Key Takeaways

  • Small-scale, high-tech production facilities known as microfactories are emerging as a potential solution to address the environmental impact, the long lead times, and the legacy of overproduction that have plagued mass manufacturing offshore.
  • Portugal is emerging as a leader in the micro-factory movement.
  • Recognising these benefits, Portugal has fostered a national climate and economic support network to encourage the development of in-country microfactories – placing a digitally-advanced manufacturing base near the heart of Europe, made up of facilities that consume less water and energy, use fairer labour practices, and can respond more quickly than traditional, high-volume production partnerships.
  • Questions hang over the scalability and viability of the microfactory business model, with government subsidies, tax exemptions, and other incentives potentially being necessary to prop up the idea while brands potentially adjust to higher unit costs that are offset by better margins and greater agility.
  • Even in ideal circumstances, microfactories are unlikely to inherit enough of a share of fashion’s overall production volume to make enough of an impact on the industry’s sustainability record, meaning that similar digital transformations will still need to take place at the heart of traditional production networks.
  • If the microfactory model does successfully scale, it could unlock a new stream of connected, agile, sustainable, in-country production that could then be replicated close to – or inside – other consumption markets.

The significant growth of micro-factories – small but generally technologically-advanced facilities that specialise in short-run, on-demand, or specialised manufacturing, and that tend to be located closer to consumption markets – in recent years cannot be ignored. The State of Fashion for Good: Accelerating and Scaling Sustainability by Fashion for Good predicted that the number of micro-factories worldwide will double from 100 in 2019 to 200 by 2025 – an exercise in scale that has the potential to revolutionise sustainable and ethical manufacturing practices by bringing demand-driven production closer to home.

The same report also highlights the growing importance of micro-factories to the fashion industry’s wider plans for supply chain de-risking, diversification, and transparency, and suggests that their expansion could significantly drive sustainable manufacturing practices forward.

Despite the potential impact that micro-factories might have on the manufacturing industry, they are still regarded as a relatively new concept. And although mitigating the environmental and humanitarian damage caused by production (and especially by overproduction) is an important return on investment by itself, micro-factories could be about to face a heavy weight of expectation that their current scale will struggle to meet, at the same time as questions are asked about the viability of the business model during this transitional time.

This article explores how small-scale production facilities are, right now, impacting garment manufacturing techniques in the fashion industry. This highlights Portugal’s efforts to promote micro-manufacturing, and assesses how effectively that pioneering investment is translating into improved sustainability and innovation, and whether the factories that make up that growing network are likely to be able to sustain themselves while the rest of the fashion industry catches up.

I also delved into some case studies demonstrating micro-factories’ capabilities, and identified some constraints and drawbacks that might arise when – and if – the model is widely adopted.

Micro-factories: An Environmentally Friendly Alternative to Traditional Mass Production?

As sustainability becomes an increasingly pressing concern in fashion, micro-factories are emerging as a potential solution to address the environmental impact of traditional mass production methods.

The obvious gulf between the two, in sustainability terms, is partially one of proximity; micro-factories can be, and often are, located closer to the consumer, and they routinely also double up as distribution hubs. Two major sources of carbon emissions – freight and last-mile logistics – are eliminated in one fell swoop.

But micro-factories are also placed in the “sustainable” bracket for other reasons – primarily their associated with fair(er) wages, regionally-sourced raw materials, and more advanced manufacturing hardware. A micro-factory does not, by definition, need to have all these attributes, but many do, because – after all – relocating a portion of production capacity from offshore facilities would be pointless if the process brought with it the problematic legacies of pollution and exploitation.

Just how justified is that claim, though? Can micro-factories offer a sustainable alternative to mass production and contribute to a more environmentally conscious future for the industry? To tackle that question, we need to start at the beginning.

Micro-factories, conceived  in 1990, are founded on the principle of streamlining the garment and accessories production process through computerization and automation in a small footprint, thereby reducing the lengthy production calendars that have characterised most product lifecycles for decades.

