Shoemaker Leans on Automation to Expand U.S. Production
Footwear manufacturer Keen plans next month to open a new factory in Shepherdsville, Ky., near Louisville. The 60,000-square-foot facility will nearly double the company's domestic production capacity, in part by ramping up its use of automation.
Ahead of the new building's opening, Keen closed its previous, smaller factory in Portland, Ore. The decision to double down on U.S. manufacturing could give Keen a competitive edge as the Trump administration has rolled out new tariffs on imports from around the world.
Hari Perumal, the company's chief operating officer, said Keen opted to invest in American manufacturing long before there was discussion of new tariffs. The privately held company, founded in 2003, has been making footwear in the U.S. since 2010. At that time, Keen's manufacturing costs had started to climb in China, and it wanted to diversify its sourcing to help prevent supply-chain disruptions.
'We did not know that we would be considered lucky 10 years ago,' Perumal said. 'But it definitely puts us in a good position.'
Most shoes sold in the U.S. are made in China and are therefore subject to hefty new tariffs on Chinese imported goods—a cost that Keen is exempt from because it no longer manufactures in China.
More than 2.1 billion pairs of shoes were imported into the U.S. last year, of which about 58% came from China, according to the trade group Footwear Distributors and Retailers of America. That is compared with about 25 million pairs of shoes that are made in the U.S. annually, according to FDRA.
Keen, which makes work boots, hiking shoes and thick-soled sandals, today produces about one-third of its shoes at factories it owns and runs in the U.S., the Dominican Republic and Thailand. The remaining two-thirds of its products are made by contract manufacturers in Cambodia, Vietnam and India.
Its shoes made abroad are subject to a new 10% reciprocal tariff on top of previously existing duties on imported shoes. Keen said it plans to share those cost increases with its suppliers and that it won't implement any price increases for the rest of this year, a decision that comes as other retailers say they will pass along the cost of higher tariffs to consumers.
Perumal said the company chose to relocate manufacturing to Kentucky in part because of the state's central location within the U.S., enabling Keen to reach 80% of U.S. consumers with two-day ground shipping while cutting transportation costs. The company has a distribution center and several suppliers nearby.
Keen plans to rely heavily on automation at its new facility, using machinery to handle mundane, repetitive tasks while employing human workers to handle more precise work. It plans to hire 24 highly skilled workers and expand its payroll as production ramps up.
Patrick Penfield, a supply-chain management professor at Syracuse University, said companies choosing to manufacture in the U.S. are employing more automation to help control labor costs.
'Automation is getting better. The price points for machines are coming down, so the [return on investment] is there now where we can say, 'Hey, look, it does make sense to automate,'' Penfield said.
Write to Liz Young at liz.young@wsj.com
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