Joachim Hensch, once Managing Director for HUGO BOSS’s production facility in Izmir, Turkey, is an authority on the smart factory. Under his leadership, that brand-owned, 65,000 square metre facility was transformed from a traditional manufacturer into a case study for Industry 4.0 – one that saw close to 4,000 employees producing men’s suits, jackets, shirt and coats, as well as a wide range of womenswear, all with complete visibility enabled by connectivity and automation.

Today, Joachim (with his own consulting firm) advises brands on how to make the same transition, from manufacturing with limited (or no) visibility, to lean, digital-native processes that he believes will distinguish the fashion businesses that are futureproof from those that remain fixed in the past.

Our correspondent in Hensch’s native Germany, Yvonne Heinen-Foudeh, recently spent time discussing the practicalities of blending digital nearshore production with high-volume overseas manufacturing to create a supply chain that runs on data and intelligent automation.

The Interline: We currently live in a period of peak anxiety – a time when the consumer market has been shaken like never before, and a time when the traditional global supply chain has never seemed so unstable. From your perspective, what share of the fashion industry’s current challenges originated with the pandemic, and what percentage were pre-existing problems that the industry now had to confront quickly?

Joachim Hensch: In my estimation, 80% of the problems, and thus challenges, facing the fashion industry were already immanent and to a large extent obvious before the outbreak of COVID-19. The global pandemic has mainly acted as a fire accelerator and – to look at things in a more positive light – as an eye-opener. This applies especially to the overly long and non-transparent supply chains that characterise a lot of big-brand sourcing, where the inability to accurately predict market needs is leading to a continuous cycle of over-production.

In those supply chains, accurate forecasting and real-time market insights are the exception rather than the rule, which translates into a host of negative impacts – including waste of materials and resources – as well as manifesting itself as under-performance for the brand from a commercial point of view.  And it’s important to note that, even with increasing consolidation along the supply chain, fashion manufacturing as a whole is still in no way sustainable. Combined, these long-standing challenges are going to hinder a more sustainable, circular future rather than enabling it – especially now that the pandemic has accelerated them in an entirely new way. 

The Interline: Taking those different challenges as context, what do you see as the primary reasons for the need for a different model of production? Your work on the Izmir production site for HUGO BOSS started back in 2015, when the shift to smart manufacturing might have been seen as a bold step, whereas today both the outer world and the industry’s overall mindset seem to be changing.

Joachim Hensch: How can I keep producing profitably with continuously increasing complexity? That was the question I had to ask myself in 2015, when the Hugo Boss management gave the go-ahead for the implementation of the smart factory in its wholly-owned production facility in Izmir, Turkey.  That’s an even more relevant question today, as every business faces the need to withstand complexity, manage reduced batch sizes, serve customers in an individualised way, and meet the growing demand for personalisation.

In my experience, trying to answer that question brings you very quickly to interrogating yourself with a different one: if lean manufacturing is the end goal, then what is the hammer and what is the nail? Cellular Manufacturing (CM), Total Quality Management (TQM), Six Sigma, Kaizen strategy… these road-tested tools are still relevant in many way, but they are not sufficient to tackle the real demands of smart manufacturing.  The only way to do that is through full digitalisation – something that’s already opening so many doors elsewhere in the fashion industry.

I think that mindset shift is happening, but the scale of the change required still strikes fear into many people.  To put it simply, the fashion industry is moving steadily towards mass tailoring, which means creating profitable themes, but doing it in an individualised way.  People often confuse that with made-to-measure clothing, which in reality only accounts for a marginal share of the overall trends.

The demand is clear, though: numerous studies and point-of-sale figures from major cities are demonstrating that micro-fulfilment is going to be essential for catering to the expectations of diverse communities and areas where demands, trends, and other variables are hyper-localised.  Against that backdrop, the traditional approach to bulk production that does not take that variance into account seems outdated.  Instead, unified commerce (which is a buzzword but one that resonates with me) is going to be the way that retailers assess demand on a local level, and make adjustments to their assortments and their strategies accordingly.

The Interline: How do you define smart manufacturing? And can you explain how it’s distinct from traditional assembly line automation?

Joachim Hensch: Smart manufacturing refers to a completely flexible system enabling self-optimisation across an all-embracing network, self-adapting to and learning from new conditions in real or near-real time. This system can autonomously run entire production processes.

That complete connection and flexibility is where smart manufacturing is distinct from traditional automation.  It uses a constant data stream from connected operations and production systems to learn and adapt to demand in real-time.  And it can be used for any product, any single model, any line – from single order entry to delivery.

The Interline: Thinking specifically about the Izmir production site, can you give us an idea of how far-reaching the changes were between the established way of working and the new smart approach, how people within the brand responded to them, and whether that factory can serve as a template for transforming other traditional manufacturing sites? Because the industry certainly needs examples of digitisation done right.

Joachim Hensch: We challenged everything, and nothing was sacred. We analysed every process, we looked at existing infrastructure and machinery, we considered the people and their skills. Over a period of five years, while the facility was still running, we changed almost everything, and anything was up for change.

And you’re absolutely right: taking people with you, from the board to every single operator, is a basic requirement for this journey.  Digital transformation is not just an organizational or operational change, but also – and perhaps even predominantly – a cultural one. For that reason, while smart integration of digital technologies, processes, and competencies  all follow a set of rules, the Hugo Boss smart factory cannot serve as a template for anyone else. Every smart factory implementation will be unique, even if it makes use of the same essential building blocks.

