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Agile Armor
Speed and service keep an athletic-apparel maker in the game.
By Maggie Overfelt/Baltimore

(FORTUNE Small Business) – If you don't own any Under Armour, you've probably seen it on pro athletes or your kids. The Baltimore company reinvented the $415-million-a-year market for snug-fitting, sweat-wicking athletic togs. But now Under Armour has reached the vulnerable stage at which fast-growing small companies attract the attention of giant rivals--in this case, Nike and Reebok, both of which have a history of crushing sports-apparel upstarts.

In its bid to survive, Under Armour has just invested $1.3 million in a revolutionary manufacturing shop that can turn around many large orders in hours rather than months--promising to help the smaller firm maintain the advantage of nimbleness.

Back in 1996, Kevin Plank created a snug synthetic undershirt that wicked an athlete's sweat far more efficiently than cotton. Today, Under Armour is a $200-million-a-year company that supplies retailers and sports teams all over the country with so-called compression clothing. The company even has a Pentagon contract to supply compression bras for servicewomen.

Although Under Armour commands 76% of the market, Nike and Reebok are breathing down its neck. In January, Nike started an exclusive five-year contract to provide all 30 Major League Baseball clubs with gear and apparel; Reebok's ten-year deal with the NFL launched in 2002. (Both deals specify that the athletes may not display other manufacturers' logos on game day.)

In an effort to stay competitive, Under Armour introduced 80 new products in 2004, including its Duplicity SportBra and its Metal Series of garments made with a new faster-wicking fabric. The company also just opened its new 4th Quarter Shop, a 17,000-square-foot cutting and sewing facility that can turn out large orders in record time.

Under Armour manufactures about 75% of its products in 18 countries abroad. But the company built the 4th Quarter Shop near its Baltimore headquarters to accommodate truly last-minute orders. For example, the company recently used the Shop to produce--overnight--a jumbo undershirt for Shaquille O'Neal, after the hulking hoops star forgot to bring his regular Under Armour shirt along on a road trip. "We used to job these things out to different sewing facilities, but then you lose control," says Plank, 32, a former University of Maryland football player who runs Under Armour from a renovated soap factory with the help of a management team composed mainly of ex-jocks. "Now we're more efficient." Outside analysts tend to agree. "There is no way the big guys can react to customers as quickly as Under Armour can," says Neil Schwartz, marketing director of SportScanINFO, a West Palm Beach-based research firm. "It's like a speedboat vs. an aircraft carrier."

Stocked with customized machines that replace human hands, the Shop can process as many as 144 units of clothing within four hours. (Regular orders take anywhere from four to six months to manufacture overseas.) "The gain here is that our customers can trust us to come through for them in nearly any situation," says Shop designer Kip Fulks, Under Armour's VP of manufacturing.

About 30 workers toil in the Shop, which Fulks designed to be as productive and safe as possible. Bright white walls and extra lights help sewing-machine operators see thread better. The ceiling panels, 100% pricier than regular ones, absorb sound so well that employees can hear each other whisper while standing near humming machinery. Unlike most apparel workshops, this one has no power cords visible above the 50 sewing machines. Under Armour spent 50% extra to place wiring under the floor, both for safety and to facilitate moving machines around for different projects.

Like most modern manufacturing facilities, the 4th Quarter Shop uses computer-assisted design (CAD) software and customized machines to speed up the process. Its Invescut Quartz automatic cutting system takes less than four minutes to cut a ream of material that once took 15 employees two or three hours to cut by hand. Fulks chose a cutting machine from a Spanish company, Investronica Sistemas (bought by France-based Lectra last year). U.S.-based Gerber Technology and Tukatech both make similar systems.

So far the Shop has been a loss leader for Under Armour. Plank says the facility won't recoup its capital costs until the end of this year, which suggests that the Shop might generate just 2% to 3% of Under Armour's 2005 revenues. One reason for these anemic numbers: Under Armour doesn't charge extra for rush orders, even though manufacturing on U.S. soil is significantly more expensive. (Plank won't say how much more, but a 2004 Goldman Sachs study estimated that apparel companies spend about 20 times more in hourly labor costs for each U.S. worker.)

But Under Armour's explosive growth is closely related to the company's extraordinary customer service, which the 4th Quarter Shop takes to a new level. Revenues for 2004 are up 300% over 2002, when the company took in $55 million. "If I need shorts with a bigger or shorter rise, Under Armour gets back to me within a day," says Oakland Athletics equipment manager Steve Vucinich, 52, who will buy Under Armour if his players ask for it, even though other manufacturers supply the team for free. "The bigger companies can take weeks."