POMPANO BEACH, Fla. -- Howard Shaffer opened a small factory here in 1995 to make sneakers for Adidas AG -- but also to make a point.
Having spent the previous decade setting up plants in China to manufacture shoes for big U.S. brands, he thought he knew how to revive the moribund U.S. footwear industry: use heavy automation run by a handful of skilled workers instead of relying on large numbers of low-paid Chinese laborers.
It never quite worked. Within a few years, he dropped the idea of making sneakers, and decided to adapt the factory he had built to make high-end custom shoes, relying on computer imaging to fit customers from around the U.S. and Canada remotely. He changed the name of his company from Brightwood LLC to Otabo LLC, and soon was turning out shoes for $450 or more a pop.
But now, he is throwing in the towel on that venture, too. He closed his factory over the weekend, and is shifting the bulk of his operations to China.
What killed his U.S. factory isn't just competition from Asia's cheap labor, he says. It is the lack of infrastructure needed to make a factory tick, a problem that has bedeviled the few remaining independent shoemakers in the U.S. Finding technicians to fly in on short notice to fix shoe machines was a constant and growing challenge, Mr. Shaffer says, because the number of U.S. companies that make and service machines has dwindled. The suppliers of shoelaces, leather and other basic materials insisted that he buy in batches far larger than made sense for a small-scale producer.
Consider what happened with his supplier of outsoles, which form the bottom part of the shoe. Mr. Shaffer initially found a domestic supplier to provide what he needed at a reasonable price. But a glitch developed about a year ago. One Otabo style required an outsole with two types of polyurethane sandwiched together -- a tough bottom layer that resists wear and a spongy inner layer that makes the shoes more comfortable. It is a more complex process, Mr. Shaffer says, "and so after three years of supplying us, they said they just can't do it that way anymore."
The supplier, Meramec Group Inc. in Sullivan, Mo., says that there just wasn't enough overall demand to justify making the outsoles. "Howard's right," says Thomas Dieckhaus, one of Meramec's family owners. "One of the biggest challenges for the footwear manufacturers that remain in the U.S. is sourcing components. It limits the materials they can use -- and therefore influences the type of footwear that gets manufactured."
The search for eyelets, the small metal rings that line lace holes, was even tougher. Mr. Shaffer was hoping to have customized eyelets with the word "Otabo" molded into the rim. The last major U.S. eyelet producer, Stimpson Co., makes them at a sprawling factory that also happens to be in Pompano Beach. "They told me my order wasn't big enough to be worth their trouble," says Mr. Shaffer, who wanted 5,000 eyelets in two different metal finishes. Being able to buy in small quantities is crucial in a fashion business like shoes, he adds, because consumers demand many choices.
Kevin Gentilin, a sales manager at Stimpson, says he doesn't have any record of Mr. Shaffer's inquiry, but that the company usually requires a minimum order of at least 100,000 eyelets. "It has to be enough to justify us setting up a press and ordering the metal," he says.
Mr. Shaffer eventually got the parts from Taiwan.
One thing that made the constant battles with suppliers irksome for Mr. Shaffer was knowing how much easier it was for shoemakers in Asia. "There are places in China where you have city blocks made up of nothing but makers of shoe materials," he says ruefully. "You can buy 10,000 laces or 10 laces."
He learned Mandarin while serving in the U.S. Air Force and ultimately settled in Taiwan, where he met and married his wife and business partner, Jennifer. He joined Nike Inc. in 1981 and spearheaded that company's efforts to set up manufacturing operations in mainland China at a time when almost no Western shoe companies were doing so.
He eventually left Nike to launch his own business, making shoes in Chinese factories for Western companies, which typically outsource production to foreign factories. He and Jennifer would fly back and forth from Taiwan to China every week, a grueling lifestyle that led to their decision to build the Florida factory, where they eventually employed 40 people.
David Murphy, chief executive of closely held Red Wing Shoe Co. in Red Wing, Minn., an iconic American boot maker that has kept a large manufacturing operation in the U.S., says even a larger-scale company like his, with annual sales of more than $400 million, has to worry about the shoe industry's withering infrastructure.
Almost 99% of the 2.4 billion shoes purchased in the U.S. every year are imported, 86% of them from China. The problem of obtaining components is especially acute when it comes to materials uniquely designed for shoes, as opposed to generic items such as cardboard boxes that are used by a wide array of manufacturers. This is one reason why Red Wing prepares its own shoe leather, says Mr. Murphy.
Mr. Murphy notes he just got a call from a small custom shoe producer in northern Minnesota who often turns to Red Wing for supplies. "They were having trouble getting shoe laces," he says.
Mr. Shaffer insists he isn't melancholy about the shutdown, though he poured $20 million of his own fortune into a venture only to discover that it wouldn't work. He won't disclose specific sales figures, though he says he never made a profit. He did earn praise from within the industry: A trade magazine catering to the factory-automation industry pronounced him "Progressive Manufacturer of the Year" in 2005, picking tiny Otabo for an award that usually goes to a large multinational.
That same year, then-Gov. Jeb Bush visited the factory, which is nestled in the back of a palm-dotted industrial park, and was fitted with a custom pair of Otabo shoes. A picture of Mr. Bush standing in front of the plant hangs in the front lobby, along with an electronic scan of the politician's feet and a never-cashed check from Gov. Bush.
"I really thought I could show how this industry had a future here," says the 59-year-old Mr. Shaffer, standing last week amid a cluster of boxes destined for China in the back of his emptying factory. Everything had to be out of the space by the weekend, which meant working late into the night disconnecting cables from machines and piling boxes on pallets sturdy enough to withstand a long ocean journey.
As part of dismantling the factory, Mr. Shaffer advertised many of the machines he won't need in China on the Web site Craigslist. Jeffrey Spilfogel, the vice president of sales and manufacturing at SunTex Group LLC, which makes parts for swimsuits and bras in nearby West Palm Beach, contacted him three months ago, and the two have become friends. On a recent day, Mr. Spilfogel came by to disconnect electrical wires in preparation for taking one of the big machines.
"Howard definitely encountered a lot of barriers, but I think it was partly because of the business he's in -- the shoe business has really been wiped out," Mr. Spilfogel says. He says the bra business also has largely moved out of the U.S., but he has survived because many large U.S. retailers insist foreign producers still use his components in their final products.
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