SoftWear Automation, Inc.
April 28, 2014 Issue
The Most Powerful Name In Corporate News and Information
Automated Production Lines for Garments and Sewn Products
SoftWear Automation, Inc.
Atlanta, GA 30308
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – April 28, 2014
CEOCFO: Mr. Lockhart, what is the concept at SoftWear Automation?
Mr. Lockhart: The concept at SoftWear Automation is designing and building robotic work cells for the automatic production of garments and other sewn products.
CEOCFO: Why the decision to work in that area?
Mr. Lockhart: For the last thirty years the major clothing brands have chased cheap labor; first from New England to the Southeast to the Caribbean to Latin America to China and now to India, Bangladesh and Vietnam. Since the year 2000, seven hundred thousand jobs in the US have been eliminated. That translates into a lost payroll, annually, of three hundred and eighty million dollars. Therefore, as our founder looked at this and obtained the first patent, the idea was if US manufacturers could match the off shore cost of production, they could be competitive. We’re really talking about transforming a labor intensive industry to one that is capital intensive and economical anywhere.
CEOCFO: What are the challenges? Why has it been so difficult or has it been tried in the past?
Mr. Lockhart: It was tried in the past. In fact, manufacturers of shirts automated production of in the 1980s. They have since abandoned manufacturing and sold the equipment to their contractors. Today most shirts sold in the US are manufactured off shore. The reason for the abandonment was the cost of the hard automation was so expensive. With the cost of computing dropping every year, it has made computers and robotics cost effective. One of the ways we are doing this hinges on the patent that the company obtained in January of 2012. It measures the distortion in fabric by counting threads. That is because as fabric moves along the production line and into the sewing head, it distorts each time the needle punctures the material. It changes the way the fabric is moving. SoftWear’s high speed camera measures that distortion at the rate of 830 frames per second. The high speed camera communicates the change to another device called a sewing dog, which was patented in November of 2013. That communication relays what the movement is, what the distortion is and how to correct it. Therefore, the end result is that you get a perfect stitch every time.
CEOCFO: Where are you in the development and / or commercialization process?
Mr. Lockhart: That is a great question. The overall concept is to have a robotic work cell that can cut, place, stitch and sew together two pieces of fabric. The process begins with a roll of fabric at one end and end up with something like a basic pair of blue jeans at the other. Along the way, as we interviewed companies that were existing contract manufacturers, we spoke about this and they said, “What we really need is a robot that could feed fabric pieces into our existing hard automation. For example, we spoke with a company two weeks ago that cuts fabric pieces for blue jeans at a plant in Alabama and then ships them to the Caribbean to be sewn together into a pair blue jeans and then shipped back to the US. As we were talking about the technology this engineer said, “Stop right there. Are you telling me that as we robotically cut these fabric parts for jeans, you have another robot that could feed these fabric pieces into the sewing machine?” I said, “Yes. We are getting ready to deploy our first fabric handling robot into a plant in South Carolina next week.” He said, “It sounds like to me that I could save on the outbound and the inbound freight and pay for the robot.” I said, “You would pay for it within a year.” He said, “We have got several other plants in Georgia and I will schedule a time to visit you on the Georgia Tech Campus in April.
CEOCFO: Will this be an outright sale for you? What is the business model plan?
Mr. Lockhart: The Business model plan is that we are initially going to manufacture and sell fabric handling robots. It is a light weight robotic transfer device that we call LOWRY. For the plant in South Carolina, it has an attachment that will pick up the front panel of a shirt and feed it into a sewing machine that sets and sews buttons. Then it will also feed a sister machine for the other side of the front of the shirt panel, that is called the button hole slitter. It actually makes the buttonhole and stitches around it. Then you take the two front pieces and attach them to a back fabric panel, of which an operator then takes it and sews on the arms and a collar and then you have a finished shirt.
CEOCFO: Will you be involved in maintenance? What will happen as you go forward?