Those core rules, though, are where I believe fashion’s most acute need is today.  These are areas that every brand can learn, understand, and adopt technologies and processes for the benefit of the entire industry.  And this is what motivated me to share my knowledge and experience of scaling this smart approach, and it’s what underpins the Inverted Online Programme.

The Interline: Aside from HUGO BOSS, who else do you see as leaders in smart manufacturing today? Are some geographical areas ahead of others?

Joachim Hensch: There are a few in Asia – and I’m not just talking about China.  I can’t be too specific about client names, but I can say that the greatest demand for smart manufacturing is currently coming from Bangladesh, India, Pakistan, and Sri Lanka.  These are the countries that I know are already working on smart factory applications today. But I know of no other location that has embraced smart manufacturing as holistically as Izmir.

The Interline: Let’s talk about technology: when it came to connecting the Izmir facility at the machine level, was it a case of buying new hardware, or adding IoT modules to existing machinery? How was that information then aggregated and acted on by people who wanted oversight at the production level, and how much of the needlepoint data was shared with the sourcing teams who were coordinating between design, development, and production?

Joachim Hensch: In a factory of that scale, with 3,500 sewing machines, of course you don’t want to buy everything new.  So no, we did not purchase any new production hardware; we were able to work completely with existing machinery that we connected systematically to a network, sequentially, via IoT.  Around 1,600 sewing machines were also equipped with iPads for the operators to use for manual input.  We also made use of RFID technology and QR code scans, and using NFC sensors the number of human-machine transactions in any given day hit 250,000.  And then there were some of the simpler, mechanical solutions that enabled full flexibility, such as placing machinery in the right places for each role.

Across both analogue and digital solutions, we followed a phased implementation, and I believe those phases are applicable to any implementation of smart manufacturing.

Phase 1 is what I call CONNECT.  Where does the data come from? Phase 2 is the creation of the DIGITAL TWIN, a virtual equivalent that forms the basic prerequisite for everything that follows.  That digital twin represents every product, person, machine, and process within my company and exists in a quasi-parallel world where the third phase, PROCESSES, is managed.  In effect that means managing two production operations simultaneously: the analogue process on one hand, and the real-time digital one on the other. 

Over time the digital factory will come to overtake the real one, by which point the data aggregated at any time will be so precise, so optimized, that the digital factory will start to tell the real factory what the optimal solution is for any task at hand. And that takes us to phase 4, the PREDICTION of events.

To use a simplified example, when we search for “polo” in an internet browser, we might be looking for the German car of that name, the equestrian sport, or the collared t-shirt.  But based on our previous search history, our patterns of behaviour, and other contextual queues that make up the digital twin of the person conducting that search, the search engine algorithm will predict their actual area of interest and prioritise those results.  This is exactly how the digital twin of the physical factory works – by understanding history, context, intent and more, and by using those indicators to make informed, intelligent predictions.

The Interline: What advice would you give a brand that either owns or closely partners with their producers and wants to upgrade its facilities to gain greater visibility and control? Where do they start?

Joachim Hensch: Set a North Star that’s unique to your company and develop everything with that individualised strategy in mind.  Based on my conversations with industry insiders, that’s something that only 10% of organisations have in place today, but those that have are already realising significant benefits from it.  The same principles that apply throughout the business world also apply to digitalisation: when strategy leads, success follows.

The Interline: How far do you see production returning to Europe and the USA? Should the industry be attempting to repatriate all manufacturing, or focusing on establishing highly-skilled and high-tech facilities in-country and in neighbouring countries for smaller production runs, and leaving high-volume production to offshore partners? At what point does technologically advanced domestic production become inefficient to scale, and how do you see the balance between that and traditional manufacturing stabilising in the future?  

Joachim Hensch: This is an important question, and the answer cannot be expressed as a percentage.  Instead, the mix between the two will be determined by the business’s unique strategy, and by the needs of individual markets and product categories.  Smart manufacturing, as an innovative concept and as the force driving an entirely new model for the fashion industry, undoubtedly favours near-shoring – but not exclusively.  Smart manufacturing is, as I’ve said, a new concept, and it can unlock new strategic directions for fashion businesses. But it is not a replacement for management decisions, and neither is it a tool for squeezing every last cent out of gross profit margins, so the balance of labour, logistics, and other variables that are set at the top will govern the global distribution of production. Smart manufacturing does not automatically mean manufacturing conducted closer to home.

Instead, the right way to look at lean, digital production is as a necessity for any business that wants to remain competitive and resilient in the face of a changed future. It supports the sale of products at full price, it minimises the risks of overproduction and markdowns, and slashes return rates.

But it makes little sense to apply smart manufacturing principles for basics – at least not at the point we’ve reached today.  High volume, offshore, predictable production will likely remain in place for those categories, while smart factory implementations in-country will be utilised for smaller-scaler applications.  Although I would like to draw your readers’ attention to the Belgian-German vertical retail group C&A, which is launching a new digital, CO2-free jeans production facility that, by this autumn, will produce 2,000 pieces per day at the University of Applied Sciences, Mönchengladbach/Germany.

The Interline: What do you see as the most important trends influencing the near and longer-term future of fashion – both in manufacturing and elsewhere – and what are you working on today that you think is emblematic of where the industry as a whole is heading?

Joachim Hensch: For me, the biggest trend is the awareness that every consumer has a voice.  Only 150 years ago, customers ordered their blouses, dresses, shirts, and other garments and then they were made – with actual sales driving the supply chain.  Through digitalisation, we’re returning to the past in a very positive way, and hopefully discarding a lot of the recent damage that fashion has caused.