very uncommon types of costs and challenges that traditional manufacturers don’t really endure: expensive rights fees, non-commodity products, licensing fees, heavy investments in marketing to stay in front of pop culture and fads, and continuous technology improvements that are, quite literally, game-changers. All of these, too, are tied together and cross over.

Let’s take a look at some of these challenges and how they impact those categories of sports manufacturing.

Game-changing technology improvements

For example, new high-tech synthetic fabrics are introduced frequently by performance-based apparel manufacturers such as Nike, adidas, and Under Armour. Taylor Made introduces a new driver every year that is more aerodynamic or controllable than the year before. Innovations make last year’s models of shoes, clothing, and equipment “obsolete”, just like last year’s models did to the models preceding it. Merging customer needs with scientific or technological discoveries in the form of innovation can be expensive (but not always).

Heavy marketing investment

Technology brings us the lightest soccer cleats, the fabric that wicks moisture the best, the irons with the most forgiveness on missed hits…and now manufacturing companies have to convince consumers that they need the best equipment in order to perform their best. The manufacturers want to be the brand you play and the brand you wear, and in no other industry are individuals or teams married to brands like they are in sports. Marketing investment begets awareness, awareness begets coolness and preference and vanity, and coolness and preference beget high price tags for consumers. Marketing investment, as a result, is high. Endorsement deals from athletes, airing commercials during high profile sporting events, and dedicated advertisements at specialty stores and points of purchase all build brand clout.

andrew luck jersey colts

Licensing fees

In other industries, multiple suppliers could be procured for components that are somewhat commoditized. In sports, however, manufacturers fight for individual licensing fees that are deliberately kept in limited numbers. Being the exclusive apparel supplier to a sports team or league comes with a hefty price. Not only must your products be of high performance caliber and capable of meeting the needs of the players, but how much you pay the league or team in the form of royalties is also a significant portion of whether you land the contract. Some leagues get paid upwards of 20% of revenues from licensed products – again, that’s revenues and not gains or profits – just on the sales of individual pieces, depending on the means of such sales. That’s not taking into account any sort of upfront fees or side agreements.

With authentic on-field gear, there is just one supplier and therefore one license. In the NFL, Nike has the license to make on-field player jerseys so your super-expensive authentic Andrew Luck jersey is made by Nike.

But think about the benefits of paying those licensing fees – your logos are all over television and in the faces of fans as they watch your products in use as a pseudo-demonstration (or failed demonstration) of the kind of performance that is possible with that gear.

Non-commoditized items

Sports equipment, merchandise, and items generally have a short shelf life due to new technologies coming out every year, new concepts introduced, and players being traded or leaving teams. The market for sports equipment is also fairly small – so many color variations, so many teams with different players, so many customizations required – so high production runs are infrequent.

What does this mean for manufacturing of sports equipment?

Innovation of new products might occur stateside but because of the pressure to keep manufacturing costs low with short shelf lives and short runs, manufacturers of sports merchandise are loathe to bring manufacturing stateside. Under Armour does specialized production domestically but most consumer products are made overseas and imported. Easton-Bell, manufacturer of Bell helmets and Riddell helmets and Easton gear, has a number of management and supply chain operations stateside but their production mostly occurs in Asia. NFL jerseys for consumer and fan use are imported. Even shoe manufacturer New Balance claims a lot of “Made in the USA” products but their website says one in four pairs of shoes they sell in the USA is actually “made in the USA”. Louisville Slugger wood bat production is a rare exception in this high-tech high-vanity market.

There’s little pressure from the public to keep sports equipment manufacturing stateside. The leagues have demonstrated that maximizing profits through license fees and rights fees is the highest priority and they are fine with letting suppliers figure out what they need to do for themselves to remain profitable, even at the expense of American jobs.

The seasonality of sports helps manufacturers plan for rollouts of new product lines and scheduling of production in large runs at low individual unit costs overseas (but high inventories of overproduction and the necessary transportation for handling it all isn’t getting the attention it deserves). What manufacturers can’t predict is sudden spikes in demand for certain gear or player merchandise. (Amirite, Johnny Football and adidas?)

Just like with sports franchises, simply getting in the door to play the game is a huge mountain to climb for manufacturers and licensees. The front-of-mind brands are unlikely to consider heavy reinvestment in domestic production because, well, they’re on the top of the perch so why would they risk those benefits? It’s a sad truth on the state of sports equipment production.

I’m part of the ASQ Influential Voices program. While I receive an honorarium from ASQ for my commitment, the thoughts and opinions expressed on my blog are my own.

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