Mr. Lockhart: We are going to have what is called a “health hotline” or health monitor, so that the machines could be reprogrammed or reconfigured from a central location in Atlanta. We have a veteran of the sewn products industry with installations in fifty-nine countries that will be the exclusive agent in North, South and Central America for this LOWRY robot. He will do some of the maintenance as well. He will do the sales, installation and maintenance. However, they can be reprogrammed from our offices in Atlanta.
CEOCFO: Do you have the manufacturing capabilities set up? Are you able to ramp up quickly, should the industry wake up and say, “This is it! We want one right now!”
Mr. Lockhart: That would be a high class problem! Our plan is to deliver twenty five of these robots by the end of 2014 and then ramp up. Initially we will buy the components domestically and then we will do the final assembly in Georgia. Therefore, that is part of our plan and the capital raised right now is to build staff on the engineering and software side. Then, we will hire manufacturing professionals that can assemble these components for the finished product.
CEOCFO: In the long range of manufacturing coming back to the United States, where do you see that developing or do you see more of selling to the various countries now where manufacturing is today?
Mr. Lockhart: That is a good question. I see it coming back, first to the US. Someone asked us recently how and why could we not produce garments here and then ship them to South East Asia. The freight cost would not be competitive. Here is what happens. For a manufacturer today, to order a shipment of, say, men’s khaki slacks, from the day the order is placed by the retailer, to the consumer brand, to the contract manufacturer, until they are delivered, is a seven month process. Let us just say, optimistically, six months from order entry to order fulfillment means your inventory turns over twice a year. That’s a lot of capital tied up in inventory. If you are manufacturing in the US, closer to your end customer you can turn your inventory every thirty days or twelve times a year. You have lower inventory costs and do not have a huge transportation cost. You do not have the long delivery time and ultimately, you will see this move, within five years, to custom garments, that will be delivered based on the consumer storing his/her measurements with an avatar online. When you want jeans you can press the button, order them and have them custom made and delivered within forty eight hours.
CEOCFO: Many things seem really good on the drawing board and really good in the early testing and then when they get out and are actually being used, problems develop. How do you know this is going to work well? What is your assurance and what is your gut feeling as well?
Mr. Lockhart: My gut feeling is that it will work. However, rather than rush to the market too soon. Our engineers and scientists have insisted on double checking the accuracy. We have double stress tested this in a lab where they have run for twenty-four hour periods without fail. The next step is to put this in this plant in South Carolina, where they also do a lot of custom evaluation of different types of manufacturing equipment. Then they can come back to us and say, “Here is something that you may not have thought of and this is what causes the problem,” so that we can address that. That is what we are allowing for, for the balance of this year, for further design and testing. We are trying to do all of these tests within a ninety minute drive of downtown Atlanta, so that we can get out and back. Several people have said, “Can you do this for us in Arizona? Can you do this in Texas?” Ultimately, we will do that, but it is too far, if it fails, to send engineers back and forth to correct it. Therefore, we have opportunities with strategic partners within an hour and a half drive from Atlanta. That is what we think will best serve us in the short term and our customers in the long term. This is a “Field of Dreams” kind of moment. Once we build it then the manufacturers will come and the brands will follow. It offers a pretty rapid return of investment. Some people say, “You are not charging enough.” And we have said, “Currently as the contract manufacturers find a production advantage, their customer wants the savings passed on immediately. Therefore, it is priced so that the sewn products manufacturer or contract manufacturer can receive a rapid return on its investment, before they have to pass it along.
CEOCFO: You have a long business history. What have you learned in past experiences that have been most applicable and most helpful here at SoftWear?
Mr. Lockhart: That it will take twice as long and cost twice as much as you think when you initially start. That is true, not just at SoftWear; it is true in any business.
CEOCFO: What do you see as the barrier to entry? Do you anticipate copycats trying to duplicate what you have done, once it becomes so effective and because it is such a large market?