The operational potential of small-scale, high-tech production is calibrated towards reducing waste and overproduction almost by definition, because garments are produced in limited quantities, based on demand. In addition, micro-factories can use advanced technologies like 3D printing, digital knitting, intelligent yield optimisation, and other digital processes to produce garments with minimal waste.

These are all proven processes in their own right. And I – as well as others at The Interline – have been invited to observe several micro-factory proofs-of-concept that stack these different innovations end-to-end to create a full digital product pipeline that, in theory, can be picked up and placed almost anywhere there’s sufficient space, interest, and investment to warrant it.

Several companies in the USA have also run with these pilots and built businesses around them, although in practice these now seem to be supplemented by other revenue streams, casting some doubt on how effectively the “all digital,” end-to-end microfactory is able to acquit itself as a self-sustaining commercial operation.

One of the few actual certainties is that micro-factories possess the potential to create job prospects and encourage entrepreneurship at the local level by advocating for small-scale manufacturing. According to a report from the World Economic Forum, micro-factories could create 4.5 million jobs globally by 2030 by generating jobs throughout the entire value chain, including design, production, marketing, and sales. Crucially, these are jobs that are both critical to the future of fashion and jobs that have been allowed to almost entirely flee consumption markets, making this a potentially much-needed reversal.

In addition, micro-factories can promote economic growth and job creation by empowering local communities to establish their own manufacturing businesses. Unlike setting up a full-scale assembly line, which is the preserve of big investors only, microfactories are most cost-effective to establish, and will only come down in cost as the digital-native hardware required for them scales downward itself.

So how about that environmental impact? Is that something that can be directly quantified? According to Fashion for Good research, micro-factories can significantly reduce water, chemical, and energy usage when compared to traditional, high-volume production techniques, making them an attractive option for sustainable fashion production. In terms of actual numbers,  micro-factories can, according to the report, reduce water usage by up to 90%, chemical usage by up to 50%, and energy usage by up to 80% compared to traditional manufacturing methods.

Also, it is worth noting that leveraging localised production can verifiably reduce the carbon footprint associated with transportation, and the waste generated by overproduction. For example, a study by the MIT Center for Transportation and Logistics found that producing garments locally can reduce carbon emissions by up to 15% compared to traditional global sourcing models, and the result of switching to more demand-driven production can have a similarly measurable effect on fashion’s tendency to produce far more than it can actually sell.

Conventional mass production can lead to 30-40% overproduction and 60-80% of co2 emissions comes from manufacturing,” said Kurt Svegård, COO of Fashion Innovation Center.. “Micro-factories are the far most effective way to reduce co2 emissions by cutting overproduction and [moving to] on-demand production”,

Lastly, in a report titled “The Future of Fashion Manufacturing,” McKinsey & Company highlight the advantages of micro-factories with a similar set of fairly concrete, but more commercially-oriented figures. Some of the findings state that micro-factories can help fashion brands reduce costs by up to 20%, improve time-to-market by up to 50%, and reduce lead times by up to 70%.

So micro-factories are, both in theory and in practice, a compelling option. But what does it look like when a country commits to the idea? To answer that question, we can turn our attention to Portugal.

Portugal, Harnessing the Power of Small

As the momentum behind the “power of small” grows, Portugal has emerged as a leader in the micro-factory movement.

It’s important to note, though, that Portugal is not new to the manufacturing space in general. The country  is emerging as a thriving hub for micro-manufacturing at least in part because of  its rich tradition of skilled craftsmanship in textiles, ceramics, and woodworking, which has given the region access to a pool of highly skilled labour with skillsets that have been.  passed down from generation to generation, resulting in a workforce exhibiting exceptional proficiency and a deep understanding of their craft.

Then there is Portugal’s commitment to sustainable practices. The country has not shied away from encouraging  action and enforcing standards regarding environmental preservation. Governing bodies have, for instance, implemented tax incentives for companies that embrace sustainable energy sources, and they have also launched programs to encourage businesses to reduce waste and environmental harm.

