Looking Beyond China
October 12, 2012
For fashion brands, sourcing is no longer about putting all their eggs in only a few baskets.
While China remains the industry's top manufacturing destination, its dominant position is being slowly eroded as labor costs rise and labor shortages increase, and the movement to manufacture more for domestic consumption and less for exports gains ground. The result is an opportunity for gains in market share and development of specialized production across the globe, from Asian nations to European countries and the Western Hemisphere.
Capital Business Credit's (CBC) latest Global Retail Manufacturers and Importers Survey found 26 percent of those surveyed have moved some of their manufacturing out of China and 40 percent are considering moving some of their production out of the country.
"While we at CBC continue to believe that China will remain a strong manufacturing partner for retail goods imported into the United States, there is a shift taking place to either low cost manufacturing destinations like Vietnam and Pakistan, or on the opposite end of the spectrum, to cities in the United States where importers can keep an eye on quality control and produce goods faster due to the elimination of overseas shipping times," said Andrew Tananbaum, executive chairman of CBC.
When clients were asked to which countries they were moving their manufacturing, the United States was the most popular at 31.3 percent, followed by Vietnam at 18.8 percent, Pakistan at 10.9 percent, Bangladesh at 9.4 percent and the Philippines at 3.1 percent.
A new United Nations report documents a shift from the extensive offshoring of the last two decades back to making goods closer to home. The return of production, or 'reshoring,' should have positive employment consequences for industrialized countries, the report said.
The study, which points out that the steep increase in world oil prices "has sharply driven up logistics and transportation costs," states that "a reassessment of supply chain risks and management costs may lead companies to reconsider manufacturing goods in the United States."
Jeff Streader, operating partner of Marlin Equity, said he believes in the "reemergence of the apparel industry in the United States. It won't be a top 10 producer in terms of major apparel producing countries, but I think any companies that we invest in will take a hard look in the migration of production to the United States in some products where it makes sense."
Reprinted in part from Women's Wear Daily