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OrthoLite Milestone: Live Nations

OrthoLite Inc. intends to be wherever its customers make shoes.

As footwear brands have expanded and diversified their manufacturing bases outside of China, OrthoLite is establishing operations in Asian countries to service them. “We are part of the component infrastructure, and our job is to deliver quality in the shortest possible time frame,” said John Barrett, GM for Asia.

“As the industrial revolution continues in China, the costs associated with manufacturing there are following suit and trending in only one direction, which is upwards,” he said. “This has forced shoe factories that are Tier-1 suppliers to look for alternative countries and regions for manufacturing. As a Tier-2 supplier, we follow them.”

By the end of the year, OrthoLite will open its newest factory, a 78,000-sq.-foot environmentally friendly facility in Vietnam, which will increase the company’s production capacity by 35 percent. There’s also room for the factory to grow and expand production, Barrett said. “We will expand to service the footwear manufacturing base, [which will be] dictated by demand,” he said.

Barrett said Vietnam, with its lower labor costs, helps keep production costs down. Costs have risen drastically in China in recent years, as have outlays for electricity, food and oil. But while the Vietnamese factory will offer cheaper labor, there are trade-offs. “You are paying more for many of the materials [such as PU foam and fabric] because much of it is still imported from China, Taiwan [and] Korea,” Barrett said.

On balance, Barrett said, a diversified production base is a clear advantage in wooing footwear brands that are looking to streamline their sourcing. “A win for both our customers and ourselves is the ability to deliver a product at the same price, whether it’s made in China, Vietnam or Indonesia,” he said. “Many shoe factories make identical [products] in two countries and it helps greatly when they can get consistent component pricing.”

The new Vietnamese facility follows the debut of an Indonesian factory in 2011 through a partnership with Boo Young Industries, and a 2006 partnership with a Korean manufacturer. In all, the company has nine factories, which it either owns or operates through subcontracts and partnerships. Barrett stressed that costs are not the only consideration when expanding OrthoLite’s areas for sourcing — the placement of its manufacturing operations is designed to ensure a fast response to the needs of the brand. “We can address market demand quickly,” he said.

The company’s global pursuits began in 1997 with two partners in China. As business grew, it became apparent that additional capacity was needed. To meet the demand, in 2009, OrthoLite launched its own factory and chemical-systems operation called Dongguan Eco Polymer, a wholly owned subsidiary. “We felt it necessary to control our destiny and supply our customers with consistent product and constant innovation,” Barrett said. “With DGEP, we became more vertical, with the ability to not only produce our own insoles and foam but also new chemical systems.”

Even as its factory base expands, Barrett said, the company retains tight control over the unique polyurethane foam that has made it so successful. The Chinese facility manufacturers the foam, while the other operations specialize in the molding and processing of the company’s products. “We make all of our foam and compounds in-house and supply our own factories, as well as our subcontract partners, with that product to maintain control and consistency,” he said. “The science of our product is inherent in the foam — and that never gets farmed out.”

Developing product to meet the needs of its vendor partners typically begins in the U.S. and Europe, where company representatives work with the brands. Once a development package has been established, OrthoLite’s China-based offices build the product and work with the factories to make sure finished products meet production guidelines. “This is a constant process, as styles change each season and new technologies are created,” Barrett said. “Offering concept to finished product makes us a great partner, and the brands appreciate that we bring the whole package from their domestic headquarters right through the front door of their shoe factories.”

Looking ahead, Barrett said, the company will continue to explore opportunities in other parts of the world, wherever footwear brands move their production. “As space is getting filled up in Vietnam, Cambodia is the next frontier. I think we’ll probably do something there next year. I’m being asked to visit Bangladesh. I could see that being a possibility down the road as well. For us, it’s all about where the shoe factories want to go.”

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