Furthermore, the Portuguese government has made substantial investments in vocational training programs to provide the future workforce with the essential skills required to succeed in the modern manufacturing industry. And as we all know, the next generation of fashion talent is arriving in the industry with sustainability already firmly on the their minds.

Diving deeper, the success of micro-manufacturing in Portugal can be attributed to various other factors, including a supportive regulatory environment. The government of Portugal has implemented several policies specifically designed to promote small-scale manufacturing enterprises. For example, the government has executed various measures to reduce bureaucratic procedures, streamline the process of obtaining licences and permits, and provide tax incentives to businesses operating in designated areas.

Additionally, the government has implemented measures to enhance the accessibility of funding for small businesses. These measures include providing loans and grants to support the establishment of such companies – something that will go a long way to softening the amount of investment required to obtain cutting-edge production hardware.

Small-Scale Manufacturing Development and Progress in Portugal

Portugal has also strategically leveraged its geographic location to position itself as a hub for micro-manufacturing. The country is located between Europe, Africa, and the Americas, which allows for efficient transportation and shipping of goods, making it a cost-effective option for businesses that rely on international trade.

Additionally, Portugal is home to  a resilient transportation infrastructure that includes modern highways, airports, and seaports, effectively streamlining the import and export of goods for commercial enterprises.

To see this all being put into practice, we can look at companies like Tintex. The prominent Portuguese textile manufacturer utilises sustainable materials such as organic cotton, Tencel, and recycled fibres in its production process, and, they incorporate advanced technologies to reduce water and energy consumption and minimise waste.

Then there’s Riopele, a textile manufacturer which has implemented a sustainability program intending to reduce its environmental impact. The organisation has adopted sustainable practices by utilising eco-friendly materials and processes. Additionally, it has implemented several initiatives to reduce energy and water consumption while promoting recycling.

Last but not least is the Son of a Tailor. In pursuit of transforming the clothing industry, the Danish company, founded in 2014, has now set up a micro-factory in Portugal called SON Supply.

The adoption of SON Supply has improved transparency and flexibility in the supply chain, thereby reducing industry-wide risks and effectively addressing two significant challenges that have hindered the widespread adoption of Made to Order, namely unit cost and delivery time.

These are just a scattering of examples, but although the micro-factory model makes up only a small percentage of firms in the fashion industry, it appears as though there’s a real chance for some of these to find success, then scale, and to emerge as a viable alternatives to large-scale, overseas manufacturing partners – at least for some portions of fashion’s complex, multi-category production demands.

Despite the advantages of flexibility that micro-factories offer for experimentation, though i’is crucial to recognise the persistent uncertainties surrounding the practicability and efficacy of these initiatives. For one or more microfactories to get to scale, they must first secure their own profitability in the short and medium term. Therefore, before the global adoption of micro-factories can become a serious conversation, pressing constraints and drawbacks must first be addressed.

Challenges and Limitations

Although micro-factories have captured the attention of the manufacturing industry, fashion businesses need first to understand the challenges and limitations of investing in small production.

The first drawback is that some fashion businesses need large-scale production runs to meet the market’s demands, a capability that micro-factories still need to achieve. In fairness, this is something most micro-factory owners are candid about; the intention is not to replace high-volume offshore manufacturing, but to offer an alternative for cases where speed, specialised production, and other variables lend themselves better to nearshoring.

Another challenge that businesses encounter with micro-factories is the problem of increased costs. Small-scale production typically involves more significant initial investment and operating costs than conventional factories, which may present a potential barrier to entry, particularly for smaller businesses with limited financial resources. Again, most micro-factory owners have an answer here, which is to look beyond unit costs and amortise the extra price across an entire collection, stacking it against higher margins per product to reveal a – hopefully – more compelling proposition for the brand commissioning the order as well as the consumer.