Mr. Lockhart: I am sure it will be and I am sure that we will be under attack. That is why, as we go forward, we try to choose strategic partners and investors with integrity and deep pockets. We intend to fully enforce our patents. Part of our patent protection is prohibiting the importation of products made with our technology. A key differentiator is in the cost of transportation. If we license this technology to a company in Europe and they match their off shore costs of production, but then have to absorb the transportation costs to ship it back to the US, it is the same dynamic that would keep the US from; manufacturing and then shipping it to Europe. That is because the freight is the differentiator. Here’s another example of a basic pair blue jeans. They are made of cotton denim. Cotton is a commodity that trades at the same price, worldwide. The average cost of the fabric going into a pair of jeans is three dollars and ninety cents. It costs somewhere between eighty-seven cents and one dollar to cut and sew the fabric to make a pair of jeans. It costs four dollars and thirty-three cents to ship those jeans from South East Asia to the US. It costs the US manufacturer ten cents to ship them within the US. Therefore, there is the four dollars and twenty three cent differential. There is nothing that I see that would lower the cost, all the way across the ocean, from four dollars and thirty three cents to ten cents. Also, you can get them delivered and you can turn your inventory every thirty days.
CEOCFO: I would think that that is certainly a reason for people to be jumping on this. It basically puts a whole new light on retail!
Mr. Lockhart: Someone said to us, “We are manufacturing garments for the military. Here is a person that is picking up a piece of fabric and feeding it in to this machine which clamps it and stitches it. The same person takes it out and puts it on another device that stretches it and then takes it and inverts it and has it stitched one more time.” Then he said, “This is what we pay this person. If you could come up with something that could do this robotically, we could take her and teach her how to do a more advanced product, like set the sleeve on a shirt and she would make more money and we would be more productive. We would be more likely to win commercial work and you would sell a robot and we would increase our sales. That’s a win for everybody.” The next item would be who is going to work on this. There are companies that we have talked with that said, “The people that sew for us today are getting along in years and young people do not want to do this.” However, they do like computers and robots. So, we are going to be looking for technical college graduates who want to run, operate a work cell or five of these cells and maintain the computers. That is because the robots are going to be doing the heavy physical work. It is also a job opportunity for the returning veteran, because most veterans today have good science and math skills, because they need them to operate the advanced weaponry and communication systems in today’s military. Those are skills that can be adapted into the manufacturing process.
CEOCFO: What challenges are you on the lookout for as you proceed with your project and with the whole commercialization?
Mr. Lockhart: The whole challenge is to gain market acceptance. Our biggest competition, right now, is the status quo. The sourcing managers with the big consumer brands have gotten used to their quarterly trips to South East Asia and they live a pretty comfortable life. Even when the chairman says it is important to manufacture domestically, the person down the line, the sourcing manager says, “I have a pretty good life with my trips to South East Asia two to four times a year and I am not interested in change. I have been doing this for thirty years. I do not want to change.”
CEOCFO: How will you overcome that?
Mr. Lockhart: We will overcome that the same way that some of the manufacturers of military apparel have said to us, “These people do not cost much. We are not going to automate.” Others have said, “We are going to automate because that is going to make us more competitive.” Therefore, if they want to survive, ultimately they will embrace the technology.
CEOCFO: Why should people pay attention to SoftWear Automation?
pay attention because it is disruptive technology that is going to lead the
next generation of manufacturing. It is just like robots that are doing the
heavy lifting in the automobile manufacturing plants. Consider the example
of either the Hyundai or KIA plants. The Hyundai is in Montgomery, Alabama.
The KIA plant is in West Point, Georgia. The heavy, gritty work is done by
robots which are controlled by technicians operating work cells, away from
the actual manufacturing floor. There is a quote attributed to Thomas
Edison, which states, “There’s a way to do it better. Find it.” The future
belongs to the efficient. We have found a better way and we are going to be
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