Levi Strauss, the Supply Chain, and 3D Printing

By on November 24th, 2021 in Ideas, news

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Levi’s Display [Source: Mike Mozart via Flickr]

Charles R. Goulding and Harry Foxman look at how the pandemic could encourage fashion makers to use more 3D printing technology.

The COVID-19 pandemic has caused supply chain disruptions to every industry. Not excluded from that list is the textile industry.

Recent forecasts suggest trade volumes have decreased between 13% and 32% for textiles and garments. We hear constantly about issues with the supply chain, but little is brought forth of how to solve these issues. With demand for clothing increasing, many companies are finding themselves unprepared to deal with supply chain disruptions.

Levi Strauss & Co., the American clothing company known worldwide for its denim jeans, has done a masterful job of setting itself up for success during times of supply chain volatility. Founded in 1853, Levi Strauss & Co. has had plenty of experience and time to develop effective sourcing and manufacturing strategies to remain strong in times of uncertainty.

While a lot of textile companies source from a handful of countries, Levi Strauss sources its merchandise from 24 different countries. Vietnam has had facilities shut down for extended periods of time due to the pandemic. Because Levi Strauss sources less than 4% of the company’s production is from Vietnam, they were minimally affected by this problem. The company’s leadership has previously made the decision to not source more than 20% of their product from any one country. Levi Strauss also has incorporated the practice of cross sourcing its merchandise in multiple countries to be able to shift production when necessary.

This diversification has proven successful in dealing with large disruptions in the supply chain. The company has recently locked in about 70% of ocean volume and costs through summer of next year. This smart move allows Levi Strauss to work with certainty while protecting capacity and cost controls. In addition to sourcing, Levi Strauss has also improved their manufacturing process to create a more sustainable supply chain, as well as a cleaner jean. This new process involves automating the jean finishing process. That allows the company to reduce the number of chemical formulations used from thousands to under one hundred. The finishes create worn, faded design elements that were previously highly manual and labor-intensive. Now, the process is far more efficient and time-effective.

While diversification is one way to curb supply chain disruptions, the utilization of 3D printing can also help. If some aspects of the manufacturing process utilized 3D printing in-house, that would result in less reliance overseas. With continued advancements in additive manufacturing, companies are experimenting more and more with 3D printing in the textile industry. Startups and well-established companies are exploring different methods to manufacture clothing and accessories using 3D printing. Levi Strauss has utilized 3D printing recently to create digital and physical renderings of their denim jacket. While they are not producing fully functional jackets, these prototypes assist Levi Strauss in developing their denim products and relying less on foreign manufacturers.

Textile companies that utilize 3D printing and related activities may be eligible for the R&D Tax Credit.

The Research & Development Tax Credit

The now permanent Research and Development (R&D) Tax Credit is available for companies developing new or improved products, processes and/or software. 

3D printing can help boost a company’s R&D Tax Credits. Wages for technical employees creating, testing, and revising 3D printed prototypes can be included as a percentage of eligible time spent for the R&D Tax Credit. Similarly, when used as a method of improving a process, time spent integrating 3D printing hardware and software counts as an eligible activity. Lastly, when used for modeling and preproduction, the costs of filaments consumed during the development process may also be recovered.

Whether it is used for creating and testing prototypes or for final production, 3D printing is a great indicator that R&D Credit eligible activities are taking place. Companies implementing this technology at any point should consider taking advantage of R&D Tax Credits.

Conclusion

Levi Strauss has shown they are well equipped to handle any type of major supply chain disruption through their sourcing and manufacturing strategies. Other companies in the textile industry, as well as any industry, should follow their lead in diversification. With a variety of companies in different industries adopting a diversified sourcing approach, that may mitigate the effects of future pandemics, natural disasters, or other disruptions on the global supply chain. 

By Charles Goulding

Charles Goulding is the Founder and President of R&D Tax Savers, a New York-based firm dedicated to providing clients with quality R&D tax credits available to them. 3D printing carries business implications for companies working in the industry, for which R&D tax credits may be applicable.

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