Suppose you decide to go the route of partnering up with a micro-factory. In that case, it is crucial to consider that some facilities may have access to a different level of technological advancements and equipment than their larger counterparts. The presence of a digital direct-to-garment printer, for example, does not automatically mean that a facility has access to other cutting-edge hardware. And as a result, these restrictions may hinder their ability to produce specific commodities or utilise particular manufacturing methods, leaving international sourcing and production as the sole option.

Despite Portugal’s efforts to create a favourable environment for micro-manufacturing enterprises, it has been argued that the same business model might be challenging for manufacturers outside of Portugal to adopt as a viable business option. Some of the significant challenges of facilitating small-scale production outside of Portugal is the lack of skilled labour, bureaucratic hindrances, and exorbitant expenses linked with commencing a new enterprise. And this is something The Interline has seen first-hand, with micro-factories in the US and UK turning to alternative sources of income to support production lines that do not appear to make enough profit to self-sustain.

Micro-factories will face challenges motivated by highly complex demands and agility required. The biggest challenge will be ensuring connectivity between all the resources from people, systems and equipment, ensuring flexibility, communication integration and interoperability for all products and processes”, explained Manuel Goncalves from the TMG Group to The Interline.

Furthermore, implementing small-scale production outside of Portugal has even more in the way of increased costs per unit, posing a challenge for manufacturers trying to compete with larger firms that enjoy the advantages of economies of scale. In addition, the fashion industry poses a challenge due to the general consumer expectation of low prices and rapid turnaround times.

Despite the obstacles, though, experts in this space believe that given appropriate backing and infrastructure, manufacturers located beyond Portugal can still adopt and successfully implement the micro-factory approach.

Addressing the Limitations

The most common approach to addressing the limitations of micro-factories is through collaborations. By collaborating with strategic partners, you will be better equipped to address the challenges posed by rules in scale and technology. The micro-factories concept holds significant potential in addressing specific challenges through cooperative efforts with other factories, designers, and brands. In addition, this approach facilitates sharing resources and expertise, leading to more efficient and effective solutions.

When addressing the shortage of skilled labour, another strategic approach is for brands that have a set desire to produce in a new, nearby region to invest in training and educational initiatives to enhance the local workforce’s skill sets. Micro-factories have the potential to allocate resources towards such initiatives and provide opportunities for their employees to develop and improve their skills.

Another constraint relates to the economic feasibility of micro-factories. The effective management of challenges and risks inherent in this business model requires the convergence of various factors, including the adoption of technology and the promotion of collaboration. Therefore, it is advisable to investigate viable strategies that promote the formation of a cooperative network of micro-factories, which can facilitate the exchange of resources, information, and expertise – as well as providing fallbacks should one “node” in the network fail

“The process of finding a production partner that was willing to go for a minimum order quantity of one item was a challenge”, noted Kay Litzinger of SON OF A TAILOR.

Litzinger also told The Interline that they learnt that identifying a suitable partner and establishing solid relationships are critical factors that require the utmost attention. In addition, Litzinger also shared that producing goods on demand requires a continuous exchange of information and close cooperation, which is seldom seen in the traditional fashion industry that operates on a large-scale production model and non-transparent supply chains.

Given today’s circumstances concerning new sustainability legislation, government intervention has become crucial. For example, the allocation of subsidies, tax exemptions, and other inducements can function as a strategy to aid micro-factories in overcoming the initial capital and operational costs linked with creating and administering a limited-scale production plant. In addition, governments have the authority to establish a regulatory framework that promotes micro-factories growth.

At a country and policy level, this adds an extra incentive to the impetus to set up and support the establishment and growth of microfactories themselves, as well as enabling systemic change and promote a more sustainable and socially responsible fashion industry.

Micro-factories: have big brands helped set the template?

As the micro-factory movement grows, it is always a good idea to analyse the businesses that have demonstrated the potential of micro-factories but with greater support from more established brands. For example, initiatives like the Adidas Speedfactory have driven micro-factories’ growth and shown industries the impact micro-factories can have on sustainability, innovation, and economic development, despite having its roots in one of the world’s largest organisations

The Speedfactory, first established in Ansbach, Germany, in 2016 and subsequently in Atlanta, USA, in 2017, was established with the purpose of manufacturing shoes in restricted quantities while ensuring rapid production cycles. This approach aimed to reduce the need for traditional mass production methods, which frequently result in excess inventory and waste.

Despite discontinuing its Speed Factories in 2019 owing to elevated production expenses, though, Adidas’ innovative approach remains noteworthy and merits acknowledgement. The manufacturing process of athletic shoes underwent a successful revolution with the introduction of fully automated, localised, and on-demand production facilities. This facilitated a prompt reaction to the ever-changing requirements of the market.

In pursuit of promoting sustainability and ethical practices within the fashion industry, Eileen Fisher, a sustainable fashion brand based in New York, also established a micro-factory in Irvington, New York. This endeavour entailed partnering with neighbouring manufacturers to create exclusive clothing items and explore innovative sustainable manufacturing methods. In addition, the micro-factory implemented sustainable practices, including zero-waste cutting techniques, natural dyeing processes, and on-demand production, to minimise waste and optimise operational efficiency.

Then there is Fast Radius. They are on a mission to change manufacturing and logistics for the better. They have combined their Cloud Manufacturing Platform™ to simplify the entire process. “So our microfactories, they’re designed to be hyper-efficient. They’re designed to be extremely reliable, and they’re also designed to be digitally connected so that at all times, our software stack knows what’s happening and is directing its operations“, shared Chief Scientist Bill King and Chief Executive Officer Lou Rassey when they sat down together to discuss the future of manufacturing and the impact of micro-factories on the industry.

Also, considering the Ministry of Supply is crucial in this context, as they implemented a micro-factory to produce clothing items in line with customer demand, minimising waste while providing personalised customisation. The United States-based fashion company also utilised advanced manufacturing technologies such as laser cutting and digital knitting in their micro-factory to efficiently and accurately produce apparel.

Although the above case studies illustrate the potential of micro-factories, it is crucial to acknowledge that while some companies, like Fast Radius. They have successfully integrated micro-factories into their manufacturing processes and demonstrated their potential; others, like Adidas SpeedFactory, have chosen to move away from this approach and are no longer operational.

Yes, these companies encountered challenges in expanding their production capacity, stating high costs as a significant impediment. However, it is essential to focus not on the “failure” of the micro-factories but on the insights and learning moments. I think that ventures such as these offer valuable perspectives that could put industry players in a stronger position when it comes to formulating a micro-factory strategy that is able to avoid past “problems” faced by previous companies.

Conclusion: The Viability of Micro-Factories

In summary, fashion brands are gradually realising that micro-factories have the potential to revolutionise their business, enabling them to implement changes and respond more effectively to future regulations.

Looking ahead, we cannot ignore the fact that with the current global economic uncertainty, there is an increasing expectation that micro-factories will become more significant. Therefore, I predict that in the near future, micro-factories will attain greater significance in the forthcoming years, and may potentially stimulate economic expansion at the local and regional levels. Furthermore, the emergence of micro-factories provides a unique opportunity for fashion brands ready to reevaluate how they produce their product.

It is important to note that implementing micro-factories still presents particular challenges, such as the significant initial capital investment required for facility establishment and the need for a skilled workforce. On this, Goncalves points out that although micro-factories can serve as a way to facilitate the development of innovative business models, including made-to-order, made-to-measure, and customization, “it is improbable and unfeasible for all products to be exclusively manufactured through micro-factories.”

For micro-factories to succeed, significant investments in technology and equipment are imperative, in addition to ongoing training programs for the workforce. Additionally, adopting small-scale production methods could result in high per-unit expenses, which could present difficulty for manufacturers competing with larger, established enterprises.

As fashion brands consider how to maximise the micro-factory trend, it is important to remember that small-scale production should not be treated as the “be-all and end-all” solution to the fashion industry’s environmental challenges but instead think critically and view micro-factories as a promising alternative to conventional mass production methods.